Fannie Mae projects cooling home sales for the remainder of this year and into 2022.
Fannie Mae Economic Forecasters Expecting Waning Demand
Despite an uptick forecast of 3.3% annual growth from August’s 3.1% projection, Fannie Mae economists are expecting cooling home sales into 2022. Due primarily to low supplies of for-sale homes, Fannie Mae is projecting that combined new and existing home sales will decrease by nearly -2% next year.
Even if new home sales were to increase next year, such an increase would not offset Fannie’s expected drop in existing home sales because of lacking inventory.
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“Actions Speak Louder than Words”
Homebuyers are living out the old saying that “actions speak louder than words.” Homebuyers are not signing as many pending sales contracts as they were just a few months ago nor are homebuyers signing as many purchase mortgage applications. They’re also not participating in as many bidding wars as they were just a few months ago.
Translation of homebuyer actions, or, if you will, inactions into words? Homebuyers are saying, “Enough! Enough competition for too few houses! Enough too-high prices!” They’ve packed up their dreams of homeownership and taken them out of the marketplace.
Fannie’s Assessment & Projections of New and Existing Home Sales 2020 – 2022
To repeat, Fannie Mae is projecting that sales of new and existing homes will decline by nearly -2% next year.
Take a look at its assessment of 2020 home sales and its projections of home sales for the duration of this year and 2022:
2020
– Existing home sales – 5,640,000
– New home sales – 822,000
2021
– Existing home sales – 5,887,000
– New home sales – 790,000
2022
– Existing home sales – 5,676,000
– New home sales – 881,000
Fannie Mae Projects Double-Digit Annual Home Price Appreciation to Decline “Dramatically” in 2022
Fannie’s economists are expecting double-digit home price appreciation to continue but decline through 2021 Fannie is expecting home price appreciation to slip to 16.2% in Q3 2021 and to 14.8% in Q4 2021. Then, according to Fannie’s projections, declining appreciation will begin at 12.1% in Q1 2022.
Appreciation rates are then expected to fall dramatically for the remainder of 2022. Beginning at 6.8% in Q2 2022, home price appreciation will, according to Fannie, slip to 6.6% in Q3 2022 and to 5.1% in Q4 2022.
Fannie Anticipating Only “Modest Increase in Home Supply as Foreclosure Moratorium Ends”
Fannie’s projections about “only a modest increase in the number of homes placed on the market as the foreclosure moratorium ends” stand with those from ATTOM Data Solutions and CoreLogic. Fannie attributes “only a modest increase” in foreclosures to an improving labor market and the high levels of home equity due to soaring price increases.
Fannie Mae Forecasting Gentle Rise in Mortgage Rates Next Year
Fannie is projecting mortgage interest rates to remain comparatively low to pre-pandemic rates with an average of 3.2% during the final three months of 2022. Even this modest increase, Fannie expects mortgage lenders to do -25% less business in 2022 than they have done this year.
Thanks to Fannie Mae and Inman.
