WASHINGTON—Affordability and the so-called “lock-in effect” will likely keep housing activity subdued in 2025, Fannie Mae forecast.
Mark Palim
Fannie Mae's Economic and Strategic Research (ESR) Group shared five predictions for the housing market in 2025:
- 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,” Palim said. “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.”