Forecasters say an extra boost in home sales in 2024 could come at the cost of a slight slowdown next year as mortgage rates rise.
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Fannie Mae forecasters said on Friday that continued strength in the U.S. economy could further boost home sales in 2024, but that could lead to slightly slower sales growth next year as mortgage rates continue to rise.
Fannie Mae currently expects new and existing home sales to grow 5.0% this year to 4.996 million units and another 10.9% next year to 5.543 million units.
Last month, the mortgage giant’s forecasters predicted home sales would grow 3.7% in 2024 and 12.6% in 2025.
Regardless, home sales in 2024 and 2025 total about 10.5 million units.but latest forecast Sales in 2024 are expected to be 32,000 units higher than January’s forecast and 2025 sales to be 48,000 units lower.
“We raised our 2024 forecast slightly, primarily due to higher growth expectations, while we lowered our 2025 forecast, mainly due to expected interest rates,” Fannie Mae economists said in the 2020 report. The environment is slightly higher.” Comment Attached are their latest forecasts.
A strong economy could slow the decline in mortgage rates
source: Fannie Mae and Mortgage Bankers Association Forecast, February 2024.
While Fannie Mae economists said they still expect mortgage rates to fall back below 6% this year, they see little room for further declines in 2025.
Last month, Fannie Mae forecasters predicted that 30-year fixed-rate mortgage rates would average 5.8% in the fourth quarter of this year, falling to 5.5% in the fourth quarter of 2025. The latest forecast predicts that interest rates will fall to an average of 5.9% in the fourth quarter, growing to 5.7% in 2024, and growing to 5.7% in the fourth quarter of 2025.
Doug Duncan
“Our base case currently projects slower economic growth, gradually lower interest rates, and new single-family home sales as construction increases supply,” Fannie Mae Chief Economist Doug Duncan said in the report. Slow recovery.” statement. “However, if economic growth continues to surprise on the upside, then we believe the risk of mortgage rates remaining elevated for an extended period will also increase.”
in a Forecast for February 20Economists at the Mortgage Bankers Association don’t expect mortgage rates to fall below 6% this year, but to fall sharply next year, to an average of 5.5% by the fourth quarter of 2025.
Lockdown effect limits existing home sales
source: Fannie Mae Housing ForecastFebruary 2024.
As the “lock-in effect” and other factors continue to limit the supply of existing homes on the market, Fannie Mae economists expect homebuilders to continue struggling to meet homebuyer demand, with new single-family home starts expected to grow 7.4% through 2024. , will reach 1.01 million.
Fannie Mae forecasters expect existing home sales to rise 4.2% in 2024 to 4.26 million units, while new home sales are expected to more than triple, jumping 9.9% to 734,000 units.
Fannie Mae expects that trend to reverse next year, when existing home sales are expected to rise 12.1% to 4.78 million units, while new home sales growth is expected to slow to 4.2%, with new home sales expected to 765,000 units.
Refinancing expected to see double-digit growth
source: Fannie Mae Housing ForecastFebruary 2024.
Weaker-than-expected data on the average price of new home sales led Fannie Mae economists to lower their forecast for home purchase mortgage loan originations by $30 billion in 2024 and by $40 billion from their previous forecast for 2025 home purchase loan volumes. One hundred million U.S. dollars.
Home purchase loans are still expected to grow by 16.7% this year, reaching US$1.46 trillion, and next year are expected to grow by another 13.2%, reaching US$1.65 trillion.
Lower interest rates are expected to lead to double-digit growth in refinance volume, which shrinks sharply in 2022 and 2023 as mortgage rates soar. Refinancing volumes are expected to grow 81.4% this year to $459 billion and another 54.5% to $709 billion by 2025.
That’s still less than a third of the $2.67 trillion in mortgages that will be refinanced in 2021.
Annual house price appreciation expected to cool
source: Fannie Mae Housing ForecastJanuary 2024.
Fannie Mae economists said in January that they expected home price growth to slow this year, to 3.2% in the fourth quarter. Fannie Mae expects annual home price growth to be essentially flat at 0.3% through the fourth quarter of 2025.
Fannie Mae updates its home price appreciation forecasts quarterly, with the next update scheduled for April.
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