Fannie Mae foresees more competitive mortgage rates but a resilient "lock-in" effect to close the year.
The 30-year fixed-rate mortgage will end the year at 6.0%, down from
The government-sponsored enterprise didn't improve its origination outlook for the year, with an anticipated $1.67 trillion in loan volume for 2024, of which $1.3 trillion would be purchase activity.
"The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale," said Mark Palim, senior vice president and chief economist at Fannie, in a press release Thursday.
The ESR Group's home sales prediction is also at risk of
Home price appreciation in 2024 was slower than initially reported, according to revisions to the Fannie Mae Home Price Index. Economists still warned of a steady rise, mitigating the motivation to sell. The ESR Group expects home prices to rise 5.8% in the fourth quarter on an annual basis, and upwardly revised its 2025 forecast to 3.6% growth from 3.0%.
The 30-year FRM may be a full percentage point lower than the same time last year, but analysts today put it squarely in the mid-6% range. As of Thursday afternoon, National Mortgage News' LenderPrice index showed a 30-year FRM over 6.8%.
"Rates have risen because of 'good' reasons, including better economic growth and above-consensus increases in
Among recent economic highlights was a "Quits Rate" falling to 1.9% in August, its lowest level since July 2015. The figure, Fannie explained, is a useful metric for future wage growth and confidence in the labor market.
The 10-year Treasury, the more direct influence on mortgage rates, has jumped from 3.65% in mid-September to around 4.1% Thursday. ESR Group authors wrote they don't expect that rise to be a significant headwind for future rate growth.
Fannie still expects an overall slowdown in economic growth, but consumer finances appear to be stabilizing. The government has made "sizable upward revisions" to personal income data and savings. A savings rate of 5.2% in Q2, authors wrote, is below the pre-pandemic level but represents more cohesion between income and spending levels.
"As such, we no longer believe that consumption growth will need to slow as much to bring this relationship into balance," the ESR Group said.
Mortgage rates meanwhile should average 5.7% in 2025. Originations will surpass $2 trillion, but the projection was downgraded slightly this month to $2.14 trillion from $2.16 trillion. Refinance volume, which has already shown signs of life, should double to over $600 billion next year.
Inventory remains the crux of the housing market. New home sales fell on a seasonally adjusted annualized rate to 716,000 in August. Despite a lack of available homes, starts had lagged this summer on weak demand off high rates.
"Continued strong homebuilding activity will also play a significant role as the shortage of national housing stock remains the primary impediment to affordability," the economists said.
