Affordability concerns remain the primary limitation on home sales even as for-sale home listings are on the rise, according to commentary from the Fannie Mae Economic and Strategic Research Group. As a result, the group has downwardly revised its total home sales forecast for 2024 to 4.82 million, which would represent just a 1.3% annual gain.

Home sales have remained weaker than expected despite the recent rise in listings, which may indicate that many homeowners are no longer willing to delay moving due to the so-called “lock-in effect” – perhaps in part due to a general upward recalibration in mortgage rate expectations by consumers following the historically low mortgage rates of the pandemic. While the number of homes available for sale remains tight by historical standards, the months’ supply of inventory is gradually increasing, a dynamic the ESR Group sees as consistent with a deceleration in home price growth.

“The economy appears to be slowing, and recent readings offer hope that inflation is cooling after progress on that front stalled in the first quarter – a trend that will likely need to be sustained for the Fed to feel comfortable cutting rates,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Additionally, the labor market is showing signs of a gradual slowdown, with the unemployment rate creeping up to 4% in the June report. Unfortunately, we’re still not forecasting a ramp-up in housing activity, which will require some combination of continued household income growth, a further slowing of home price appreciation, or a decline in mortgage rates to bring affordability within range of many waiting first-time and move-up home buyers.”

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