Fannie Mae's Economic and Strategic Research (ESR) group warns that soaring interest rates and a "higher-for-longer" Federal Reserve policy stance will affect the economy into 2024. The 10-year treasury yield recently peaked at 4.91%, leading Fannie Mae to shy away from further rate hike predictions. Despite recent data revisions showing a better balance between real consumption and incomes, inflation remains elevated, which could affect a potential economic "soft landing."
Fannie Mae has revised its 2023 home price growth forecast to 6.7% on a Q4/Q4 basis and anticipates deceleration in 2024 due to ongoing affordability constraints. Mortgage originations for 2023 are expected to remain around $1.3 trillion, with a 10% increase predicted for 2024, HousingWire reports.
Several Fed officials have indicated that a rate pause is necessary while stressing rates will remain higher for longer. The Mortgage Bankers Association (MBA) had also expected the central bank would pause on rate hikes as real rates – which are inflation-adjusted– are 2%.
Fannie Mae noted that the economy likely faces fewer structural headwinds than previously thought after significant updates to the national accounts showed real consumption and incomes are in better balance than had been reported previously.
Advertisement
Related Stories
Economics
Housing Share of GDP in Q1 2024 Rises Above 16%
The increase marks the first time GDP has surpassed 16% since 2022
Economics
Shelter Costs Drive Inflation Higher Than Expected in January
January Consumer Price Index data show inflation increased more than anticipated as shelter costs continue to rise despite Federal Reserve policy tightening
Economics
Weighing the Effects of the Fed's and Treasury's Latest Announcements
The upshot of the Jan. 31 announcements is that while mortgage rates will stay higher for longer, they're likely to hold steady