BAM’s Key Details:
- Per Fannie Mae’s updated 2023 housing market forecast, the economy will enter and exit a modest recession in 2023, followed by a rebound in 2024
- Housing sales are expected to hit a trough in Q2 2023 before rebounding
- The ESR group expects the federal funds rate to top out at 5.0% in early 2023
Fannie Mae’s updated 2023 housing market forecast is now live with a few modest adjustments to its previous forecast.
Economists still expect a modest recession in 2023, with a rebound in 2024. And housing sales are expected to hit a trough in the second quarter of 2023 before beginning to rebound.
FORECASTS FOR GDP AND THE FEDERAL FUNDS RATE
After a brief rebound in Q3, real gross domestic product (GDP) is expected to again turn negative in Q4 of 2022, according to the November 2022 commentary by Fannie Mae’s Economic and Strategic Research (ESR) Group.
The ESR Group also expects a modest recession in the first quarter of 2023.
GDP growth for 2022 is now expected to be 0.0%, an upgrade of one-tenth from the previous forecast. Forecasted GDP growth for 2023 was downgraded by one-tenth to a 0.6% contraction.
Also, the ESR Group’s forecast for 2024 shows GDP growth rebounding to 2.0% on a Q4/Q4 basis, reflecting the start of an expected economic recovery.
On a related but less optimistic note, while inflation showed signs of cooling in October, Fannie Mae expects the Federal Open Market Committee (FOMC) will again raise the federal funds rate at its next meeting—and that the rate will top out at about 5.0% in early 2023.
FORECASTS OF TOTAL SINGLE-FAMILY HOME SALES
After modest updates, total single-family home sales for 2022 and 2023 are projected to be 5.67 million and 4.42 million, respectively. In 2024, sales are expected to rebound 18.6% from the previous year to 5.25 million, thanks to the following:
- An anticipated modest decline in mortgage rates
- The broader projected economic recovery
- A continued shortfall in housing inventory that should support new home construction
A major contributor to the ESR Group’s somewhat pessimistic outlook on home sales is the “lock-in effect,” so named because many homeowners have a strong financial disincentive to move because the rate on their current mortgage is well below today’s rate.
Nov 22, 2022
