Fannie Mae economists are projecting strong new and existing home sales through the end of 2021.
Fannie Mae “Meaningfully” Upgraded Projections for Existing Home Sales Through 2021
Fannie Mae economists have reevaluated their home sales projections through the end of this year.
In its recently released October Economic and Housing Outlook, Fannie Mae economists have “meaningfully upgraded” their projections for new and existing home sales in the last half of 2021. These October projections indicate that sales will increase +4.7% to 6.8M sold units.
Economists with Fannie are a bit less bullish on sales of existing homes in 2022 due to expected listing shortages that will continue to accelerate home prices and further limit affordability for many future homebuyers.
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Mortgage Rates Expected to Rise Slightly in 2022
Fannie’s Economic and Strategic Research Group (ESR) Group anticipates that continuing supply chain disruptions will impact both mortgage rate expectations and home price growth.
The ESR Group forecasts mortgage rates to average 3.3% in 2022, revised slightly up from last month’s projections at 3.1%.
Doug Duncan, Fannie Mae Chief Economist, said, “Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong home price appreciation through at least 2022, limiting interest rate effects on home sales and home prices.”
(Other economic prognosticators are not quite as optimistic as Fannie’s forecasters about mortgage rates increasing only “slightly” in 2022. The Mortgage Bankers Association, for one, predicted that rates on a 30-year fixed rate mortgage loan to rise an average of 4% by Q4 2022.)
New and Existing Home Sales
Breaking down projected annual sales of new and existing homes for 2021 and 2022, Fannie Mae indicated that new home sales in 2021 would total approximately 791,000 as labor and materials shortages continue to cramp builders. Projections for existing home sales in 2021 came in at 5,977,000.
Fannie expects 2022 to be a different story with sales of new homes projected to soar to 893,000, an increase of +13%. Fannie’s economists have projected that existing homes in 2022 would drop -5.6% to 5.642M with continued home price growth being the culprit.
Fannie Mae economists wrote in this latest October report that the supply of new listings is “…not strong enough in our view to sustain the current sales pace (of existing homes) and, when combined with a modest increase in mortgage rates, we expect home sales to drift lower next year.”
Home Price Appreciation
Fannie’s economists via the ESR Group predicted home price growth to rise +16.6% for 2021 and +7.4% for 2022. Persistently tight inventory levels are the driving forces behind Fannie’s upward home price growth projections
Here are Fannie Mae’s quarterly home price appreciation forecasts:
- Q4 2021 – +16.6%
- Q1 2022 – +14.8%
- Q2 2022 – +11.0%
- Q3 2022 – +8.8%
- Q4 2022 – +7.4%
Thanks to Fannie Mae, Inman and the Mortgage Bankers Association.
