Fannie Mae nearly doubles home price growth forecast: Why you should refinance now

Home prices are surging, and will continue to increase through the rest of the year before beginning to moderate.  (iStock)

Mortgage giant Fannie Mae expects a surge in home price growth for the rest of 2021, according to its latest year-end forecast, amid record housing demand and highly limited inventory.

The company’s Economic and Strategic Research (ESR) Group significantly upgraded its home price forecast, as measured by the FHFA Purchase-Only Index, to 14.8% annualized growth across all metros in the United States in 2021. This is up from its prior forecast of 8%.

The rapid rise in home prices can be detrimental to their affordability, but they can benefit homeowners by allowing them to tap into the increases through cash-out refinance transactions. Visit Credible to see your options in today's market to take out a line of equity on your home or lower your interest rate through a refinance.


Why is now a good time to refinance?

With home prices on the rise and positive outlooks for the year of growth ahead, refinancing now can be beneficial for homeowners. Here three reasons why homeowners should do so, rather than wait:

  1. Rising home prices. In order to refinance and take money out of their home, homeowners must maintain at least 80% equity. With home prices surging, many homeowners are now in the market for a cash-out refinance. Home prices are now higher than ever, rising nearly 18% in May, according to the latest housing data from Black Knight. This marked the third consecutive month for the value of all homes to hit an all-time high. This could help homeowners who want to pull money out of their home through a refinance. Visit Credible to get started.
  2. Low interest rates. They're the greatest reason to refinance and are where homeowners can see the most savings. With interest rates at all-time lows, many homeowners can lower their monthly payment by hundreds of dollars by refinancing into today’s sub-3% mortgage rates. But these low rates won’t last long as mortgage rates are projected to rise by the end of the year.
  3. No refinance fee. Among the many good reasons to refinance, the Biden administration recently eliminated the adverse market refinance fee, which will save homeowners an average of $1,400 when they refinance their mortgage. Now, homeowners can enjoy the full benefit of refinancing and lowering their mortgage payments while saving significantly in closing costs.

If you are interested in seeing your refinance options, contact Credible to speak to a home loan expert and get all of your questions answered.


As prices surge, demand for homes will weaken

Fannie Mae predicts the high demand for homes from prospective buyers will moderate as current industry trends continue and prices increase. In addition to supply chain disruptions, material costs, and labor shortages easing – which should allow homebuilders to ramp up production on new homes – the ESR Group expects home price growth to moderate to 5.4% in 2022 – which is welcome news to homebuyers.

Many are currently bidding well above asking price, even as high as $100,000 over asking prices in popular metro areas like Dallas and San Francisco.

"While recent home price growth has been historically high, we’re forecasting further home price appreciation to moderate through the remainder of the year and into 2022," said Mark Palim, Fannie Mae vice president and deputy chief economist. "Demographic trends remain favorable for a strong housing market over the next few years, and, combined with the chronic undersupply of homes built over the last decade, upward pricing pressure is likely to remain through the forecast horizon – just not at the rate seen this spring. Nevertheless, we expect home price growth to become one of the more persistent drivers of inflation going forward, as other, more transitory factors diminish."

As the mortgage giant forecasts a rise in median home prices, it also lowered its interest rate forecast. With interest rates projected to remain low - now expected to rise to just 3.1% by the end of the year - the incentive to refinance is greater than ever. Homeowners could save hundreds on their monthly payment by refinancing into low mortgage rates, and they can tap into the increased equity in their home brought on by rising median home values and use it for home renovations or to pay down high-interest debt. Visit Credible to compare multiple lenders at once.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.