Fannie Mae Updates 2022 and 2023 Projections for GDP and Housing

Fannie Mae (FM) on Monday (8-22-22) updated their projection for real gross domestic product (GDP) in 2022. FM now projects that GDP will be flat at 0.0% growth on a Q4/Q4 basis. According to FM, the latest GDP reading showed an expected decline in Q2, but recent data point to a return to a modest growth in Q3.

As a result, FM says that they continue to view the economy as generally stagnating in light of tighter monetary policy and high inflation. Indicators are painting a mixed picture, most prominently the negative GDP readings in the first half of the year despite strong employment growth over the same period.

As the full effects of tighter monetary policy and fading fiscal stimulus work through the economy and suppress consumer spending, FM expects a moderate contraction to occur in 2023 along with a weakening of the labor market. FM’s forecast for 2023 GDP on a Q4/Q4 basis is negative 0.4%, unchanged from the prior forecast.

In regard to housing, FM has lowered its 2022 forecast for total homes sales modestly to a 5.78 million units, which is a 16.2% decline from 2021 and down from their previous forecast of a 15.6% decline. FM says that despite a pullback in mortgage rates over the past month, recent incoming data point to a faster near-term slowdown in sales than expected, especially for new homes.

In contrast, FM’s total sales outlook for 2023 was revised upward slightly from 5.15 million to 5.18 million units. Given changes to the outlook for both home sales and mortgage rates, FM has slightly lowered its forecast for 2022 mortgage originations to $2.47 trillion (previously $2.53 trillion), while modestly raising the 2023 originations forecast to $2.29 trillion (previously $2.22 trillion).