Fannie Mae Unveils Comprehensive Housing Market Projections: Mortgage Rates, Home Sales, And More For The Next Two Years
Peering into Tomorrow’s Homes: Fannie Mae’s In-Depth Analysis on Mortgage Rates, Home Sales, and Beyond for the Next Two Years.
The real estate market is poised for a positive turn in the upcoming years, yet facing persistent challenges that curb a more significant transformation, according to the latest forecast from Fannie Mae.
Anticipated total home sales for 2024 hover around 4.8 million, showing minimal change compared to this year’s expected figures. However, a subsequent surge is expected in 2025, with sales projected to reach 5.4 million.
Highlighting the hurdles, Fannie Mae emphasized, “The drivers of slow sales are well known at this point: unaffordability, lock-in effects, and a lack of existing inventories freezing much of the housing market. While we believe these dynamics will slowly dissipate over time, they will remain obstacles in 2024.”
Despite these challenges, existing home sales are predicted to undergo a gradual recovery starting next year, following a likely low point in October at a seasonally adjusted annualized rate of 3.79 million.
New home sales, buoyed by the housing shortage and builders’ willingness to offer mortgage buydowns, are expected to decline only slightly in the 2024 forecast due to a modest economic contraction, according to the report.
The recent adjustment in monetary policy led to a noticeable drop in mortgage rates this quarter. However, Fannie Mae acknowledges a limit to how much these rates will decrease, projecting the 30-year fixed rate to average 6.7% in 2024, dipping to 6.2% in 2025 from the current level just below 7%, after reaching close to 8% earlier this year.
“The recent pullback in mortgage rates to 6.95% from their peak of 7.79% in October points to an incoming rebound in sales, but even with recent declines, mortgage rates are currently similar to those of the summer of this year,” noted Fannie Mae.
Despite the anticipated price appreciation and increased refinancing activity next year, single-family mortgage originations are expected to rise from $1.5 trillion to $1.9 trillion in 2024 and further to $2.3 trillion in 2025.
While prices are forecasted to continue growing, Fannie Mae does not anticipate the momentum from 2023 to carry over into the subsequent years. The latest quarterly survey conducted in October revealed respondents foreseeing home price growth of 2.4% and 2.7% in 2024 and 2025, following an estimated 5.9% surge this year.
Regarding new construction, Fannie Mae acknowledged an economic slowdown expected to persist into 2024. However, this is likely to present only a temporary setback to housing starts, as low-interest rates are expected to propel single-family starts through 2025.
On the other hand, multifamily starts are anticipated to level off, given the existing inventory in the market and expectations of muted rent growth.
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