Affordability housing crisis into 2025?

Dated: March 22 2024

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Where are mortgage rates headed?

My favorite real estate reporter, Lance Lambert commented this week in his ResiClub newsletter on upcoming trends for mortgage rates and the potential impact on affordability through 2025. He also brilliantly reports on how the "lock in" effect actually has caused a rise in home prices, dramatically increasing the housing affordability crisis;

The average 30-year fixed mortgage rate as of Friday is 6.91%.

By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. While Wells Faro’s model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

IF those forecasts come to fruition (Note: ResiClub takes all forecasts with a grain of salt), it’d mean that housing affordability would still remain strained in 2024 and 2025.

“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024… Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we'd previously forecast, as markets continue to evolve their expectations of future monetary policy. Still, while we don’t expect a dramatic surge in the supply of homes for sale, we do anticipate an increase in the level of market transactions relative to 2023—even if mortgage rates remain elevated,” wrote Doug Duncan, chief economist of Fannie Mae, on Tuesday.


How the "Lock In" Effect impacts home prices

Not only has the lock-in effect cost the housing market 1.3 million home sales, but FHFA researchers find it has also put upward pressure on national home prices.

The supply reduction [created by the lock-in effect] increased [national] home prices by 5.7%, outweighing the direct impact of elevated [mortgage] rates, which decreased prices by 3.3%. These findings underscore how mortgage rate lock-in restricts mobility, results in people not living in homes they would prefer, inflates prices, and worsens affordability. Certain borrower groups with lower wealth accumulation are less able to strategically time their sales, worsening inequality,” wrote the FHFA researchers. Read more

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Susanna Kunkel, Realtor
eXp Realty, LLC


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Susanna Kunkel

Susanna provides executive level service to all her clients based on her years in corporate CEO offices. Creative marketing, global networking and local expertise. Her unique mix of business savvy and....

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Read More