Predicting future home prices is not an exact science but over the next couple of years, many housing experts expect average annual price growth to decelerate, according to Fannie Mae’s recent quarterly Home Price Expectations Survey.
The survey, produced in partnership with research firm Pulsenomics, polled more than 100 professionals on their forecasts of national home price percentage changes in the next five calendar years.
Experts’ average responses put total 2024 home price growth at 5.2%, with the next couple of years falling to 3.8% and 3.6% respectively.
Home prices were up 5.9% in the third quarter of this year when compared to the same period the year prior, according to the latest reading of the Fannie Mae Home Price Index.
Among the 92 industry and academia representatives — 80% of all respondents — who expect home price appreciation to be lower in 2025, 45 cited higher mortgage rates as the top reason for slower growth.
More homes in inventory as well as a flatter wage growth were experts’ next top selected reasons for lower home price appreciation in the new year.
Paul Carrillo, a George Washington University economics professor, said high interest rates’ impact on home prices can be a “double-edged sword” because they can limit housing demand and prevent home buyers from affording new homes, but also cause a lock-in effect.
“Households that would otherwise want to move or upgrade and purchase new construction or a bigger house, they were able to refinance at some point and they have very cheap mortgages,” Carillo said.
These homeowners are unwilling to reenter the market at a much higher mortgage rate, limiting both demand and supply.
Carillo said housing prices cannot keep rising at the rate that they have been because household incomes have not risen at the same pace.
“We believe that in the long run, incomes and home prices should kind of move in the same direction,” he said. “If one variable is moving faster, we believe that at some point there has to be some sort of adjustment.”
Not all experts agreed with home price growth decelerating within the 3% range.
Susan Wachter, a University of Pennsylvania professor of real estate and finance, said her prediction lands around 4% for the next year because of pent-up demand, adding price pressure to housing. However, she said there should be a deceleration in prices because the overall economy shows signs of slowing.
“The unemployment rate is slightly rising, particularly among the important demographic of first-time homebuyers and very importantly there’s price resistance across the board” Wachter said.
Ryan Sweet, Oxford Economics chief U.S. economist, said a change in housing demand due to higher mortgage rates could cause house price growth deceleration.
“Demand is going to be under pressure because mortgage rates are going to be elevated,” Sweet said. “In fact, mortgage rates could be higher than what either we or the consensus is expecting given Trump’s tariffs and his expansionary fiscal policy.”
Tariffs, a form of tax on imported goods, and higher government spending threaten to heat up inflation, and could force policymakers to keep interest rates higher for longer to contain any surge.
Despite the forecasted slower rise in prices, homebuyers could still struggle to buy a home in 2025 and may put off the purchase.
"We share our panelists' view that home price growth is likely to decelerate next year, as the mix of continued elevated mortgage rates and the run-up in home prices of the past four years will likely continue to strain affordability and remain an impediment to many would-be homebuyers,” said Mark Palim, Fannie Mae senior vice president and chief economist in a statement.
The National Association of Realtors’ 2024 Profile of Home Buyers and Sellers recorded the lowest share of first-time home buyers — 24% — ever recorded from its survey. Mischa Fisher, Angi Inc. chief economist and instructor at Northwestern University, said a small amount of first-time home buyers is likely to continue.
“The deceleration of home prices is of course not a reduction in home prices, it is just the growth rate of prices going up more slowly,” Fisher said. “I think mortgage rates have to come down for more first-time buyers to get into the market.”
Multiple experts said this aligns with more young adults living with their parents for longer periods of time or continuing to rent rather than buy a home.
Fisher also expects the housing shortage to persist for a while because builders cannot build homes at a fast enough rate, especially due to the risk if most Americans cannot afford the homes.
The Northwestern instructor said 2025 could continue to be a difficult year for home buyers with the one silver lining being that more sellers may be ready to list their homes, but there is hope for 2026.
“My default expectation is about the same as 2024, but I think buyers will have more choice than they had, but I don’t know if they’re going to see a lot more savings,” he said.