Single-family home sales likely bottomed out during the fourth quarter this year and are expected to begin a slow but meaningful recovery in 2024, according to the latest commentary from the Fannie Mae (OTCQB: FNMA) Economic and Strategic Research (ESR) Group.
The ESR Group observed that purchase mortgage applications have rebounded approximately 15% from a low point in November and will continue to improve if mortgage rates continue to decline. However, the coming year will also continue to see the challenges that burdened the housing market this year, including affordability challenges, the lock-in effect, and a lack of homes available for sale.
Furthermore, the ESR Group is predicting the U.S. economy will experience a modest downturn in 2024 followed by a return to growth in 2025.
“Last week’s comments by Chairman Powell, as well as the Federal Reserve’s updated Summary of Economic Projections, suggest increased Fed confidence that a soft landing has been achieved and inflation is headed sustainably to 2%,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Clearly, the many economic forecasters who previously forecasted a recession beginning in 2023 were wrong, including us. However, we continue to think there are reasons for concern that will likely lead to a mild economic downturn, including stretched consumer spending relative to personal incomes and the continued effects of restrictive monetary policy still working through the economy. Although we expect headline growth to clock in at 2.6% in 2023 – above what is generally considered to be the economy’s long-term growth potential of 1.8% – we’re also forecasting slightly negative growth in 2024.”
