Whether you’re refining your business model, learning new technology, or finding a strategy to take advantage of the next market boom. inman connect new york It will prepare you to take a bold step. The next chapter is about to begin. Please join us. would you like to join Join thousands of real estate leaders from January 22-24, 2025.
Fannie Mae economists said Thursday that the U.S. economy’s surprisingly strong performance has eased fears of a recession, but home prices are likely to continue rising and mortgage rates may not fall as quickly as previously expected. He said that it means that there is a gender.
Fannie Mae economists predicted last month that this year could be the weakest year for home sales since 1995 as prospective home buyers continue to grapple with affordability issues.
The recent drop in mortgage rates and expectations that rates will fall below 6% next year have prompted forecasters at major mortgage lenders to raise their home sales forecasts for 2024 and 2025, but only slightly.
Home sales predicted to increase by 10% in 2025
Source: Fannie Mae housing forecastOctober 2024.
fannie mae october housing forecast forecasts 4.77 million home sales in 2024, an increase of 30,000 from September’s forecast of 4.74 million. If the latest predictions come true, sales this year will be 16,000 more than in 2023, and last year will go down in history as the weakest year of the century.
mark parim
Fannie Mae said, “While potential homebuyers have noticed a decline in mortgage rates over the past few months, especially for first-time buyers, we have seen little to no easing in home prices, another major driver of home prices.” We are equally aware that we have not done so.” Chief Economist Mark Parim said: statement.
“The timing of the long-anticipated recovery in home sales activity and further slowing of home price growth will depend in part on the willingness of current homeowners to forgo low mortgage rates by putting their homes up for sale. .”
Fannie Mae forecasters expect home sales to rise 10% to 5.24 million next year, with an even bigger increase in sales expected. This is 27,000 more sales than Fannie Mae expected in September.
Most of next year’s sales growth is expected to come from existing homes, which Fannie Mae predicts will increase 11% to 4.52 million units. The number of new home sales in 2025 is expected to remain roughly unchanged at 715,000 units, but this is up from last month’s forecast of 703,000 units.
“In this month’s outlook, we have revised our new home sales outlook upward in response to lower interest rates, and we continue to expect the lack of existing homes for sale to support new home sales, leading to a modest year-on-year increase. “forecast horizon,” Fannie Mae forecasters said.
House price growth slows
Source: Fannie Mae housing forecastOctober 2024.
Fannie Mae’s October housing forecast predicts that home prices will continue to rise next year, but at a slower pace. House price growth is expected to slow to 3.6% by the end of next year, which is higher than the 3% forecast in July for the fourth quarter of 2025.
[Fannie Mae economists produce their housing forecast on a monthly basis, but home price appreciation projections are only updated on a quarterly basis.]
Many homeowners are feeling a “lock-in effect” due to rising mortgage rates. They don’t want to put their homes on the market because they don’t want to give up the low interest rates on their existing mortgages. Home sales are expected to recover next year, but the lock-in effect has left many markets with a lack of inventory, which is pushing down prices.
“We expect home price growth to slow as affordability continues to grow and the inventory of available homes for sale increases in some regions,” Fannie Mae economists said. economists said. Explanation Accompanied by the latest forecasts. “However, the overall low level of available homes for sale continues to drive home price growth, especially as income growth and employment remain strong.”
Are home loan interest rates below 6%?
Source: Fannie Mae housing forecastOctober 2024. Mortgage Bankers Association Mortgage Finance Forecast, September 2024.
Fannie Mae forecasters expect 30-year fixed-rate mortgage rates to fall below 6% in the first quarter of 2025 and continue to fall to an average of 5.6% in the third and fourth quarters.
However, although this forecast was published on October 17th, it was completed at the beginning of the same month. Since then, interest rates have been trending higher, which Fannie Mae forecasters say poses “upside risk” to the latest mortgage rate and home sales forecasts.
Mortgage rates have risen 40 basis points since hitting a 2024 low of 6.03% on September 17, with the strong economy leading Fed policymakers to take a cautious approach to future rate cuts. It appears that it is now possible to obtain it.
Fannie Mae forecasters said that due to recent increases in mortgage rates, “home sales activity is likely to remain subdued,” but that “overall, the outlook for the economy and labor market is improving.” “The improvements will be a boon for the housing market.”
Fannie Mae expects 30-year fixed-rate mortgage rates to average 6% in the fourth quarter (October, November, and December), data tracked below. Optimal blue Borrowers on Wednesday indicated they were locking in an average interest rate of 6.43%.
Fannie Mae economists said, “The strong economic data has led to significant increases in mortgage rates, posing an upside risk to the interest rate outlook, but also a downside risk to our sales forecast.” he admitted. “Regardless of changes in mortgage rates, we expect the effects of ‘lock-in’ to remain strong and the recovery in home sales to remain gradual in the short term.”
Rather than a recession, Fannie Mae’s Economic Strategic Research (ESR) Group expects economic growth (as measured by gross domestic product) to slow from 3.2% in 2023 to 2.3% this year and 2.0% next year. I’m watching.
Fannie Mae forecasters said, “While the positive economic outlook will support demand for home purchases, it will also likely lead to higher mortgage rates, further constraining sales of existing homes.” . “In fact, the slight increase in purchase mortgage applications seen in September has leveled off in the most recent week of data.”
Housing prices drive mortgage origination
Source: Fannie Mae housing forecastOctober 2024.
Fannie Mae predicts that if home sales grow as expected next year and home prices continue to rise in many markets, mortgage originations will rise 28% to 2.14 trillion next year.
Purchase loan originations are expected to rise 16% to $1.52 trillion, and refinances could rise 70% to $625 billion.
The building boom continues to cool down
Source: Fannie Mae housing forecastOctober 2024.
Fannie Mae expects single-family housing starts to stabilize at 996,000 units next year, although the pandemic-era building boom continues to cool. Last month, Fannie Mae predicted that single-family housing starts would reach 989,000 in 2025.
Fannie Mae economists said, “We expect the new home sales market to continue to be positive as the labor market continues to be resilient and existing home sales remain low.” “We have upwardly revised our 2024 and 2025 new home sales forecasts and slightly increased our single-family home starts forecast.”
Get Inman’s Mortgage Overview Newsletter delivered straight to your inbox. Get the world’s biggest mortgage and closing news all in one place every Wednesday. Click here to subscribe.
Email Matt Carter
