For mortgage lenders whose business mantra last year was "survive until 25," Fannie Mae just threw some cold water on those plans.
Its January economic and housing forecast is bearish compared with in December, forecasting higher mortgage rates and fewer home sales for 2025. That translates to less originations than it previously predicted.
"While we still see signs of resilience in the labor market, the higher mortgage rates that are associated with a growing economy will likely continue the affordability challenges faced by many potential homebuyers," said Mark Palim, Fannie Mae's chief economist, in a press release. "Due to the ongoing lock-in effect and affordability constraints, we currently expect another year of sluggish existing home sales."
The
While volume for the next two years will be higher than it was in 2024, the gap is narrowing.
Last year, Fannie Mae estimated production finished the year at $1.69 trillion. For 2025, originations should end the year at $1.92 trillion; in December it forecast $1.97 trillion. Next year's potential production of $2.27 trillion is $100 billion lower than the previous estimate of $2.37 trillion.
"A silver lining for affordability is that we also anticipate income growth will outpace both home price and rent growth this year — and
Fannie Mae now expects the 30-year fixed rate mortgage to end the year at 6.5%, a 20 basis point increase, with a full-year average of 6.6%. For 2026, the government-sponsored enterprise no longer expects the 30-year FRM to sink below 6%; it now calls for a 6.3% rate by year-end, 40 basis point rise over the prior outlook. The 2026 full-year average is expected to be 6.4%.
Last week's Freddie Mac survey (which provides the historic rate data Fannie Mae uses in its economic report)
Fannie Mae's forecast is for total home sales forecast for 2025 to 4.89 million units from the previous 5.00 million and for 2026 to 5.25 million compared with December's 5.47 million.
That is causing the GSE to reduce the purchase volume forecast by $19 billion this year to $1.4 trillion; next year it now calls for $1.6 trillion, $63 billion less than in December.
Because of the higher rate environment, it cut the refinance forecast to $496 billion in 2025, $33 billion lower. The 2026 refi outlook was reduced by $31 billion to $693 billion.
The Redfin Home Price Index increased by 0.4% (on a seasonally adjusted basis) in December from November and 5.4% year-over-year.
Prices should grow at a similar rate in 2025, it said.
"Prices will keep going up consistently because it's unlikely there will be enough new inventory to meet buyer demand," said Redfin Senior Economist Sheharyar Bokhari in a press release. "We expect there will be slightly more sales this year, largely due to pent-up demand, but there won't be enough of an increase in listing activity to put significant downward pressure on prices."
However, the Real Brokerage said its agents are optimistic about the prospects for the home sales business this year, expecting a recovery in the U.S.
"Our agents' outlook for 2025 signals a turning point for the industry," said Tamir Poleg, chairman and CEO of Real, in a press release. "Even in an elevated rate environment, agents are preparing for recovery as the housing market emerges from two years of historically low transaction activity."
The company operates in both the U.S. and Canada. Its Transaction Growth Index, which tracks year-over-year changes in home sales activity, dipped slightly to 47.7 in December from 48.3 in November.
While Canada continued to show modest expansion, with an index score of 56.7 (a slight dip from November's 61.0), the U.S. index edged down to 46.8 from 46.9. A score over 50 is a sign of an expanding market.
