Economists forecast rates to decline modestly, and new home sales to grow in 2025. The Sun Belt, including Florida, will see strong housing activity.
WASHINGTON — Affordability and the so-called “lock-in effect” are expected to keep housing activity subdued in 2025, with existing home sales forecast to move only slightly upward from recent multi-decade lows, according to the December 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The broader economy is expected to remain on solid footing and expand at an above-trend pace through 2026 as it navigates elevated core inflationary pressures and heightened policy uncertainty.
As part of its latest outlook, Fannie Mae’s economists shared five predictions for the housing market in 2025. They expect:
- Average mortgage rates will decline modestly but remain above 6%, with likely bouts of volatility.
- Existing homes sales will remain near 30-year lows, but location matters.
- New home sales will remain a bright spot in the housing market (where they can be built).
- National home price growth will decelerate.
- Multifamily housing will remain in a holding pattern.
“From an affordability perspective, we think 2025 will look a lot like 2024, with mortgage rates above 6%, home price growth easing from recent highs but staying positive, and supply remaining below pre-pandemic levels,” said Mark Palim, Fannie Mae senior vice president and chief economist. “Still, heightened mortgage rate volatility may present opportunities for would-be homebuyers to take advantage of temporary lows, and we may see stretches where housing activity is boosted by lower rates – but, on average, we expect mortgage rates to remain elevated and a hindrance to activity. While we think conditions on a national basis will remain challenging, we’re seeing meaningful regional differences in market conditions, and the homebuying experience – as the adage goes – will continue to be a local one.
For example, in the Sun Belt, where construction has been robust for a few years and homebuilders are targeting first-time homebuyers with some offerings, we expect to see relatively strong housing activity. By comparison, we’re not expecting to see the same in the supply-constrained Northeast. And while we foresee the current affordability crunch hampering activity through our forecast horizon, we expect nominal wage growth will outpace home price growth for the first time in more than a decade in 2025, slowly but surely providing some much-needed relief to potential homebuyers.”
Source: Fannie Mae
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Author: amyc