Fannie Mae’s Economic and Strategic Research Group Releases Its December Commentary

Fannie Mae’s Economic and Strategic Research (ESR) Group on Monday (12-18-23) released its December commentary. The ESR Group studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analysis on the economy, housing, and mortgage markets.

In its December commentary, the ESR Group said single-family home sales likely bottomed out in 2023Q4 and, due to the recent pullback in mortgage rates, are expected to begin a slow but meaningful recovery over the course of the next year, alongside upward-trending mortgage origination activity.

The ESR Group pointed out that purchase mortgage applications have rebounded approximately 15% from their trough in November, a trend expected to continue if mortgage rates continue to slide.

However, the same dynamics that kept home sales in 2023 at their lowest level since the Great Financial Crisis—including affordability challenges, the lock-in effect, and a lack of homes available for sale—will likely persist in 2024. As such, the ESR Group expects the home sales recovery to be meaningful but slow.

On the downside, the ESR Group is continuing to forecast a modest downturn in 2024, followed by a return to growth in 2025, noting that many of the underlying business cycle dynamics that contributed to last year’s recession call remain. While the likelihood of a soft landing has certainly improved over the last few months, engineering it while avoiding a resurgence in inflation will likely be a difficult task.