Housing Market Outlook Takes Another Sharp Turn
The housing market outlook has taken another sharp turn with rate cuts from the Federal Reserve looking more imminent. In its latest forecast, Freddie Mac predicts that home prices will rise 2.1% in 2024 and 0.6% in 2025.
Recent Shift in Freddie Mac’s Forecast
Just a few months ago, Freddie Mac predicted that home prices would increase only 0.5% in 2024 and 2025. However, in its latest forecast, the mortgage giant has revised its prediction, citing a series of higher-than-expected inflation readings in the spring, which made the prospect of Fed rate cuts look more distant. But with the latest inflation rate hitting a three-year low, making a rate cut next month look more certain, Freddie Mac has revised its forecast again.
What’s Driving the Changes in the Housing Market?
The prospect of Fed rate cuts has sent mortgage rates tumbling, with rates edging closer to 6%, the "magic number" that some experts think will trigger more loosening in the housing market. Freddie Mac expects a big surge in demand, mainly from first-time homebuyers, but other parts of its outlook are more mixed.
Freddie Mac’s Latest Forecast
According to Freddie Mac’s latest forecast, home prices will rise 2.1% in 2024 and 0.6% in 2025. The mortgage giant also expects lower rates to loosen the rate lock-in effect, providing some boost to inventory, although it expects the bulk of existing homeowners to have locked-in rates below 6%. As a result, Freddie Mac predicts only a modest increase in home sales for the rest of the year and 2025, remaining below an annual pace of 6 million.
The Economy and the Housing Market
Despite some loosening, Freddie Mac remains optimistic overall and doesn’t expect the economy to tip into a recession. The mortgage giant notes that prospective homebuyers continue to face affordability challenges due to high home prices, but homeowners are experiencing significant wealth gains, making them less vulnerable to adverse economic events.
Conclusion
In conclusion, the housing market outlook has taken another sharp turn with rate cuts from the Federal Reserve looking more imminent. Freddie Mac’s latest forecast predicts that home prices will rise 2.1% in 2024 and 0.6% in 2025. While the prospect of Fed rate cuts has sent mortgage rates tumbling, Freddie Mac expects only a modest increase in home sales for the rest of the year and 2025.
FAQs
Q: What is driving the changes in the housing market?
A: The prospect of Fed rate cuts is driving the changes in the housing market.
Q: What is Freddie Mac’s latest forecast for home prices?
A: Freddie Mac predicts that home prices will rise 2.1% in 2024 and 0.6% in 2025.
Q: What is the impact of lower rates on the housing market?
A: Lower rates are expected to loosen the rate lock-in effect, providing some boost to inventory, although it is expected to be minimal.
Q: What is Freddie Mac’s outlook for the economy?
A: Freddie Mac remains optimistic overall and doesn’t expect the economy to tip into a recession.
Q: What is the expected increase in home sales for the rest of the year and 2025?
A: Freddie Mac predicts only a modest increase in home sales for the rest of the year and 2025, remaining below an annual pace of 6 million.
Author: fortune.com
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