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                        Mortgage Rates Expected to Dip Below 6 Percent in 2024, Boosting Home Sales
    Press Release
Mortgage Rates Expected to Dip Below 6 Percent in 2024, Boosting Home Sales
January 18, 2024
ESR Group’s 2024 Theme: “Housing Seeks Balance Amid Economic Uncertainty”
WASHINGTON, DC – The housing market is expected to begin a gradual return to a more normal balance in 2024, following years of significant oscillations in mortgage rates and divergences of key housing market measures from their historical, pre-pandemic relationships, according to the January 2024 commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. The ESR Group expects mortgage rates to decline in 2024, ending the year below 6 percent. The lower rate environment is expected to boost refinance volumes, which are already on the upswing, as evidenced by the recent uptick in Fannie Mae’s Refinance Application-Level Index, to nearly double their 2023 levels in 2024. Lower rates are also likely to help “thaw” the existing home sales market currently affected by the so-called “lock-in effect.” In fact, the ESR Group expects the annualized pace of existing home sales to move up to 4.5 million units by the fourth quarter of 2024, compared to 3.8 million in Q4 2023. However, a full recovery to the pre-pandemic sales rate is expected to take years, as housing affordability remains stretched extremely thin by historical standards relative to household incomes. The ongoing lack of supply and affordability constraints in the existing homes market are expected to continue to bolster the market for new single-family homes, with 2024 starts and new home sales forecast to top 2023 levels. Overall, though, the ESR Group expects that the slowly normalizing existing homes market, as well as additional housing supply from the construction of new homes, will help keep further home price growth in check in 2024: Home prices are now expected to rise 3.2 percent over the year, compared to 7.1 percent in 2023.

The ESR Group’s latest forecast continues to project a slowdown in economic growth in 2024; however, it now anticipates a brighter economic backdrop compared to previous months, having replaced its call for a modest recession with positive-but-below-trend growth in 2024. The ESR Group notes the rapid recent easing in financial conditions following the Federal Reserve’s December meeting and the solid, upward trend in real personal income growth in October and November as positive impulses for growth over the coming quarters. However, the ESR Group underscores that the current forecast includes heightened uncertainty and significant downside risks, and maintains that the economy still faces higher-than-normal risk of recession.

“In 2024, we expect home sales and mortgage origination activity to begin a gradual recovery in the presence of a slow-growing economy,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Inflation’s decline and the resultant Fed pivot to signaling future rate cuts rates lead us to believe that home sales and mortgage originations likely bottomed out in the second half of 2023 and that a gradual improvement is now underway. We expect mortgage rates to dip below 6 percent by year-end 2024 and for homebuilders to continue to add new supply, both of which should aid affordability. Additionally, the decline in mortgage rates is likely to push refinancing volumes upward, along with some pickup in purchase financing. However, even at less than 6 percent, we think rates will still have a significant way to go in order to meaningfully reduce the ‘lock-in effect’ experienced by homeowners who refinanced or bought during the pandemic. Overall, we expect 2024 to be a better year than 2023 for homebuyer affordability and the mortgage industry.”

Visit the Economic & Strategic Research site at fanniemae.com to read the full January 2024 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

*Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.*

**About the ESR Group**
Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.
**About Fannie Mae**
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:fanniemae.com | Twitter | Facebook | LinkedIn | Instagram | YouTube | Blog

**Media Contact**Matthew Classick
202-752-3662

**Fannie Mae Newsroom**https://www.fanniemae.com/news

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