Fannie Mae's latest mortgage and housing outlook brings promising news for the housing market, but lingering economic uncertainties complicate the picture.
The government-sponsored enterprise now sees mortgage rates falling by the fourth quarter to 6.3% (with a full-year average of 6.5%) and slipping further to 6.2% by the end of 2026.
As a result, home sales will now be better than expected.
Competing forecasts and market reactions
February's outlook had
However, the economics team led by Mark Palim has cut its gross domestic product projections to 1.7% for 2025 and 2.1% for 2026. The February outlook put GDP at 2.2% for each year.
"While our latest forecast calls for a period of modestly slower economic growth, historically, interest rates have been the most important driver of home sales," Palim said in a press release. "We think mortgage rates will move even lower within the next quarter and ultimately close the year at approximately 6.3%, which could be low enough to generate some extra sales from any would-be buyers still waiting on the sidelines."
Freddie Mac's most recent Primary Mortgage Market Survey, whose data Fannie Mae uses in its outlooks,
The Mortgage Bankers Association's latest forecast, issued on March 20, puts the 30-year at 6.5% for the fourth quarter and full year. For 2026, across all four quarters, it expects rates to remain at 6.4%. This was unchanged from February.
Both forecasts were compiled before this morning's personal consumption expenditure's announcement, which came in
While the Federal Open Market Committee does not set long-term rates, investors price the 10-year Treasury, a benchmark for the 30-year fixed, based on its outlook. If inflation remains high, the FOMC is more likely to cut short-term rates.
Most people expect two cuts this year, although forecasts have ranged from one to as many as four. Palim is in the one cut camp, followed by two in 2026, although he admits upside and downside risk to this projection.
Home sales and mortgage volume predictions revised
Total home sales are now expected to rise this year by 4.2% over 2024; next year's annual gain is projected at 6.8%. If rates end the year where Palim expects, it "could be low enough to generate some extra sales from any would-be buyers still waiting on the sidelines."
But the outlook is clouded by the unknown impact
When it comes to volume, Fannie Mae increased its purchase origination forecast by $12 billion to $1.4 trillion for 2025, which represents a 10% growth rate year-over-year. Next year, purchase activity should increase another 10%, to $1.6 trillion.
Its lower rate forecast will also result in increased refinance volume, to total $502 billion in 2025. That is $38 billion higher than last month's outlook. Refis are predicted to increase to just under $700 billion in 2026.
This makes total volume for this year to approximately $1.94 trillion and $2.28 trillion in 2026. Fannie Mae's latest estimate for 2024 was $1.69 trillion, with $1.3 trillion of purchase and $302 billion of refinancings.
How the MBA's forecast compares
The MBA's volume estimates for last year were $1.78 trillion, consisting of $1.29 trillion of purchase and $491 billion of refis.
In the March forecast for this year, MBA is looking for $2.07 trillion of total activity, with $1.41 trillion coming from purchase and $663 billion from refinancings.
It was slightly higher on a total basis from February, with total volume of $2.06 trillion, as a result of increasing refi expectations from $638 billion, but dropping the purchase volume from $1.42 trillion.
The MBA's 2026 and 2027 forecasts were not changed from February, remaining at $2.37 trillion and $2.46 trillion.
