As rate of interest cuts by the US Federal Reserve have gotten ever more imminent, the situation on the true estate market has once more modified significantly.
Accordingly Freddie Mac’s latest forecast According to a study released Tuesday, home prices are expected to rise 2.1% in 2024 and 0.6% in 2025, marking the most recent dizzying turning point for this 12 months particularly.
In April, the mortgage giant said home prices would rise by just 0.5% in 2024 and 2025, well below its Forecast in Marchwhen a price increase of two.5 percent was forecast for 2024 and a couple of.1 percent for 2025.
Freddie Mac didn’t issue recent home price forecasts between April and today, opting as a substitute for a quarterly cadence. This proved prescient, because the dust has only recently settled after major upheavals within the markets and economic data.
A series of higher-than-expected inflation readings within the spring pushed the prospect of Fed rate cuts further and further away, resulting in an increase in bond yields and mortgage rates.
But that view modified over the summer, when inflation hit a three-year low, making a rate cut next month seem more certain. And on Friday, Fed Chairman Jerome Powell essentially confirmed that view, saying “the time for a rate cut has come.”
Mortgage rates have fallen significantly in recent weeks and are actually approaching the 6% mark, the “magic number” that some experts consider will result in further easing of the housing market.
Freddie Mac sees a giant surge in demand, especially from first-time buyers. However, other facets of its forecast are more mixed, much like the sharp upward revision in home prices for 2024 versus a more muted forecast for 2025.
“We also expect lower rates to mitigate the lock-in effect to some extent, leading to some increase in inventory – although this should be minimal given that the majority of existing homeowners have lock-in rates below 6%,” it said. “Despite some easing, tight inventory (due to a decade of construction, exacerbated by the lock-in effect) is expected to continue to constrain home sales.”
The result’s prone to be only a modest increase in home sales for the rest of the 12 months and into 2025, remaining below the 6 million annual rate.
Nevertheless, Freddie Mac stays optimistic overall and doesn’t expect the economy to slide right into a recession.
“While potential homebuyers continue to face housing affordability challenges due to high home prices, homeowners are experiencing significant wealth gains that make them less vulnerable to economic adversities,” the report said.
