The Federal Home Loan Mortgage Corporation, better known as Freddie Mac, is predicting that home prices will rise much more modestly in 2024 and 2025 than its experts had previously estimated.
At the beginning of the year, Freddie Mac had forecasted that home prices would have increased by 2.8 percent in 2024 and by 2.0 percent in 2025 at the national level. But in its latest monthly outlook, published on Thursday, the government-sponsored corporation has dramatically changed its prediction.
According to Freddie Mac’s baseline scenario, home prices will increase by a much more modest 0.5 percent this year and in 2025.
“Under our baseline scenario, our housing outlook, particularly for home sales, remains subdued,” the corporation wrote.
“While housing demand is solid due to a large share of millennial first-time homebuyers looking to buy homes, they are challenged by high mortgage rates and a lack of homes available for sale.”
ANDREW CABALLERO-REYNOLDS/AFP via Getty Images
Freddie Mac expects these challenges to continue throughout 2024 “mainly in the absence of significant rate cuts, which will keep the rate-lock effect in place and keep total home sales volume below five million in 2024.”
Newsweek previously reported about the impact that millennials are having on the housing market, where they’re unwillingly contributing to keeping prices high.
The generation born between 1981 and 1996 has been waiting years for the right moment to buy only to see the financial crisis of 2007-2008 followed by the COVID-19 pandemic. Many got tired of waiting, and they’re now trying to get on the property ladder en masse, shaking up the entire market.
This pent-up demand for homes is keeping prices high, especially as the U.S. is still suffering from a historic lack of inventory and mortgage rates, which are currently averaging 6.8 percent, remain high. The result is that many homebuyers are still being squeezed out of the market—as recent sales data show.
The latest report on existing-home sales by the National Association of Realtors (NAR), published on Thursday, found that existing-home sales descended 4.3 percent in March from February. Compared to a year before, they dropped 3.7 percent. At the same time as sales dropped, prices climbed: between February and March, the median existing home sale price rose 4.8 percent to $393,500.
Matthew Walsh, Moody’s Analytics housing economist, told Newsweek that, as expected by Freddie Mac, home sales are expected to remain low throughout 2024.
“Extremely low housing affordability and a lean existing sales inventory will keep a lid on existing-home sales in the coming months,” he told Newsweek.
“Sales remain well below their average over the past decade, and forward-looking indicators are downbeat. The National Association of Realtors’ pending home sales index had an uneven showing to start the year, and is averaging near its record low. Similarly, mortgage purchase applications have moved sideways over the last few weeks.”
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.