Happy Forecast Season: Next Up, Fannie Mae's 2025 Outlook

Happy New Year!

(Or should I say, Happy Forecast Season?)

At the Home Buying Institute, we often refer to the months of December and January as "forecast season" for the housing market. It's a time when many economists and analysts share their real estate predictions for the new year.

We've analyzed some of those forecasts in previous issues. Today, we'll take a look at the long-range views recently shared by the mortgage-buying giant Fannie Mae.

But first, a top-of-the-year summary of Texas housing market trends.

Texas Housing Market at the Start of 2025

Here are some of the trends we are monitoring at the start of 2025. You can expect to see more of them over the coming weeks:

• The Texas real estate market has experienced inventory growth over the past few years, and especially during the last seven months or so.
• In 2025, home buyers in many cities across Texas will have more properties to choose from, increasing their chances for success.
• The median home price for the Lone Star State remained mostly flat during 2024, hovering around $300,000 according to Zillow.
• Numerous forecasts suggest that prices could begin to climb at a gradual pace in 2025.
• Realtor.com predicted that the El Paso and McAllen metro areas will be among the top U.S. housing markets of 2025, when measured by home sales and price growth.

So that's where this market stands at the start of the new year. Now, let's take a look at that Fannie Mae forecast mentioned earlier.

Fannie Mae's Housing Outlook for 2025

Last month, the Economic and Strategic Research Group at Fannie Mae issued a forecast for the U.S. real estate market and a prediction for mortgage rates.

Here are some key highlights from their recent forecast:

• Mortgage Rates: Average 30-year mortgage rates are expected to decline slightly but will likely stay above 6%, with potential volatility throughout the year.
• Existing Home Sales: Sales will remain close to 30-year lows, with significant regional variations. Areas like the Sun Belt may see more activity due to robust construction.
• New Home Sales: New home sales will outperform other segments of the market, particularly in regions with ongoing construction.
• Home Price Growth: National home price growth is forecast to slow but remain positive, offering some relief to buyers.
• Affordability Challenges: Affordability conditions in 2025 will resemble those of 2024, with supply levels staying below pre-pandemic norms.
• Multifamily Housing: The multifamily sector is anticipated to remain in a holding pattern, with little change in activity.
• Nominal Wage Growth: Wage growth is projected to exceed home price growth for the first time in over a decade, gradually easing affordability pressures for buyers.

According to Mark Palim, Fannie Mae Senior Vice President and Chief Economist:

"From an affordability perspective, we think 2025 will look a lot like 2024, with mortgage rates above 6 percent, home price growth easing from recent highs but staying positive, and supply remaining below pre-pandemic levels."

Palim also reiterated something that we already know -- real estate conditions sometimes vary significantly from one metro area or region to the next:

"For example, in the Sun Belt, where construction has been robust for a few years and homebuilders are targeting first-time homebuyers with some offerings, we expect to see relatively strong housing activity. By comparison, we're not expecting to see the same in the supply-constrained Northeast."

It's a new year with new possibilities for the housing market. And we'll do our absolute best to keep you informed about the trends that matter most.

Thanks for being a subscriber, and enjoy the rest of your week!

Brandon Cornett, Publisher​
Texas Housing Weekly
Home Buying Institute