The Housing Market May Stay Frozen

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The Housing Market May Stay Frozen

Fannie Mae economists have issued a revised forecast, suggesting that stagnation in the U.S. housing market may continue until 2024, regardless of whether the economy avoids a recession. They anticipate that existing home sales will remain subdued and within a narrow range. This projection follows a 2.2% decline in existing home sales in July, bringing the annual rate to 4.07 million units, down 16.6% compared to the previous year.


The main reason for this slowdown is the increase in mortgage rates, which reached a 20 year high of 7.23%, up from 5.55% a year ago. High mortgage rates are not only limiting affordability for potential homeowners but are also not helping the issue of limited housing supply. Many sellers with low pre-pandemic mortgage rates are hesitant to sell, leading to a decrease of over 9% in available homes compared to the previous year.


Fannie Mae economists predict that even if the economy avoids a recession, the housing market will continue to face affordability concerns due to limited supply, and in the event of an economic downturn, the housing market’s challenges would be compounded. A meaningful recovery in existing home sales is not expected in the foreseeable future, making 2023 a year with some of the lowest home sales since 2009. The economists also anticipate a downturn in 2024, with a 0.2% year-over-year decline in real GDP by the fourth quarter.

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