Fannie Forecasts Slight Increase in Mortgage Apps Next Year
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae economists are forecasting a slow recovery in home sales and mortgage originations amid a modern downturn in the economy in 2024.
In its December commentary, Fannie’s Economic and Strategic Research Group said that single-family home sales likely bottomed out in the fourth quarter of this year, noting that purchase mortgage applications have so far rebounded 15 percent from a low in November.
Fannie cautioned that the projected increase in applications is based on the assumption that mortgage rates continue to slide. Fannie also said that the same dynamics that kept home sales in 2023 at their lowest level since the Great Financial Crisis — affordability challenges, the lock-in effect, and a lack of homes available for sale — will likely persist in 2024.
“While we think home sales will start to rise over the new year, the combination of modest increases in home prices and still-elevated interest rates suggest a slow pace of recovery from previously recessionary levels of housing activity,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
The ESR Group also continues to forecast a modest economic downturn in 2024, followed by a return to growth in 2025.
“Last week’s comments by Chairman Powell, as well as the Federal Reserve’s updated Summary of Economic Projections, suggest increased Fed confidence that a soft landing has been achieved and inflation is headed sustainably to 2 percent,” said Duncan. “Clearly, the many economic forecasters who previously forecasted a recession beginning in 2023 were wrong, including us. However, we continue to think there are reasons for concern that will likely lead to a mild economic downturn.”
Those factors include stretched consumer spending relative to personal incomes and the continued effects of restrictive monetary policy still working through the economy.
Fannie expects economic growth of 2.6 percent year-over-year in the fourth quarter of 2023. The forecast for 2024 is a slight 0.3 percent decline in GDP, followed by 1.7 percent growth in 2025.
Additionally, Fannie is forecasting:
Total home sales of around 4.8 million in 2023 and 2024, and 5.4 million in 2025.
Total single-family mortgage originations to grow from $1.5 trillion in 2023 to $1.9 trillion in 2024, and then to $2.3 trillion in 2025.
An average 30-year mortgage rate of 6.7 percent in 2024 and 6.2 percent in 2025.
Slight increases over previous projections for 2024 for refinance volume, as well as housing starts in both single-family and multifamily sectors.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
