Fannie Mae has raised its forecast for mortgage issuance for both this year and next on a slightly more optimistic view of home sales and prices, though all are still expected to fall.
The April outlook calls for $1.66 trillion in lending in 2023, up from $1.55 trillion in March and close to expectations in February of a $1.69 trillion market there Year. This is still less than $2.42 trillion for 2022.
Similarly, Fannie Mae pushed its 2024 guidance back above the $2 trillion mark to $2.02 trillion, from $1.89 trillion in March and just below the $2.03 trillion guidance in February .
Doug Duncan, Fannie Mae’s chief economist, still expected an economic downturn in the second half of this year, but softened slightly.
“The economic slowdown has resumed – whether the end result is a mild recession or simply a soft landing remains to be seen – although we continue to expect the former, as we have done since April last year, when we first issued our 2023 recession call did.” Duncan said in a press release. “The housing sector’s higher-than-expected resilience to affordability pressures from higher house prices and mortgage rates is central to our expectation that the recession will be moderate.”
The economic tightening that resulted from the collapse of Silvergate Bank, Silicon Valley Bank and Signature Bank had the same outcome as the Federal Reserve’s rate hikes. As a result, Duncan now envisages just one more rate hike of 25 basis points at its May meeting before embarking on another round of easing by the end of this year.
“While we believe it would be premature to expect no further difficulties in the banking sector other than a credit crunch, we maintain our baseline view of a mild recession as we see signs of a weakening labor market, slowing retail sales, and slowing manufacturing activity,” continued Duncan. “However, the quick response of hopeful homeowners to periodic declines in mortgage rates, even from the current higher rates, gives us added confidence in our use of the word ‘humble.'”
Home prices are now expected to fall 1.2% over the year; Fannie Mae previously expected a 4.2% decline.
For 2024, it revised its forecast to a 2.2% decline, slightly less than the 2.3% decline previously estimated.
Meanwhile, the home sales forecast for this year has been raised to 4.84 million units from 4.63 million units. That’s still down 14.6% from 2022 and the slowest pace since 2011, Fannie Mae pointed out.
The Mortgage Bankers Association’s April outlook, released earlier this week, is more optimistic than Fannie Mae’s. But it trimmed its 2023 origination expectations to $1.81 trillion from $1.84 trillion in March. For the next year, it fell from $2.3 trillion to $2.25 trillion.
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