While Fannie Mae economists see mortgage rates coming down by a full percentage point, forecasters at the Mortgage Bankers Association have issued a more cautious take.
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With mortgage rates looking like they could come down a little faster this year and next, Fannie Mae economists think home sales could bounce back by 3.6 percent this year, to 4.92 million homes.
That’s 54,000 more home sales than Fannie Mae was forecasting in April, when economists at the mortgage giant were expecting mortgage rates to still be at 6.2 percent at the end of this year and 6 percent next year.
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Fannie Mae’s latest forecast, released Wednesday, projects rates on 30-year fixed-rate mortgages will drop to 6.1 percent by the end of this year and to 5.8 percent by the end of next year.
Home sales expected to accelerate
Source: Fannie Mae housing forecast, May 2025.
With sales of new homes projected to shrink by 1 percent this year, to 679,000, the projected bounce in home sales would be driven entirely by 4.4 percent growth in sales of existing homes, to 4.24 million.
Fannie Mae’s Economic and Strategic Research (ESR) Group is forecasting even stronger 2026 growth, with total sales expected to surge by 6.8 percent to 5.25 million.
If that forecast pans out, it would be the first time since 2022 that sales of new and existing homes surpassed five million.
Next year’s gains are also projected to be driven by 7 percent growth in existing home sales, to 4.53 million, with new home sales also forecast to grow by 5.9 percent, to 719,000.
Duelling mortgage rate forecasts
Source: Fannie Mae and Mortgage Bankers Association forecasts, May 2025.
While Fannie Mae economists see mortgage rates coming down by a full percentage point from Q1 2025 levels, forecasters at the Mortgage Bankers Association issued a more cautious take on May 16.
MBA economists think rates will still be averaging 6.6 percent during Q4 2025 and 6.3 percent during Q4 2026.
Home prices keep going up
Source: Fannie Mae housing forecast, May 2025.
Fannie Mae economists update their home price appreciation forecast four times a year — in the first month of each quarter — rather than monthly.
In January, Fannie Mae economists were expecting annual home price appreciation to cool to 3.5 percent by Q4 2025.
In updating their home price appreciation forecast in April, forecasters at the mortgage giant predicted that home prices will be up 4.1 percent from a year ago in Q4 2025, before appreciation cools to 2 percent by Q4 2026.
Mortgage volume trending up from 2023 low
Source: Fannie Mae housing forecast, May 2025.
With home sales and home prices both expected to post gains, Fannie Mae economists expect mortgage originations to grow by 17.7 percent this year, to $2 trillion.
While refinancing is projected to grow by 35.6 percent this year, to $529 billion, lenders are on track to do almost three times as much purchase mortgage business.
Fannie Mae economists expect purchase loan volume will grow by 12.3 percent this year, to $1.46 trillion.
Additional easing of mortgage rates next year is expected to boost 2026 refinancing by 47.1 percent, to $778 billion, and purchase lending by 9.5 percent, to $1.6 trillion.
Next year’s projected $2.38 trillion in total mortgage volume would represent 58 percent growth from a 2023 trough of $1.5 trillion.
Housing starts expected to bottom out
Source: Fannie Mae housing forecast, May 2025.
With inventories of new homes for sale on the rise in some markets, Fannie Mae economists expect single-family home starts will shrink by 5.3 percent this year, to 959,000, even as multifamily home starts grow by 4.8 percent to 371,000.
Next year, single-family home starts are expected to be flat at 959,000, with 6.7 percent growth in multifamily home starts, to 396,000.
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