Fannie Mae Lowers Mortgage Rate and Home Price Forecasts, Sees Gradual Housing Recovery Through 2026 — Evening Brief – 07.24.25
Fannie Mae has revised its economic and housing outlook, dialing back its expectations for both mortgage rates and home price appreciation through 2026. According to its July 2025 Economic and Housing Outlook report, the government-sponsored enterprise now sees 30-year fixed mortgage rates ending 2025 at 6.4% and declining further to 6.0% by the end of 2026. That’s a modest, yet notable downgrade from last month’s forecast of 6.5% and 6.1%, signaling slightly improved rate relief in the medium term.
In tandem, Fannie Mae also trimmed its home price growth projections. It now expects home prices to rise just 2.8% in 2025 and a mere 1.1% in 2026, down from previous estimates of 4.1% and 2.0%, respectively. These Q4-over-Q4 revisions reflect a cooling in price momentum as elevated mortgage rates continue to suppress affordability and constrain demand. While rates are projected to decline, the slower pace of economic expansion and persistent inventory constraints are likely tempering price pressures.
Interestingly, despite lower home price expectations, Fannie Mae has nudged its forecast for home sales slightly higher. Existing and new home sales are now projected to reach 4.85 million units in 2025 and 5.35 million in 2026, modestly above last month’s estimates. This adjustment may reflect expectations that marginal improvements in borrowing costs will boost buyer activity, especially from pent-up demand among first-time buyers.
The outlook for mortgage originations also improved, with total origination volume now expected to hit $1.92 trillion in 2025 and $2.34 trillion in 2026, up from $1.90 trillion and $2.28 trillion previously. The upward revision suggests Fannie Mae sees incremental recovery in both purchase and refinance activity as rates ease and home sales slowly rebound.
On the macroeconomic front, Fannie Mae slightly lowered its 2025 GDP growth forecast to 1.3% (from 1.4%) but raised its 2026 forecast to 2.3% (from 2.2%). These modest revisions reflect a cautious yet stable outlook for the U.S. economy as it navigates a prolonged high-rate environment and transitions toward a more sustainable growth trajectory.
Fannie Mae’s revised outlook points to a gradually improving housing and mortgage market, but not a dramatic rebound. The muted home price forecasts and only slightly lower mortgage rate expectations suggest the housing market will remain affordability-constrained in the near term. However, the upward revisions to home sales and originations hint at a soft-landing scenario, where demand incrementally returns as rates ease and economic conditions stabilize.