Click below to watch our video covering the Fannie Mae Housing Market Forecast:
According to a news release by Fannie Mae, they are expecting a 7.6% increase in home values in the FHFA Purchase-Only Index, and an 11.8% increase in the median home price of existing single-family homes. I’m Tim Hamilton with StellarQuest Real Estate, and in this video I am going to be reviewing the January news release by Fannie Mae that discusses why home value increases are likely to slow from 2021, but still remain at a strong pace. If you enjoy this video please help me out by hitting the “like” button below and subscribe if you like to stay up-to-date on the housing market.
Let’s start by quickly looking at some numbers for the general economy, and then we can talk about home prices specifically. Their Economic & Strategic Research Group expects GDP growth of 5.5% in 2021, which would be the strongest annual growth rate since 1984. They are projecting 3.1% growth in 2022. They expect inflation as measured by the CPI (Consumer Price Index) to average 7% on an annual basis in the first quarter, and then slowing to 4% by the end of the year. Additionally, they are expecting the Fed to raise interest rates 3 times in 2022, the first of which is expected to occur in March.
A Quote from Fannie Mae’s Chief Economist
Doug Duncan, Fannie Mae Senior Vice President and Chief Economist states “Currently, we expect inflation to run above the Fed’s 2% target through 2023, and for the Fed to respond by tightening over that period. The resultant rise in interest rates will likely put additional stress on housing affordability measures vis-à-vis higher mortgage rates for consumers and the continued, though decelerating, rise in home prices. While consumers still have a significantly elevated level of savings, the rate of saving has fallen such that, over time, we believe ‘excess’ saving will likely be eroded and affordability increasingly constrained. We observe an early indication of this in recent increases in debt-to-income measures associated with incoming mortgage originations.”
To summarize what Doug Duncan was saying in my own words, home price appreciation will likely slow as homes become less affordable. The drop in affordability will most likely be caused by increasing mortgage rates, increasing home prices, and decreasing savings. The loans that are being made right now are increasingly taking up a larger percentage of the buyer’s income. As purchasing a home becomes more expensive, this can result in decreased buyer demand and slower home price appreciation.
If you enjoyed this housing market forecast please hit the “like” button below and subscribe to our channel if you want to keep informed about the housing market. If you’re thinking about buying or selling a home feel free to call, text, or email me anytime. I am happy to answer any of your questions and help you out if you’re in Southern California. If you’re outside my area of expertise I can refer you to an experienced agent in your area.
Below are a few interesting charts related to housing market values:
Stocks vs. Home Values: https://www.longtermtrends.net/stocks-to-real-estate-ratio/
Home Values vs. Median Income: https://www.longtermtrends.net/home-price-median-annual-income-ratio/
Home Values vs. Inflation https://www.longtermtrends.net/home-price-vs-inflation/
Get More Real Estate News: https://stellarquest.com/category/news/
StellarQuest Real Estate – Lic# 02077900
www.StellarQuest.com
Video By: Tim Hamilton
Broker Associate
Lic# 01959966
(714) 486-4086
timsellsca@gmail.com