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The odds that the U.S. will manage to avoid a recession and achieve a “soft landing” as the economy decelerates are improving, but the Federal Reserve is likely to pursue a “higher-for-longer” rate strategy that will keep mortgage rates elevated and put a damper on home sales, forecasters at mortgage giant Fannie Mae predict.
“With an ongoing tight supply of existing homes for sale on the market, we expect overall home sales in 2023 to remain near the lowest annual level since 2009,” Fannie Mae economists said Wednesday in commentary accompanying their latest forecast. “This lack of supply is driving a resurgence of home price growth and supporting increases in new home construction.”
The lack of inventory — driven in part by the “lock-in effect” (a reluctance on the part of existing homeowners to give up the low rates on their mortgage) — has persisted for longer than Fannie Mae economists had expected and helped keep home prices elevated in many markets.
In April, Fannie Mae forecasters were expecting that by the final quarter of 2023, national home prices would be declining at a 1.2 percent annual rate and falling by 2.2 percent by Q4 2024. Now, they don’t see annual home price appreciation dipping into negative territory until the second half of 2024.
National home prices not expected to fall this year
Source: Fannie Mae Housing Forecast, July 2023
Fannie Mae’s home price appreciation forecast, which is updated quarterly, envisions 3.9 percent annual home price appreciation during the fourth quarter of 2023, with a gradual decline to zero percent by Q2 2024. The latest forecast doesn’t envision a significant decline in national home prices until the final three months of 2024 when prices are expected to post a 0.7 percent…