Fannie Mae makes supply-demand forecast

by Duffie Osental19 Apr 2021

The ongoing imbalance between demand and supply in the housing market will likely drive home prices higher over the course of 2021, according to a new report from Fannie Mae.

The report forecast home prices to rise 8.0% in 2021 – up from the previously forecast 4.2% – before decelerating to 2.9% annualized in 2022 on the back of the continued supply-demand imbalance in the market.

Read more: Fannie Mae has just quantified a key housing market trend

Doug Duncan, senior vice president and chief economist at Fannie Mae, warned that strong consumer demand for housing “continues to hit up against a lack of supply, limiting sales and bolstering home prices, which we expect will further compound affordability concerns in the months ahead as homebuilders also wrestle with input supply restraints.”

Meanwhile, the government-sponsored enterprise’s (GSE) full-year 2021 real GDP growth expectations improved to 6.8%, including 9.1% annualized growth in the second quarter, due primarily to “the continued easing of virus-related social restrictions and stimulus-driven consumer spending.”

“The ramp-up we’d previously forecast for the economy is underway, as evidenced by, among other measures, increasing airline passenger reservations and restaurant bookings,” said Duncan. “While inflationary pressure is growing, our latest forecast update suggests that in the near-term interest rates will remain steady at borrower-friendly levels. In fact, despite the recent increases, mortgage rates remain near historical lows, which we expect will help maintain strong housing demand in 2021.”