Inman News
Slowing economy could also help bring mortgage rates down to Earth more rapidly, with the latest forecast predicting rates will drop to 6.2% by the end of this year and to 6% next year
Incoming economic data has Fannie Mae economists expecting higher inflation and slower growth this year than they’d previously forecast in March.
The latest forecast envisions economic growth slowing to 0.5 percent this year, down from March’s forecast for 1.7 percent growth, and that annual inflation will rise to 3.5 percent by the fourth quarter.
The commentary accompanying April’s forecast lacked the in-depth analysis Fannie Mae’s Economic and Strategic Research (ESR) Group provided in March and previous months.
But other economists and many consumers expect tariffs imposed or threatened by the Trump administration will push prices up and slow the economy down this year, heightening the probability of a recession.
Signs of a slowing economy could also help bring mortgage rates down to Earth more rapidly. Fannie Mae forecasters now expect mortgage rates to come down to 6.2 percent by the end of this year and 6.0 percent next year.
Mortgage rates expected to ease
Source: Fannie Mae and Mortgage Bankers Association forecasts, April 2025.
In March, forecasters at the mortgage giant weren’t expecting mortgage rates to hit 6.2 percent until the end of next year.
Economists at the Mortgage Bankers Association in an April 11 forecast projected mortgage rates will still be averaging 6.7 percent in Q4 2025 and 6.4 percent during Q4 2026.
Home sales forecast revised down
Source: Fannie Mae housing forecast, April 2025.
Despite stronger than expected first quarter home sales, Fannie Mae economists revised their forecast for 2025 home sales to 4.86 million, down from 4.95 million in March.
While sales of existing homes are still expected to grow by 3 percent this year, to 4.186 million, Fannie Mae economists now expect sales of new homes will decline by 1 percent, to 677,0000.
A stronger rebound is still expected in 2026, with sales of new and existing homes expected to grow by 7 percent to 5.18 million and surpassing the 5 million mark for the first time since 2022.
Hotter home price appreciation
Fannie Mae economists are also expecting hotter home price appreciation than in January, the last update of the quarterly forecast for that metric.
In January, Fannie Mae economists were expecting annual home price appreciation to cool to 3.5 percent by Q4 2025. The latest forecast is that home prices will be up 4.1 percent from a year ago in Q4 2025, before appreciation cools to 2 percent by Q4 2025.
Higher prices spur mortgage originations
Higher home prices mean mortgage lenders could see 17 percent growth in 2025 lending by dollar volume, with refinancing expected to surge 36 percent to $529 billion, and purchase loans projected to hit $1.453 trillion, up 12 percent from 2024.
If mortgage rates keep trending down next year as projected, Fannie Mae economists expect refinancing to surge by 42 percent next year, to $753 billion, and purchase loan fundings to grow by 9 percent, to $1.582 trillion.