Fannie Mae Projects Mortgage Rates Will Remain Near 7% Through 2024

The latest research from the Fannie Mae Economic and Strategic Research (ESR) Group suggests that earlier projections for lower mortgage rates in late 2024 will not pan out. 

The ESR Group forecasts overall economic growth to slow and mortgage rates to end the year near 7%. Should mortgage rates remain elevated, the latest data suggested that the market will “modestly” slow. The Federal Reserve’s attitude towards easing monetary policy will affect whether mortgage rates remain on track for 7% or are pushed downward.

The report also notes that active home sale listings are now up approximately 30% compared to a year ago. Thus, the ESR Group believes a “sizable decline” in home sales is unlikely; in fact, it projects a modest increase

For general economic projections, the ESR Group expects inflation to decelerate through 2024 but remain “sticky enough” in the near term to prevent the Federal Reserve from changing course until at least September 2024.

“The question our economics team is asked most frequently by industry participants remains where we think mortgage rates are headed,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “For now, we see rates remaining closer to 7% through the end of the year – before trending downward in 2025 – but note potential downside to that forecast given recent actual movements in rates. Our consumer survey suggests that households who are paying attention to the housing market continue to take a wait-and-see approach. This is consistent with our latest housing forecast, which does not foresee a dramatic change in activity until affordability improves. Given ongoing supply constraints and recent indications that the labor market may be weakening, a downward movement in mortgage rates appears to be the likeliest lever to achieve an improvement in affordability.”

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