WASHINGTON — Fannie Mae is calling off its outlook for a modest recession, replacing it instead with a forecast for “positive-but-below-trend growth” this year.
In the January Economic Developments report from the Fannie Mae Economic and Strategic Research Group, there was also good news regarding mortgage rates, which the ESR Group sees falling below 6% by year-end, giving a boost to home sales.
Lower rates are likely to “thaw” the existing home sales market. The ESR Group expects annualized existing home sales to move up to 4.5 million units by Q4 compared with 3.8 million in the same quarter in 2023.
However, a full recovery to pre-pandemic rates is still a ways off, ESR Group noted, citing the ongoing lack of supply and affordability. This should give a boost to new single-family homes, with new home starts and sales forecast to top 2023 levels. Home prices are now expected to rise 3.2% this year vs. 7.1% in 2023.
“In 2024, we expect home sales and mortgage origination activity to begin a gradual recovery in the presence of a slow-growing economy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “We expect mortgage rates to dip below 6% by year-end 2024 and for homebuilders to continue to add new supply.”
While the ESR Group’s forecast continues to project a slowdown in economic growth, it now anticipates a brighter economic backdrop compared to previous months; thus, it’s change of viewpoint on a moderate recession. But the forecast still acknowledges uncertainty and some downside risks, which keeps a recession in play, albeit to a lesser extent.