As economists continue to debate whether the U.S. is in a recession or on the brink of one, Fannie Mae has once again adjusted its 2023 outlook.
The lender announced Wednesday that while the Fed appears resolved to tame inflation, it expects the economy to further contract next year. As such, the impact on the housing market will be more significant that previously anticipated.
Fannie Mae’s October 2022 commentary now calls for total single-family home sales in 2022 and 2023 to 5.64 million and 4.47 million, respectively, which would represent annual declines of 18.1 percent and 20.8 percent.
Further, Fannie Mae significantly revised its outlook for national home price growth and now expects year-over-year home price growth to turn negative in Q2 2023. While 2022’s home price growth is expected to top out at 9 percent annually, the lender now expects home price declines of 1.5 percent in 2023, down from its previous prediction of home price growth of 4.4 percent.
“The slowing effect on the housing market of the higher mortgage rate environment has been largely predictable, and home prices appear to have already begun trending downward,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Looking ahead to the full year 2023, on a national basis, we expect an average home price decline of 1.5%. Given the ongoing tension between potential homebuyers and home-sellers at the moment, we believe the pace of sales is likely to slow even further, too.”