Home Price Growth Reaccelerates in Fourth Quarter
Rhea-AI Summary
Fannie Mae's Home Price Index (FNM-HPI) shows single-family home prices increased 5.8% year-over-year in Q4 2024, accelerating from Q3's revised 5.4% growth. Quarterly prices rose 1.7% seasonally adjusted, up from Q3's 1.2%, while non-seasonally adjusted prices increased 0.3%.
The housing market faces challenges with historically low inventories due to the 'lock-in effect.' Mortgage rates, after reaching around 6.1%, are approaching 7%, further reducing homeowners' motivation to move. According to Fannie Mae's Chief Economist Mark Palim, 2025's housing market faces a complex situation where lower mortgage rates are needed to increase housing supply, but this could simultaneously boost demand from first-time homebuyers, potentially driving prices even higher.
Positive
- Home price growth accelerated to 5.8% YoY in Q4 2024
- Quarterly price growth increased to 1.7% (seasonally adjusted) from 1.2% in Q3
Negative
- Housing inventory remains historically low
- Mortgage rates approaching 7%, worsening affordability
- Lock-in effect continuing to restrict housing supply
Latest FNM-HPI Reading Shows Year-over-Year Increase of 5.8 Percent in Q4 2024
"Year-over-year home price growth accelerated in the fourth quarter, following back-to-back quarters of deceleration," said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. "Inventories of existing homes for sale have improved from a year ago but remain historically low, due largely to the so-called 'lock-in effect.' Since the beginning of October, mortgage rates have rebounded after bottoming out around 6.1 percent and are now inching closer to a new psychological barrier, the 7 percent threshold. The higher mortgage rate environment is not only hurting affordability, but it's also exacerbating the lock-in effect by further reducing homeowners' incentive to move."
Palim continued: "The housing market in 2025 faces a difficult balancing act, with a notable decline in mortgage rates likely needed to help unwind the lock-in effect and thaw the supply of existing homes for sale. However, we believe such a decline would likely jumpstart demand from potential first-time homebuyers currently waiting to purchase, which could lead demand to outpace any improvement in supply, further exacerbating already-high home prices and purchase affordability."
The FNM-HPI is produced by aggregating county-level data to create both seasonally adjusted and non-seasonally adjusted national indices that are representative of the whole country and designed to serve as indicators of general single-family home price trends. The FNM-HPI is publicly available at the national level as a quarterly series with a start date of Q1 1975 and extending to the most recent quarter, Q4 2024. Fannie Mae publishes the FNM-HPI approximately mid-month during the first month of each new quarter.
For more information on the FNM-HPI, including a description of the methodology and the Q4 2024 data file, please visit our Research & Insights page on fanniemae.com.
To receive email updates regarding future FNM-HPI updates and other housing market research from Fannie Mae's Economic and Strategic Research Group, please click here.
Fannie Mae's home price estimates are based on preliminary data available as of the date of index estimation and are subject to change as additional data become available. Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic and Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Mark Palim, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets.
About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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SOURCE Fannie Mae
FAQ
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