The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.
Economists who put together two of the real estate industry’s most closely watched forecasts agree that mortgage rates have probably peaked, but are sharply divided on how quickly they’ll come down over the next two years.
Economists at Fannie Mae are taking Federal Reserve policymakers at their word that they intend to pursue a “higher for longer” rate strategy, which would keep mortgage rates above 7 percent next year.
But forecasters at the Mortgage Bankers Association expect mortgage rates in the mid-6 percent range by the end of next year and in the mid-5s by the end of 2025.
Mortgage rate forecasts sharply diverge
Source: Fannie Mae and MBA forecasts, November 2023.
“Our baseline expectation is that the Fed will not raise rates further this cycle but will keep policy tight until it is clear that inflationary pressures have abated,” forecasters with Fannie Mae’s Economic and Strategic Research (ESR) Group said in commentary accompanying their Nov. 21 housing forecast.
Mortgage rates registered their biggest one-day drop in nearly four years on Nov. 14 after the Bureau of Labor Statistics reported that the all-items Consumer Price Index (CPI) fell to 3.2 percent in October, down from 3.7 percent in September.
While acknowledging that “recent volatility at the long end of the yield curve” adds “additional risk” to their forecast, Fannie Mae economists are now less optimistic about the prospect of lower rates than they were in October.
In their October forecast, Fannie Mae’s ESR Group predicted rates on 30-year fixed-rate mortgages would fall to an average of 6.7 percent during the fourth quarter of 2024. In their latest forecast, which extends into 2025, Fannie Mae economists predict…