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Fannie Mae sees increases through 2023

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The surge in US home prices is calming down, but not as fast as buyers would like, Fannie Mae said in a report. The company expects year-over-year home inflation to reach its pre-COVID average only in early 2023, and prices to continue to skyrocket at a rapid pace. history throughout the next year. Price growth will fall below its average in 2023, but the house price floor will be set permanently higher, economists Fannie Mae said. Loading Something is loading.

If soaring house prices are dissuading you from buying a home in 2021, you’ll have to wait another year for the market to cool down.

The third quarter of 2021 likely marked the peak of the housing market price spike, economists Fannie Mae said in his November real estate forecast. The team projects year-over-year residential inflation to drop to 16.6% in the fourth quarter, from a high of 18.6% in the quarter ended September 30.

The cooldown has started, but it will take time for the market to normalize, the team added. Double-digit home price inflation will last until mid-2022, according to forecasts. It is not until 2023 that domestic inflation will return to the 5% rate observed before the pandemic. The report, released on November 18, is the first to project housing market activity through the end of 2023.

Fannie Mae’s outlook paints a grim picture for potential buyers. The past year has been tough enough for the group, as historically low mortgage rates and the shift to remote working sparked a wave of movement in the era of the pandemic. Home inventories plunged to record highs as sales skyrocketed, and those still looking to buy were forced into frenzied bidding wars over the few homes left available. Monthly price growth has slowed down slightly, but the year-over-year pace is still at its highest level in more than four decades.

The November report downgrades home construction while raising expectations for home sales. Simply put, Americans are still grabbing homes at breakneck speed, but builders haven’t been able to keep up. This combination of factors is expected to leave price growth at stifling highs throughout 2022.

The labor shortage and supply crunch are preventing construction from rebounding, economists said. Bottlenecks made key materials like lumber more expensive for much of the year and nibbled away builders’ profit margins. A shortage of available workers also held back housing starts, as companies struggled to rehire. With both trends putting pressure on builders, buyers will be stuck bidding on a small supply of homes over the next few months.

“If these supply constraints can be resolved faster than we currently anticipate, there is an upside risk to the pace of housing starts and new home sales,” the team said.

But Fannie Mae doesn’t see the 2022 market being pessimistic. The company expects the 30-year average mortgage rate to climb only slightly to 3.5% by the end of 2023. By comparison, the average rate was 3.7% before the pandemic and has approached 5% at the end of 2018. Low cost borrowing offers buyers are relieved as prices continue to rise.

And while prices aren’t expected to fall, price growth for much of 2023 will be slower than average, according to Fannie Mae. Year-on-year housing inflation will fall to 4.4% in the second quarter of 2023 and end the year at 2.9%. That’s about half of the pre-pandemic norm and a much needed relief for buyers willing to wait.

Still, the pandemic is expected to permanently raise the floor for home prices in the United States. Fannie Mae predicts that the median price of a used home will exceed $ 400,000 by the middle of 2023. The median price of new homes will end in 2023 at a record high of $ 464,000, the company added, or about $ 100,000 more than it started out. from 2021.

If the experts at Fannie Mae are right, homebuyers are going to have a mixed experience. It will be easier to find accommodation in the next two years. Being able to afford it will be a whole different story.

Sources

1/ https://Google.com/

2/ https://www.businessinsider.com/housing-market-prices-inflation-outlook-home-costs-fannie-mae-forecast-2021-11

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