Existing home sales may have surprised to the upside in October, but a new Fannie Mae report anticipates just a modest improvement next year from 2024’s meager numbers.
This year’s existing home sales are on pace to sink near the lowest point in three decades, and the government-sponsored enterprise’s latest forecast calls for existing home sales to grow just 4% next year. Fannie amended its outlook downward from its last forecast, which called for an 11% uptick in resales. But with mortgage rates climbing substantially in recent weeks, Fannie is now projecting rates to end 2025 at 6.3% and stay above 6% through 2026; its previous forecast had rates finally falling below 6% in early 2025.
“Long-run interest rates have moved upward over the past couple months following a string of continued strong economic data and disappointing inflation readings,” said Mark Palim, senior vice president and chief economist at Fannie Mae. “To the extent that the recent run-up in rates has been driven by market expectations of stronger economic growth, we think this bodes well for the labor market outlook and home purchase demand. However, we expect inventories of homes added to the market, and therefore sales of existing homes, to remain subdued through next year, as the higher mortgage rate environment is likely to strengthen the ongoing lock-in effect.
“How these competing forces balance out is currently an open question, but for now we continue to expect affordability to remain the primary constraint on housing activity through our forecast horizon.”
Fannie’s Economic and Strategic Research (ESR) Group does expect the market to rebound in a major way once rates dip meaningfully, with its inaugural 2026 forecast calling for a resale upswing of roughly 17%. New home sales, meanwhile, are expected to keep rising both next year and in 2026 as builders stay proactive in offering discounts and other incentives to entice homebuyers.
Existing home sales are currently forecast at 4.01 million this year (down from 4.06 million in the last forecast), 4.18 million in 2025 (previously 4.52 million) and 4.89 million in 2026. Total 2024 home sales are now projected at 4.71 million (down from 4.77 million), with 2025 home sales pegged at 4.93 million (previously 5.24 million) and 2026 sales at 5.68 million.
Total single-family mortgage originations are now expected to be $1.64 trillion in 2024 (down from the prior forecast’s $1.67 trillion), $1.94 trillion in 2025 (previously $2.14 trillion), and $2.40 trillion in 2026.
