Fannie Mae is holding to its forecast of a modest economic downturn in 2024,
Many of the dynamics that led the economists at the government-sponsored enterprise to
"Clearly, the many economic forecasters who previously forecasted a recession beginning in 2023 were wrong, including us," Fannie Mae Chief Economist Doug Duncan said in a press release. "However, we continue to think there are reasons for concern that will likely lead to a mild economic downturn, including stretched consumer spending relative to personal incomes and the continued effects of restrictive monetary policy still working through the economy."
Duncan is anticipating gross domestic product growth of 2.6% this year, but for 2024, he is expecting a decline of 0.3%. In particular, GDP should drop by 1.4% in the second quarter and 0.8% in the following three month period, according to Fannie Mae.
This year should end with $1.528 trillion of originations, a reduction of $50 billion from Duncan's November forecast. The number is also more conservative than the latest from the Mortgage Bankers Association, which expects $1.64 trillion for 2023, unchanged from the prior month. The 2024 outlook calls for just above $2 trillion in production, approximately $19 billion
The MBA's outlooks for 2025 of $2.34 trillion and for 2026 of $2.44 trillion were unchanged.
But Fannie Mae turned around and boosted its 2024 outlook by $52 billion to $1.889 trillion. And a larger recovery is expected in 2025, with $2.308 trillion of volume forecast. In November, Fannie Mae predicted $2.214 trillion of 2025 volume.
However, the outlook for existing home sales remains murky, said First American Financial Chief Economist Mark Fleming in the title underwriter's latest Potential Home Sales Model report.
The model increased by 1.3% in November versus October as mortgage rates began the decline that has brought them under 7%. That is the highest pace of monthly growth since December 2022.
Home sales should accelerate and approach a 4 million seasonally-adjusted annualized rate as 2023 ends, Fleming said in a press release.
"Heading into 2024, existing-home sales may continue to drift higher if mortgage rates fall further or stabilize," he continued. "However, it's unlikely that existing-home sales will increase dramatically, as the bulk of existing homeowners will remain rate locked-in, even if rates drift closer to 6%."
