Supply crunch keeps pushing prices higher, rate cuts unlikely to help
Annual home prices rose by 7.4% in the first quarter as supply constraints continued to fuel price increases, according to the latest Fannie Mae Home Price Index (FNM-HPI).
On a quarterly basis, the index showed a seasonally adjusted price increase of 1.7%, mirroring the growth rate seen in the fourth quarter of 2023. Prices also increased 1.7% on a non-seasonally adjusted basis.
“Home prices continued to rise in the first quarter as the housing market remained seriously supply constrained,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said in the report.
According to the latest Census Bureau report, housing starts declined 14.7% to a seasonally adjusted annual rate of 1.32 million units in March. Multifamily starts plunged 20.8% to 290,000, while single-family starts fell 12.4% to a rate of 1.02 million.
The continued imbalance between supply and demand is expected to keep home prices rising, according to Selma Hepp, chief economist at CoreLogic.
“However, with expectations of Federal Reserve rate cuts fading out of forecasts, potential homebuyers will not gain any cost advantage by staying on the sidelines in 2024,” said Selma Hepp, chief economist at CoreLogic.
Read more: How steep is America’s housing supply crisis?
Duncan added that while mortgage rates stabilized briefly in the 6.6% to 6.7% range in January, boosting early Q1 demand, the recent upward trend in rates could impact affordability.
“Mortgage rates have trended upward again of late, but there is support for home prices in strong demographic demand from younger generations,” he said. “We expect home sales to rise modestly this year as potential homebuyers appear to be acclimating to the higher-rate environment and, in some cases, may be less able to put off moving for life reasons.”
The Fannie Mae HP tracks home price changes nationwide, excluding condos. The index compiles data to provide a comprehensive view of the trends affecting the single-family home market across various regions and is updated quarterly.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
