New York, NY – The latest outlook from Freddie Mac has revealed a significant shift in forecasts for U.S. home prices, painting a different picture than what was anticipated just a month ago. According to the mortgage giant, home prices are now projected to increase by only 0.5% in both 2024 and 2025, a sharp decline from the previous forecast of 2.5% in 2024 and 2.1% in 2025. The downward trend in price predictions is especially noticeable compared to earlier expectations at the beginning of the year when a 2.8% increase was projected for 2024.
While a less aggressive trajectory in home-price gains may seem positive for potential buyers, challenges remain due to limited inventory and sustained high mortgage rates. Freddie Mac highlighted the difficulties faced by prospective homebuyers, particularly Millennials looking to purchase their first homes, given the current market conditions.
The economic landscape has remained stable, with the main difference in the past month being the outlook on rates and potential Federal Reserve actions. Heightened inflation readings at the beginning of the year dampened hopes for imminent Fed rate cuts, leading to an upward trend in U.S. bond yields and mortgage rates. Federal Reserve Chair Jerome Powell’s recent statements confirming the decision to maintain rates for the time being further solidified market expectations.
Consequently, Treasury yields have continued to climb, with the 10-year rate surpassing 4.6%, resulting in higher borrowing costs across the board. Notably, the 30-year fixed-rate mortgage exceeded 7% for the first time this year, based on Freddie Mac’s latest data.
These developments have significantly influenced Freddie Mac’s revised housing market outlook, reflecting the impact of recent economic shifts. Initial predictions of potential Fed rate cuts and lower mortgage rates have been replaced with a more cautious approach, as the Fed adopts a “wait and see” attitude before considering any easing measures.
The updated forecast comes amidst concerns over high home prices and mortgage rates, deterring many Americans from pursuing homeownership. Redfin reported that the cost of owning a home is now at its highest on record, further complicating the housing market landscape. CEO Glenn Kelman highlighted the frustrations of prospective buyers who have delayed entering the market, emphasizing the unique challenges faced by Millennials in today’s housing market.
Overall, the housing market continues to face uncertainty as economic factors and changing trends contribute to evolving forecasts for home prices and mortgage rates. The impact of these developments on prospective buyers and the broader housing market remains a key concern for industry experts and analysts.