2024 Global Housing and Mortgage Outlook Mid-Year Update

Modest home price growth and mild increases in arrears will continue globally through 2024, broadly tracking Fitch Rating’s annual forecasts for the 15 countries covered in our 2024 Global Housing and Mortgage Outlook. Housing supply that is insufficient to meet demand continues to be the defining feature of housing markets. As a result, we have increased our 2024 home price growth forecasts for five countries from our December 2023 forecasts.

We expect home prices in the U.S. to grow by 3%-5% in 2024, with a 1.5% increase already recorded in the first quarter. We also anticipate mortgage rates will hold steady, ending the year between 6.5% and 7.5%. Mortgage arrears remain at all-time lows, with our arrears forecast unchanged.

We have increased our home price growth forecast for Spain to 3%-5% in both 2024 and 2025, although there is a divergence between growth in urban and tourist centers and stagnation in less populated areas. We have also revised Spain’s mortgage rate forecast down slightly to 3.75%-4.25% in 2024 and 3.5%-4.0% in 2025 due to the ECB’s recent 25bps rate cut and expected rate trajectory. Our 2025 projection for arrears in Spain has increased modestly to 3.0%-3.5%, reflecting the strain on a considerable segment of vulnerable borrowers from increased monthly payments and depleted savings, despite a strong labor market.

The home price growth forecast for the Netherlands is now 8%-10% for 2024, following growth of nearly 4% over the first four months of 2024, spurred by wage growth outpacing inflation, stabilized mortgage rates, and a persistent housing supply shortage. We have slightly raised the 2025 forecast to 5%-7%. Mortgage rate projections have risen to 3.75%-4.25% for 2024 and 3.5%-4.0% for 2025 because rate reductions for longer term fixed-rate mortgages have been slower than anticipated. We have not changed our arrears forecasts.

We expect slightly higher Mexican home price growth of 7%-9% in 2024, although this represents a minor deceleration from 2023. This growth is driven by increased building costs, with an expected stabilization in 2025 toward the historical average annual growth rate of 6.8%. Our Brazilian home price growth forecasts have risen slightly to 4.5%-6.5% for 2024 based on strong mortgage demand, stable household debt and unemployment rates and a supportive monetary policy. Brazil’s strong macroeconomic backdrop has also prompted us to lower our 2024 arrears forecasts to 1.5%-2.0%.

Our price forecasts for other countries remain unchanged. We expect home prices to rise modestly in 2024, except in France, China and Japan. Home prices in China and France will continue to decline due to low demand and a drop in sales. The recent ECB rate cut and slowing inflation could curb future house price declines in France. Conversely, property prices in Japan are likely to stagnate in 2H24 amid increasing rates.

Mortgage arrears performance is consistent with our December 2023 forecasts, which anticipated stability or mild increases in most regions in 2024 and stability or slightly lower rates in 2025. In addition to revising the Spain and Brazil arrears forecasts, we have also lowered our Italy mortgage arrears forecast to 0%-0.5% based on the supportive macroeconomic backdrop.

Stable loan performance is underpinned by solid labor markets. While arrears may modestly rise in areas with prevalent floating-rate or short-term fixed-rate mortgages, generally disciplined underwriting practices, supportive macroeconomic environment and real home price appreciation will prevent significant spikes.

Downside risks to arrears include household real income deterioration, high debt-to-income ratios, payment shocks related to all-in homeownership costs, and policy risks due to elections/regime changes.
Source: Fitch Ratings