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

Existing-home sales and new single-family housing starts are expected to modestly grow in 2024 amid lower mortgage rates and slowly strengthening homebuyer sentiment, according to the February commentary released by the Fannie Mae’s Economic and Strategic Research (ESR) Group on Friday.

While housing affordability is still seriously constrained following the home price run-up of the past few years, the supply of existing homes available for sale is finally showing signs of loosening, the ESR Group said. In addition, more households have recently signaled they expect mortgage rates to decline, as evidenced by Fannie Mae’s January Home Purchase Sentiment Index®, a newfound optimism that may signal an increased openness to moving.

The ESR Group’s latest forecast sees mortgage rates falling to 5.9% by the end of 2024 and 5.7% by the end of 2025, both slight upticks compared to last month’s forecast. Additionally, it expects single-family starts to trend upward in 2024 despite the pullback this past month, as permits have increased for twelve consecutive months and demand for new homes remains robust.

In remarks accompanying the release of the ESR Group’s latest commentary, Fannie Mae Senior Vice President and Chief Economist Doug Duncan said:

“Market dynamics continue to reflect significant uncertainty regarding the sustainability of stronger-than-expected recent GDP growth, the continuity of the decline of inflation, and the path of monetary policy change, not to mention the many ways in which historical relationships in housing and the larger economy remain out of balance post-pandemic. Right now, our base case scenario foresees economic growth decelerating, rates gradually declining, and new single-family home sales slowly recovering as construction adds supply. However, if economic growth continues to surprise to the upside, then we believe the risk of mortgage rates remaining higher for longer will also increase.”