The Fannie Mae Economic and Strategic Research (ESR) Group’s March 2024 commentary indicated a slight downgrade in expectations for total home sales and mortgage originations in 2024, attributed to the rise in mortgage rates in February. The ESR Group now forecasts the 30-year fixed mortgage rate to close the year at 6.4 percent, an increase from the previously predicted 5.9 percent. This adjustment comes in the wake of robust job growth and higher-than-anticipated inflation figures, which have led financial markets to expect a less aggressive rate-cutting trajectory from the Federal Reserve. Despite mixed signals from labor market indicators and the likelihood of resumed disinflation, the ESR Group anticipates that the recent data will not suffice to instill the “greater confidence” the Fed requires to start easing monetary policy shortly. However, it is expected that existing home sales will rise in 2024, partly driven by an uptick in activity from households moving due to life events, thus less impacted by the interest rate lock-in effect. This expectation is supported by a recent increase in new home listings and the strength of the ‘good time to sell’ component of the Fannie Mae Home Purchase Sentiment Index®, suggesting a gradual recovery in housing market activity over the coming months and quarters.
Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, commented on the continuing affordability challenges posed by high home prices and elevated interest rates in 2024. The unexpected spike in inflation and solid payroll numbers are anticipated to exert additional upward pressure on mortgage rates this year, altering market expectations for future monetary policy. While a dramatic rise in the supply of homes for sale is not anticipated, an increase in market transactions is expected in 2024 compared to 2023, even if mortgage rates stay high.
For the full details and insights, please refer to the original press release at the following link: https://www.fanniemae.com/newsroom/fannie-mae-news/higher-mortgage-rate-forecast-leads-decline-2024-home-sales-expectations