Fannie anticipates sales and building to slow plus “a deceleration in home price growth” this year.
Fannie Mae Economists Expect “Meaningful Slowdown”
With mortgage rates now surging to the largest rates in 40 years, houses are less affordable than they were during the 2006 housing bubble. This affordability challenge, according to Fannie Mae, will likely dampen home sales and homebuilding in 2022.
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Fannie Mae’s Economic and Strategic Research Group’s latest economic and housing outlook is projecting the following:
- A “meaningful slowdown” in home sales during Q2 and Q3 2022
- A slowdown in new home building
- A “large deceleration in home price growth” in 2023
- Home price declines in some regions of the country in 2023
- A chance of a “modest recession” in late 2022 or 2023 but nothing comparable to the Great Recession of 2007-09
Rising Mortgage Rates Reducing Affordability
Fannie Mae Chief Economist Doug Duncan wrote in a statement, “Rising mortgage rates are reducing affordability through higher mortgage-related costs, all while house prices continue to grow. Historically, rapid and substantial rises in mortgage rates have had the effect of slowing (housing) activity, which we reflect in our forecast.
“Not only is the worsening affordability of homes a problem for potential entry-level homebuyers, but current homeowners are less likely to trade in their existing lower-rate mortgages and list their homes for sale, both of which will likely weigh on sales.”
Projections for New and Existing Home Sales
Fannie Mae is projecting home sales to plunge -11% this year.
Here are Fannie’s projections for new home sales:
- 2020 – 822,000 sales
- 2021 – 771,000 sales
- 2022 – 760,000 sales
- 2023 – 665,000 sales
Fannie’s projections for existing home sales:
- 2020 – 5,640,000 sales
- 2021 – 6,120,000 sales
- 2022 – 5,364,000 sales
- 2023 – 4,749.000 sales
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Thanks to Fannie Mae May 2022 Housing Forecast.
