US Existing Home Sales Trending Towards 30-Year Lows: Fannie Mae

The annual pace of U.S. existing home sales is anticipated to be the slowest since 1995, notwithstanding the decline in mortgage rates in recent months and the improvement in housing supply in certain regions, according to Fannie Mae.

Existing home sales are predicted to average around 4 million annualized units for the rest of 2024, somewhat lower than the 2023 sales pace. Fannie Mae now forecasts total home sales to be 4.7 million in 2024, down from its previous prediction of 4.8 million and down 0.3% from 2023.

Sales will then pick up by 9.8% in 2025 to a pace of 5.1 million units, with most of that increase coming in the back half of 2025 if mortgage rates decline to an average rate of 5.7%, as it currently forecasts, Fannie Mae said.

The research identified the lock-in effect of mortgages and refinancing that occurred during the early stages of the pandemic, when interest rates were exceptionally low. Currently, homeowners who have low-rate mortgages are hesitant to finance at the current rates of over 6%.

Approximately 80% of 30-year fixed rate loans had note rates at least 100 basis points below the average 30-year fixed-rate mortgage rate of 6.20%, as of Sept.12, 2024, as measured by Freddie Mac’s weekly mortgage rate survey, based on Fannie Mae’s book of outstanding single-family mortgage loans, as of June 30, 2024.

Fannie Mae stated that affordability will remain a substantial challenge in the near future due to the ongoing rise in home prices and high mortgage rates.

“We think it’s likely that many would-be borrowers are waiting for affordability to improve even further, and that some may be anticipating additional declines in mortgage rates given expectations that the Fed will lower the federal funds target rate,” Fannie Mae said.