Housing activity forecast trimmed as inflation pressures persist and growth slows
Fannie Mae’s Economic and Strategic Research (ESR) Group has adjusted its projections for the housing market, mortgage rates, and broader economic conditions in its latest April 2025 Economic and Housing Outlook.
The updated forecast anticipates that single-family home sales will reach 4.86 million units by the end of 2025, with new single-family construction expected to total approximately 964,000 units this year. The revisions are based on a mix of recent market data and a recalibration of macroeconomic expectations, including a more modest pace of economic growth.
The ESR Group now projects real GDP growth at 0.5% for 2025 and 1.9% for 2026, both down from previous estimates of 1.7% and 2.1%, respectively. These adjustments reflect weaker-than-expected economic data from the first quarter of 2025.
Mortgage rate outlook
On mortgage rates, Fannie Mae expects a modest decline. Rates are forecast to end 2025 at 6.2% and 2026 at 6.0%, slightly lower than the prior forecast of 6.3% and 6.2%, respectively.
“We forecast mortgage rates to end 2025 and 2026 at 6.2% and 6.0%, respectively, down from 6.3% and 6.2% in our prior forecast,” Fannie Mae chief economist Mark Palim said.
However, despite the small downward revision, some experts anticipate little immediate movement in mortgage rates over the next few months.
“Given persisting inflationary pressures and the Fed’s cautious approach to cutting rates, my assumption is that mortgage rates are likely to stay where they are in May,” said Charles Goodwin, vice president of sales at Kiavi. “The bond market is balancing inflation and economic volatility at the same time, and as tariff uncertainty continues to ripple through the international community, they may wait and see how everything shakes out before moving rates in either direction."
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Looking further ahead, Goodwin added, “We expect that mortgage rates will fall over the next five years. As inflation stabilizes and the Fed eventually shifts to a more accommodative stance, we anticipate seeing rates fall slightly, although not to the previously historically low levels where they once were.”
Housing activity
Along with home sales and mortgage rates, Fannie Mae also adjusted its forecasts for home prices, mortgage originations, and inflation.
Home prices, as measured by the Fannie Mae Home Price Index (FNM-HPI), are now projected to rise 4.1% in 2025 and 2.0% in 2026, slightly higher than the previous quarterly forecast of 3.5% and 1.7%, respectively.
Mortgage originations are expected to rise to $1.98 trillion in 2025 and $2.33 trillion in 2026, up from previous projections of $1.94 trillion and $2.28 trillion, respectively.
Fannie Mae revised its real GDP growth outlook downward, citing Q1 2025 economic data, with expectations now at 0.5% for 2025 and 1.9% for 2026 on a Q4/Q4 basis.
Inflation expectations were also adjusted upward. Fannie Mae now expects the Consumer Price Index (CPI) to rise 3.5% in 2025, compared to 3.2% projected in March. Core CPI is forecast to increase 3.9% in 2025 and 2.6% in 2026.
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