Fannie
Mae’s
Economic
and
Strategic
Research
(ESR)
Group
said
on
Friday
that
it
expects
a
slower
recovery
of
the
U.S.
housing
market
than
previously
forecast.

That’s
because
volatility
in
inflation
readings
and
resilience
in
nonfarm
payroll
growth
may
provide
the


Federal
Reserve
confidence
to
cut
benchmark
rates
only
once
in
2024.   

“Unfortunately,
we’re
still
not
forecasting
a
ramp-up
in
housing
activity,
which
will
require
some
combination
of
continued
household
income
growth,
a
further
slowing
of
home
price
appreciation,
or
a
decline
in
mortgage
rates
to
bring
affordability
within
range
of
many
waiting
first-time
and
move-up
homebuyers,”

Doug
Duncan,
Fannie
Mae’s
senior
vice
president
and
chief
economist,
said
in
a
statement.

The
ESR
Group
noted
that
listings
of
for-sale
homes
have
risen
as
some
homeowners
are
no
longer
willing
to
delay
moving,
likely
due
to
a
recalibration
in

mortgage
rate
expectations.

This
has
resulted
in
a
better
supply-and-demand
balance
in
some
regional
markets,
mainly
concentrated
in
the
Sun
Belt,
and
is
consistent
with
the
group’s
view
of
decelerating
house
price
growth
through
the
rest
of
the
year. 

But
affordability
constraints
continue
to
limit
the
number
of
buyers
in
most
markets.
As
a
result,
the
ESR
Group
reduced
its
total
U.S.
home
sales
forecast
to
4.82
million
in
2024
(previously
4.89
million).
The
new
forecast
represents
an
increase
of
1.3%
compared
to
2023
(previously
2.8%).

Due
to
the
revision
in
home
sales,
the
forecast
for
mortgage
origination
volume
decreased
slightly
to
$1.71
trillion
in
2024
(previously
$1.73
trillion).
Refinance
originations
are
expected
to
account
for
22%
of
total
volume
in
2024. 

According
to
the
ESR
Group,
the
30-year
fixed
mortgage
rate
is
expected
to
average
6.8%
in
2024
and
6.4%
in
2025.

The
Fed
is
projected
to
cut
rates
only
once
this
year,
in
December,
as
opposed
to
the
previous
forecast
of
two
rate
cuts. 

“The
economy
appears
to
be
slowing,
and
recent
readings
offer
hope
that
inflation
is
cooling
after
progress
on
that
front
stalled
in
the
first
quarter
—
a
trend
that
will
likely
need
to
be
sustained
for
the
Fed
to
feel
comfortable
cutting
rates,”
Duncan
said.
“Additionally,
the
labor
market
is
showing
signs
of
a
gradual
slowdown,
with
the
unemployment
rate
creeping
up
to
4%
in
the
June
report.” 

Annual
inflation
decreased
to

3.3%
in
May
and
employers
added

272,000
jobs
last
month.
Amid
mixed
economic
signals,
the
Fed

maintained
its
short-term
policy
interest
rate
between
5.25%
and
5.5%
at
its
June
meeting. 

The
ESR
Group
downgraded
its
forecast
for
real
gross
domestic
product
(GDP)
growth
to
1.6%
year
over
year
in
the
fourth
quarter
of
2024
(previously
1.8%),
a
result
of
slowing
income
and
consumer
spending
growth,
among
other
things. 

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