Home News Home sales are going to nosedive in 2023, Fannie Mae says

Home sales are going to nosedive in 2023, Fannie Mae says

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Forecasts for the housing market in 2023 are getting worse month by month, with the latest report forecasting a drop in existing home sales of more than $1 million.

fannie maeof Economic and Strategic Studies (ESR) Group Total single-family home sales are now forecast to fall 18.1% from 2021 to 5.64 million units, a further downward revision from the September forecast of a 17.2% decline.

Also, the latest forecast sees total mortgage origination activity at $1.6 trillion in 2022. Last month’s forecastThe mortgage market is projected to further decline to $1.3 trillion by 2023, according to government-backed companies.

“In recent weeks, markets have increasingly, perhaps reluctantly, reflected the Fed’s determination to keep inflation down through a rapid tightening of monetary policy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. said. “The impact of rising mortgage rates on the housing market is largely predictable, and home prices already appear to be trending downward,” he said.

Fannie Mae forecasts an average home price decline of 1.5% for the full year 2023. “Given the ongoing tensions between potential home buyers and home sellers right now, we believe the pace of sales will likely slow further,” he added.

Sale of existing homes 4.8 million on an annualized pace, slightly higher than expected in August, according to the company. National Real Estate AssociationStill, this was a further decline from July, with sales down 19.9% ​​year-on-year.

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Combined with ESR Group’s revised upward interest rate forecast and a lower forecast for home price appreciation, Fannie Mae has lowered its forecast for existing home sales to 5.02 million in 2022 and 3.93 million in 2023.

The measure of affordability has been greatly expanded, with median house prices deviating significantly from their historical relationship with typical household incomes, but Fannie Mae believes that declining house prices have caused a recurrence of the global financial crisis. I don’t expect it to lead to

“With the minimal use of variable rate mortgages (ARMs), teaser rates, and exotic mortgage products, current single-family home borrowers are more likely than many borrowers in 2006-2008 to be. As we have seen, we are unlikely to experience a payment shock from rising interest rates,” ESR Group said.

Compared to 2008, stronger underwriting standards, as well as tools available for loan workouts and modifications, will mitigate the impact of falling home prices on mortgage delinquencies and foreclosures, the agency said. .

Fannie Mae’s ESR Group forecasts real Gross Domestic Product (GDP) to grow at an annualized rate of 2.3% in the third quarter of 2022. This is due to strong net export and inventory investment activity.

Overall, the ESR Group forecasts real GDP growth of -0.1% on a full-year basis in 2022, down from its 0% forecast in September. The agency maintained its forecast of a 0.5% contraction in real GDP in 2023.

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