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Home sales are predicted to increase while mortgage interest rates stay high longer than previously forecast,
The 30-year fixed rate mortgage is now forecast to end the year at 6.4 percent, according to the latest report from Fannie Mae’s Economic and Strategic Research Group. Just a month go the forecast was for the rate to end the year at 5.9 per cent.
The ESR group says the increase in February in mortgage rates has resulted in a modest downturn in expectations for total home sales and originations. Overall ESR Group still expects existing home sales will trend upwards in 2024 due in part to increased activity by households likely needing to move due to life events – and who are thus less sensitive to the interest rate lock-in effect. The ESR Group cited the recent trend upward in new home listings, as well as comparative strength in the latest reading of the ‘good time to sell’ component of the Fannie Mae Home Purchase Sentiment Index®, as evidence that housing market activity is likely to continue its gradual thaw in the months and quarters ahead.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast, as markets continue to evolve their expectations of future monetary policy. Still, while we don’t expect a dramatic surge in the supply of homes for sale, we do anticipate an increase in the level of market transactions relative to 2023 — even if mortgage rates remain elevated.”
