“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 Fannie Mae chief economist Mark Palim.
Mortgage rates, though expected to decline modestly, are forecast to remain above 6% for much of the year. Palim noted that volatility in mortgage rates could offer temporary opportunities for buyers to lock in lower rates, but overall affordability will remain a challenge.
“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 explained.
The “lock-in effect” continues to play a major role in suppressing housing turnover, with homeowners reluctant to sell and lose their current lower mortgage rates. This dynamic has contributed to the stagnation of existing home sales, which remain near 30-year lows.
However, Fannie Mae’s report highlighted regional differences in housing activity.
