Fannie Mae is holding tight to its predictions of a recession next year. The GSE’s Economic and Strategic Research (ESR) Group has forecasted that economic growth will decelerate in 2024, ultimately resulting in a mild recession, before returning to growth in 2025.
The ESR Group says that the combination of employment gains and declining inflation have increased the likelihood of a soft landing, but a downturn is the most likely outcome.
As far as home sales go, the ESR group expects existing home sales to further decline in the near term, but should bottom out in early 2024. Home sales should increase modestly over the course of next year, but will stay constrained by the continuing “lock-in effect.”
“The economy is now slowing from the otherwise robust first estimate of third quarter growth,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “The slowdown in employment gains has continued, and stress is growing on consumers’ ability to sustain their high levels of spending – unsurprising results that we attribute to the often-lagged economic effect of monetary policy tightening. At the same time, housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity. While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025.”
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