U.S. Economic Footing Firmer Than Previously Thought, Projected to Expand 2.3 Percent in 2024
Fannie Mae's Economic and Strategic Research (ESR) Group has revised its economic outlook for 2024 and 2025. The U.S. economy is now expected to grow by 2.3% in 2024 and 2.0% in 2025, closer to long-run trend growth rates. This improved outlook is attributed to upward revisions in personal income data and recent positive employment figures.
The ESR Group forecasts the 30-year mortgage rate to end 2024 at 6.0%, decreasing to 5.7% by the end of 2025. Home prices are projected to grow by 5.8% in 2024 and 3.6% in 2025. While low housing inventory continues to push prices up, affordability constraints and increasing available homes for sale are expected to moderate price growth.
Mark Palim, Fannie Mae's Chief Economist, notes that while mortgage rates have declined, home prices remain a significant affordability challenge, especially for first-time buyers. The timing of increased home sales and further price moderation will depend on current homeowners' willingness to sell and continued strong homebuilding activity.
- U.S. economic growth forecast revised upward to 2.3% for 2024 and 2.0% for 2025
- 30-year mortgage rate projected to decrease to 6.0% by end of 2024 and 5.7% by end of 2025
- Home prices expected to grow by 5.8% in 2024 and 3.6% in 2025
- Improved economic outlook due to upward revisions in personal income data and positive employment figures
- Ongoing affordability constraints in the housing market
- Low level of homes available for sale continues to exert upward pressure on prices
- Potential homebuyers still facing little relief on home prices despite declining mortgage rates
Home Price Growth Expected to Decelerate in 2025 as Affordability Remains Stretched
Following data revisions and recent employment data, bond market expectations for rate cuts have moved into closer alignment with the dot plot from the Federal Reserve's latest Summary of Economic Projections. As a result, the 10-year Treasury is currently up more than 40 basis points from its mid-September low. This represents upside risk to the ESR Group's latest mortgage rate forecast, which now sees the 30-year mortgage rate ending the year at 6.0 percent, down from last month's 6.2 percent projection, and to decline steadily to 5.7 percent by the end of 2025. Meanwhile, the ESR Group expects annual home prices to grow 5.8 percent in 2024 and 3.6 percent in 2025, both slight adjustments to their previous forecasts of 6.1 percent and 3.0 percent, respectively. While the general low level of homes available for sale is expected to continue to exert upward pressure on prices, the ESR Group expects ongoing affordability constraints and rising inventories of homes available for sale to help moderate the magnitude of home price growth moving forward.
"While potential homebuyers have noticed the decline in mortgage rates over the last few months, they are equally aware that there has been little relief on the home price side, the other primary driver of unaffordability, particularly for first-time buyers," said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. "The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale. Of course, continued strong homebuilding activity will also play a significant role as the shortage of national housing stock remains the primary impediment to affordability."
Visit the Economic and Strategic Research site at fanniemae.com to read the full October 2024 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae's Economic and Strategic Research Group, please click here.
Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
About the ESR Group
Fannie Mae's Economic and Strategic Research Group, led by Chief Economist Mark Palim, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets.
About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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