How the home price forecast is changing

Experts raised their home-price growth projections for 2024 largely due to supply issues, but cost trends appear likely to maintain their current downward trajectory.

Housing industry experts predict annual price growth will hit 4.7% for the full year, before slowing to a 3.1% pace in 2025, according to a quarterly poll conducted by Fannie Mae and Pulsenomics. The numbers reflect an increase in 2024 expectations from 4.3% one quarter earlier, but the 2025 number inched down from 3.2%.  

The pace of moderation largely aligns with data from various housing industry researchers, who have reported similar findings for the past several months based on monthly data. While the rapid rise of rates and low affordability have dampened purchase activity, prices are still managing to exceed previous forecasts, "a dynamic that is still primarily a function of inadequate supply," said Mark Palim, Fannie Mae vice president and deputy chief economist. 

"Recent measures of home price growth, including our own, have continued to come in stronger than previously expected," Palim added. 

Poll respondents in Fannie Mae's Home Price Expectations survey consisted of over 100 experts from housing and mortgage industries, as well as academic researchers. Looking out further, the panelists predicted growth to rise back up to 3.3% in 2026. For the five-year stretch from 2024 to 2028, housing costs will rise on a cumulative basis by 20.2%, they said.

Housing policy and affordable homeownership are garnering attention this election season. Until solutions can effectively address housing shortages, significant price relief will still be difficult to find even if rates head lower as many expect, according to Pulsenomics founder Terry Loebs.  

"While lower interest rates could incentivize some homeowners to sell, the deep-rooted housing supply and affordability crises will likely persist, even with a more accommodative monetary policy," Loebs said.  

Housing policy and zoning reform that would enable expanded construction permitting and multifamily development are seen as potential remedies to increase supply, with 48% of panelists saying they would have a moderate-to-significant impact on creating supply. 

Despite the potential growth and promise shown in such initiatives, over 63% of experts in Fannie Mae's poll had no confidence they would be rolled out widely enough to adequately address current issues.

"Most remain apprehensive about the near-term prospects of these sorts of reforms being enacted broadly enough to have a meaningful effect on supply and housing affordability," Palim said. 

On average, Fannie Mae's panelists believe the U.S. has a shortage of 2.8 million housing units, with some experts putting that number closer to 7 million. 

Among policy moves proposed or enacted within the past year that could spur new development are updates to the Federal Housing Administration's 203(k) program to promote home renovation and rehabilitation, including construction of accessory-dwelling units. 

Other federal agencies have also put forward plans to increase supply through conversions of existing buildings or increased production of manufactured homes.