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Total home sales are expected to come in lower than previously expected through the rest of this year and will not pick up meaningfully until further into in 2025, according to a new forecast from the Fannie Mae (OTCQB: FNMA) Economic and Strategic Research Group.

The new forecast downgrades total home sales forecast to 4.78 million in 2024 and 5.19 million in 2025, with no expected upswing in sales until income growth starts to outpace home price growth and mortgage rates sink closer to the 6% level – the forecast doesn’t expect rates to go below 6% until the end of 2025.

Booking.com

Furthermore, the new forecast warned that near-term slowdown in housing starts is coming because the number of new homes for sale that are already under construction is up, which is likely to delay new projects until the current inventory can be sold.

“After absorbing recent economic data, bond market participants now appear to expect slower paths for economic growth and inflation, which contributed to a softening in mortgage rates over the last few weeks,” said Mark Palim, Fannie Mae vice president and deputy chief economist. “On its face, the lower rate environment should be good for home sales by helping loosen the grip of the so-called ‘lock-in effect,’ in addition to aiding affordability more generally. However, high-frequency data, such as mortgage applications, home showing requests, and listings views, suggest that many potential homebuyers remain reluctant to make the jump. Even with moderately lower mortgage rates, affordability remains close to historic lows due to the high level of home prices relative to incomes. We are therefore expecting continued sluggishness in home sales over the rest of the year. One bright spot for the mortgage industry has been the recent uptick in refinance applications, albeit from very low levels.”

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