Some markets look vulnerable as home price appreciation cools

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Housing and mortgage experts polled by Fannie Mae have dialed back their expectations for home price appreciation this year and next, but most don’t expect national home prices to fall. Some markets, however, are looking vulnerable to price declines.

Fannie Mae’s quarterly Home Price Expectations Survey (HPES), released Friday, showed panelists surveyed in May now expect national home prices to rise by an average of 2.9 percent this year, down from their previous forecast of 3.4 percent.

Similarly, the survey’s housing, mortgage industry and academic experts now expect 2.8 percent home price appreciation in 2026, down from the 3.3 percent envisioned in February.

U.S. home price scenarios

Pessimists on the panel think national home price appreciation could cool from 5.3 percent in 2024 to less than 1 percent this year and next. A small minority — 15 percent — say the odds are better than even that national home prices will turn negative by the end of next year.

As national home price appreciation cools, some markets could see prices fall. The latest S&P CoreLogic Case-Shiller Indices showed home prices in Tampa were down 2.2 percent from a year ago in March.

While Tampa was the only top 20 metro to post a decline, price appreciation “barely stayed positive” in Dallas at 0.2 percent, S&P Dow Jones Indices analyst Nicholas Godec said in a statement.

Most of the largest housing markets tracked by Case-Shiller — 14 out of 20 — posted seasonally-adjusted price declines from February to March.

“These results underscored how markets that experienced sharp run-ups earlier in the cycle — particularly in the Sun Belt — continued to adjust under the weight of higher mortgage rates and strained affordability,” Godec said.

Mortgage rates aren’t coming down, but improving inventory in many markets helped drive up homebuyer demand for purchase loans to the second highest level of the year last week, the Mortgage Bankers Association reported Wednesday.

Only one in five Americans (21 percent) polled by Fannie Mae in May said they expect home prices to come down over the next 12 months, with 45 percent expecting prices to go up and 34 percent expecting that they’ll stay the same. While only 26 percent said May was a good time to buy, that’s up from an all-time survey low of 14 percent a year ago.

Housing and mortgage experts polled by Fannie Mae in May saw Austin, Tampa, Dallas, Denver, Houston, Miami, Phoenix, Washington, D.C., and Atlanta as markets where home prices are most likely to underperform national home price appreciation over the next 12 months.

Among the 20 largest U.S. housing markets, Boston, New York, Philadelphia, Nashville and San Diego were viewed as places where prices are most likely to go up faster than the national average.

Fannie Mae economists update their home price appreciation forecast four times a year, in the first month of each quarter.

In their April forecast, Fannie Mae economists predicted that home prices will rise 4.1 percent this year before appreciation cools to 2 percent by Q4 2026.

Fannie Mae economists think home sales bottomed at 4.75 million last year and will grow by 3.6 percent this year and 6.8 percent in 2026.

Home sales expected to bounce back

If Fannie Mae’s forecast of 5.25 million 2026 home sales pans out, it would be the first time since 2022 that sales of new and existing homes surpassed five million.

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Email Matt Carter