After predicting a 4.2% home price drop in 2023, Fannie Mae revised its house forecast last week with a projected 1.2% price decline in 2023 followed by an additional 2.2% decline in 2024, Fortune reports. An ongoing supply shortage is keeping prices higher than expected, even as demand surges and rate hikes slow.
Home builders backed by strong demand in the new-home sector are adding fresh supply to the market, but Baby Boomers aging in place and Gen-X homeowners holding onto ultra-low mortgage rates are keeping a higher-than-average share of existing homes off the for-sale market.
Why did Fannie Mae revise its home price outlook upward? It boils down to the fact that there’s an ongoing shortage of homes for sale, which continues to support home prices and single-family home construction activity, wrote Doug Duncan, chief economist at Fannie Mae, in a statement released last week.
“Demand for housing has exceeded expectations due to Baby Boomers aging in place and Gen-Xers locking in historically low rates, both of which have helped keep housing supply at historically low levels,” Duncan writes. “Homebuilders continue to add to that supply, but years of meager homebuilding over the past business cycle means the imbalance will likely continue for some time.”
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