Housing Market Measures

Housing Activity Expected To Pick Up In 2024 As Rates Move Lower

Economic growth still predicted to soften as the labor market shows signs of cooling

Fannie Mae’s Home Purchase Sentiment Index reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making.

WASHINGTON, DC – February 23, 2024 – Existing home sales and new single-family housing starts are expected to grow modestly in 2024 amid lower mortgage rates and slowly strengthening homebuyer sentiment, according to the February 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. While housing affordability is still seriously constrained following the home price run-up of the past few years, the supply of existing homes available for sale is finally showing signs of loosening. Additionally, more households have recently signaled that they expect mortgage rates to decline, as evidenced by Fannie Mae’s January 2024 Home Purchase Sentiment Index®, a newfound optimism that may signal an increased openness to moving. The ESR Group’s latest forecast sees mortgage rates falling to 5.9 percent by the end of 2024 and 5.7 percent by the end of 2025, both slight upticks compared to last month’s forecast. Additionally, it expects single-family starts to trend upward in 2024 despite the pullback this past month, as permits have increased for twelve consecutive months and demand for new homes remains robust.

The ESR Group upgraded its 2024 macroeconomic growth outlook due to a stronger-than-expected Q4 2023 gross domestic product (GDP) report, as well as incoming data on recent population growth and immigration trends that point to faster payroll and GDP growth over the forecast horizon. Still, the ESR Group continues to expect a slower pace of economic growth in 2024 compared to 2023. An unsustainably low savings rate suggests softer consumer spending going forward, consistent with the pullback in January retail sales, and slowing local and state tax receipts point to slower direct government spending growth. Further, while payroll growth looks to have reaccelerated in December and January, other labor market measures indicate softness, including the household survey and the quits rate. On net, this suggests to the ESR Group that the labor market is likely to cool in the near future.

“Market dynamics continue to reflect significant uncertainty regarding the sustainability of stronger-than-expected recent GDP growth, the continuity of the decline of inflation, and the path of monetary policy change, not to mention the many ways in which historical relationships in housing and the larger economy remain out of balance post-pandemic,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Right now, our base case scenario foresees economic growth decelerating, rates gradually declining, and new single-family home sales slowly recovering as construction adds supply. However, if economic growth continues to surprise to the upside, then we believe the risk of mortgage rates remaining higher for longer will also increase.”

Visit the Economic & Strategic Research site at fanniemae.com to read the full February 2024 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.




About the ESR Group
Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.