DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1518663
MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 66 April 2024 J O U R N A L FANNIE MAE ADJUSTS 2024 ECONOMIC FORECAST A ccording to a March 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group, expectations for total home sales and mortgage origina- tions in 2024 have been slightly lowered due to the increase in mortgage rates in February. The 30-year fixed mortgage rate is now expected to conclude the year at 6.4% by the ESR Group, up from 5.9% in the previous forecast released last month. The ESR Group notes that labor mar- ket indicators are mixed, and disinflation will likely resume, but it also thinks that recent data are unlikely to give the Fed the "greater confidence" it needs to start easing monetary policy in the near future. Strong headline jobs numbers and hotter-than-expected inflation data had led financial markets to price in a less aggressive rate-cutting path by the Federal Reserve. However, the ESR Group anticipates that existing home sales will rise in 2024, partly because of a rise in activity from households who are less susceptible to the interest rate lock-in impact because they are likely forced to relocate due to life events. The ESR Group provided evidence that the gradual "thawing" of housing market activity is likely to continue in the coming months and quarters, pointing to the recent upward trend in new home listings and the relative strength in the most recent Fannie Mae Home Purchase Sentiment Index (HPI) "good time to sell" component. "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 VP and Chief Economist. "Hotter-than-ex- pected 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 Government continue to evolve their expectations of future monetary policy. Still, while we don't expect a dramatic surge in the sup- ply of homes for sale, we do anticipate an increase in the level of market transac- tions relative to 2023—even if mortgage rates remain elevated." 2024 Housing & Mortgage Forecast Changes » Mortgage Rates: Following the increase in interest rates in February, Fannie Mae's interest rate forecast has been upgraded this month. It is now projected that the average 30-year fixed rate mortgage rate will increase by four-tenths and five-tenths, respec- tively, to 6.6% in 2024 and 6.2% in 2025. Fannie Mae's forecast for interest rates is further complicated by the fact that mortgage rates remain unstable, es- pecially in light of shifting Fed policy expectations. » Existing Home Sales: In January, the seasonally adjusted annualized rate (SAAR) of existing house sales was reported to be an estimated 4 million. Due to the anticipated higher interest rate environment, Fannie Mae has revised projections downward through 2025, although the GSE (Govern- ment-Sponsored Enterprise) believes that current sales will trend upward over time. » New Home Sales: Sales of brand-new single-family homes increased 1.5% in January to a SAAR of 661,000. Home sales in 2024 were revised lower, in line with our current prediction, as a result of higher interest rate assump- tions and an update based on recently received data. The small number of existing homes for sale continues to boost new home sales, and Fannie Mae anticipates that this trend will continue in the upcoming months. » Single-Family Housing Starts: While permits increased to 1.02 million in January, single-family home starts decreased to a SAAR of 1.00 million. Fannie Mae anticipates a decline in Q1 of 2024, and primarily to account for the increased interest rate expectation, we have lowered our estimate. In the medium run, Fannie Mae still antici- pates that the lack of existing homes