Economic forecast shows continued growth in home prices and low interest rates

African American woman and her son, spending time together, sitting on a lawn, making soap bubbles. Social distancing and self isolation in quarantine lockdown.

According to our 2021 mid-year forecast, despite the major housing supply shortage and historically high house prices across the U.S., the housing market is expected to remain strong through the end of 2021.

Two key factors supporting housing market activity are low interest rates and the recovering labor market.

Whether you’re a homeowner looking to sell or refinance or a renter interested in buying, Freddie Mac’s forecast can provide valuable insights into housing trends — and, most important, your home investment.

Sellers: Home Prices Are Still High, But Demand Is Softening

  • The current real (inflation-adjusted) home prices are the highest they have been in 131 years of data dating back to 1890, according to data compiled by Nobel Prize winning economist Robert Shiller.
  • The value of your home is likely to remain high for many months to come, even when consumer prices begin to drop, because of the shortage of available homes on the market. We forecast the growth of home prices to be moderate in 2022.
  • The pace of home sales is slowing, even though sales remain above pre-pandemic levels. Potential homebuyers are facing fatigue from the seller’s market conditions through the past few months that have resulted in a rapid increase in home prices and high competition.
  • As a result of the high home prices and softening demand, selling your home may take longer than in the first half of 2021.

Homeowners and Homebuyers: Mortgage Rates Will Remain Low

  • Interest rates remain low, with the U.S. weekly average 30-year fixed-rate mortgage at 2.78% for the week of July 22, 2021.
  • We forecast mortgage rates will increase gradually later in the year, but we don’t expect to see a rapid rise. At the end of the year, we forecast the 30-year fixed-rate mortgage will average around 3.4%, rising to 3.8% by the fourth quarter of 2022.
  • Homeowners, if you haven’t yet, consider whether refinancing this year while mortgage rates are low could benefit you and your financial goals.

Homebuyers, low mortgage rates are providing modest relief in today’s market of strong home appreciation and low inventory.