Optimistic 2024 Housing Market

Fannie Mae Predicts Sub-6% Mortgage Rates Amidst Economic Risks

The latest economic forecast from Fannie Mae paints an optimistic picture for the housing market in 2024. According to the government-sponsored enterprise, mortgage rates are expected to drop below 6% by the end of the year, marking a significant shift in the real estate landscape. In this blog post, we'll explore Fannie Mae's projections and what they mean for homebuyers, homeowners, and the overall economy.

Mortgage Rates and Market Dynamics:

Fannie Mae's economic and strategic research (ESR) group anticipates a gradual recovery in home sales and mortgage origination activity. The decline in inflation and signals from the Federal Reserve regarding future rate cuts have led to the belief that the housing market bottomed out in the second half of 2023. The projection of mortgage rates falling below 6% by the end of 2024 is expected to stimulate refinance volumes and contribute to the thawing of the existing home sales market.

• Housing Market Outlook

The ESR group expects the annualized pace of existing home sales to increase to 4.5 million units by the fourth quarter of 2024, up from 3.8 million in Q4 2023. The gradual normalization of the existing homes market, coupled with additional housing supply from new constructions, is anticipated to help prevent excessive home price growth. Fannie Mae now forecasts a more modest 3.2% increase in home prices in 2024, a significant drop from the 7.1% growth seen in 2023.

• Origination Volume Forecast

Fannie Mae predicts a robust growth in single-family mortgage originations, with a total volume of $1.98 trillion in 2024 and a further increase to $2.44 trillion in 2025, up from $1.50 trillion in 2023. Purchase origination volume is projected to see a 19% increase, reaching $1.5 trillion in 2024. However, the forecast suggests that refinance mortgage origination volume will remain subdued, with only about 10% of existing loans having rates above 6%.

• Economic Outlook and Risks

Notably, Fannie Mae has revised its economic outlook for 2024, replacing its explicit call for a recession with an expectation of "below-trend growth." The ESR group acknowledges positive economic indicators such as the recent easing in financial conditions and a solid upward trend in real personal income growth. Despite the optimistic outlook, risks for a recession still linger, including mixed signals in the labor market, rising shipping rates due to attacks on container vessels, and potential inflation concerns.

Conclusion

Fannie Mae's optimistic forecast for mortgage rates and the housing market in 2024 brings hope for both prospective homebuyers and existing homeowners. The projected decline in mortgage rates below 6% by year-end is expected to stimulate activity in the real estate market, with increased home sales and manageable price growth. However, the economy remains at a higher-than-normal risk for a recession, emphasizing the importance of monitoring potential risks and staying informed on market trends in the coming months.

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