For aspiring homeowners hoping this week’s dip in mortgage rates was a sign of things to come during the fall homebuying season, Fannie Mae’s latest economic and housing outlook may be somewhat deflating.
The government-sponsored mortgage buyer predicts the 30-year fixed-rate mortgage will end 2025 at 6.3%, which would be 11 basis points higher than this week’s average of 6.19%, per Freddie Mac data.
On a slightly more positive note, the 6.3% forecast is lower than last month’s year-end forecast of 6.4%, and Fannie maintained its 5.9% prediction for where the 30-year rate will settle by the end of 2026.
Fannie also sees a slight deceleration in home-price growth. The company now expects fourth-quarter (Q4) home prices to rise 2.5% in 2025 and 1.3% in 2026 on a Q4-to-Q4 basis, compared to its previous forecasts of 2.8% and 1.1%.
But those downward revisions may be small consolation for consumers still dealing with inflationary pressures.
On Friday morning, the Bureau of Labor Statistics (BLS) reported consumer prices rose 0.3% on a seasonally adjusted monthly basis in September, down from a 0.4% gain in August but higher than July’s 0.2% increase.
On an annual basis, the consumer price index (CPI) climbed 3% last month, creeping slowly higher than the 2.9% increase in August and 2.7% rise in July.
Fannie Mae’s Economic & Strategic Research (ESR) Group thinks inflation will settle down in the fourth quarter, with CPI inflation averaging 2.9% on a Q4-to-Q4 basis, representing a retreat from September’s projection of 3.1%.
But the ESR team foresees the unemployment rate ticking up to 4.4% during the fourth quarter. Though the ongoing federal government shutdown has buttoned up the Labor Department’s ability to supply current jobs market data, the BLS’s August report pegged the unemployment rate at 4.3%.
That weakness in the labor market tracks with the Fannie Mae economists’ prediction that the federal funds rate will average 3.8% during the fourth quarter. That would be within range if the Federal Reserve lowers its target range for the benchmark borrowing rate by 25 basis points at the conclusion of its upcoming policy meeting on Oct. 29.
