The group’s forecast predicts a gradual economic slowdown, with mortgage rates potentially settling near 7% by the end of the year. This could result in a slight dip in housing activity compared to previous projections. However, it is suggested that existing home sales will continue to see a modest upward trend, particularly compared to the historically low levels of the past two years.
“The question our economics team is asked most frequently by industry participants remains where we think mortgage rates are headed,” said Fannie Mae chief economist Doug Duncan (pictured). “For now, we see rates remaining closer to 7% through the end of the year – before trending downward in 2025 – but note potential downside to that forecast given recent actual movements in rates.”
Duncan also pointed out that many potential buyers are taking a “wait-and-see” approach, hoping for improved affordability before jumping into the market.
While the higher interest rate environment is expected to eventually dampen consumer spending, the ESR Group believes underlying economic growth in the first quarter remained solid. However, with household income not keeping pace with spending and debt interest payments remaining high, they anticipate a slowdown in overall economic growth as the year progresses.
Read more: What’s top of mind for lender in current mortgage market?
