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Fannie Mae economists expect U.S. economic growth to decelerate, leading to a mild recession in 2024, according to the latest forecast released this week by Fannie Mae.
“The economy is now slowing from the otherwise robust first estimate of third quarter growth,” wrote Doug Duncan, Fannie Mae’s chief economist. “The slowdown in employment gains has continued, and stress is growing on consumers’ ability to sustain their high levels of spending—unsurprising results that we attribute to the often-lagged economic effect of monetary policy tightening.”
But here’s the thing: While Fannie Mae expects the U.S. economy is likely to slip into a mild recession next year, it doesn’t project that national home prices will fall in 2024.
Fannie Mae’s forecast model expects U.S. home prices to finish 2023 up 6.7% followed by a 2.8% gain in 2024. Then in 2025, Fannie Mae expects a slight 0.4% dip.
Earlier this year, when Fannie Mae revised its 2023 home price forecast from negative to positive appreciation, it pointed to a lack of supply that has shielded national home prices from declining. That suggests a belief that a mild recession wouldn’t materially change that dynamic.
While Fannie Mae doesn't expect a significant mortgage rate drop next year, it anticipates that rates will continue to drift down, reaching 7.1% by the end of 2024 and 6.8% by the end of 2025.
“Housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity. While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025,” wrote Duncan.
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