What Fannie Mae predicts for 2024

Fannie Mae is predicting less originations this year but also resilient home sales in the face of wavering economic indicators. 

Economists at the government-sponsored enterprise Monday downgraded total originations for 2024 by $82 billion to $1.73 trillion, in line with other recent industry forecasts. The 30-year fixed mortgage rate will also still average 7.0% this year, with the first of two Federal Reserve interest rate cuts expected in September, the GSE's Economic and Strategic Research Group said. 

Existing-home sales fell 4.3% in March, bringing the average annualized pace to 4.19 million. New listings, however, have remained steady despite fluctuating interest rates, leading the forecasters to believe more major declines in sales are unlikely. 

"We suspect that, for a myriad of reasons, enough would-be sellers are deciding they can no longer put off moving," wrote economists in the report. 

Homeowners have contributed to a "lock-in" effect in the past year as motivation to sell their properties has been dampened by higher mortgage rates, regularly hovering around 7%. New construction sales rose 8.8% in March amid dwindling single-family starts, and Fannie noted the financing incentives homebuilders have offered buyers.

Mortgage stakeholders have reported green shoots in the housing market, with rate locks up annually in April for the first time since the Fed began rate hikes two years ago, according to Optimal Blue. The Mortgage Bankers Association Wednesday also showed loan application volumes up for the third consecutive week. 

Home prices are forecasted to rise 4.8% in 2024, and cool to 1.5% in 2025 on a fourth-quarter year-to-year basis, the researchers wrote. Its origination forecast represents a 17% increase from 2023's $1.47 trillion in single-family origination volume.

How consumers are faring
Americans meanwhile could see some financial setbacks later this year, beginning with the labor market, which is showing signs of cooling. The GSE also highlighted strong consumer spending in February and March lagging income growth, suggesting that spending was cutting into savings. 

"We think consumption is likely to slow, and the most recent pullback in core retail sales in April, which fell by 0.3% over the month, is supportive of this view," the report said. 

Personal interest payments on all non-mortgage debt, as a percentage of total personal outlays, meanwhile hit its highest mark since 2008 over the past three quarters, the researchers wrote. Credit card debt in the first quarter was over $1 trillion and total household debt, including mortgages and auto loans, topped $17 trillion, according to the New York Fed. 

The number of credit card balances that slid into delinquency was also 9% in the first quarter, a rate not seen in over a decade, that report said. Banks and credit card issuers however haven't raised serious alarms.

The Fed's anticipated action hinges largely on its inflation goal of 2%. Its preferred Personal Consumption Expenditures mark averaged 4.4% in the first three months of the year, Fannie Mae reported.

"We believe the combination of softer labor market conditions and weaker consumption growth should flow through to lower inflation prints in the second half of the year," the update said. 

Fannie Mae competitor Freddie Mac last week offered its own positive outlook on the economy and housing market, but it doesn't disclose dollar or loan count projections.