Hope for home sales wanes in revised forecast
Fannie Mae’s latest report anticipates the market will remain sluggish until the end of 2025, but there is a potential for improvement in 2026.
Forecasters at Fannie Mae are expecting a slower real estate market than anticipated in 2025 as more potential homebuyers stay on the sidelines amid the current economic slowdown.
Fannie Mae's latest Economic and Housing Outlook predicts 30-year mortgage rates will slowly but steadily decline before dropping to 6.2% by the end of the year. That would push the annualized rate for existing home sales into the 4.15 million range during the second and third quarters of 2025 before the rate jumps to around 4.26 million by the end of the year. A bigger increase is expected in 2026.
The April forecast is less optimistic than Fannie Mae's March outlook, which had existing home sales plugging along at an annualized rate of 4.38 million.
New home sales optimism dims: Experts with Fannie Mae's Economic and Strategic Research Group also lowered expectations for new home sales, with the April outlook forecasting an annualized rate of 682,000 by the end of the year, down from March's forecast of 730,000.
In addition to uncertainty about tariffs, consumer sentiment emerged as a key factor driving the forecast's revisions. Fannie Mae's housing sentiment index dropped 3.5 points in March to 68.1, following a 1.8-point drop in February, as 77% of consumers said they believed it was a bad time to purchase a home. Additionally, the largest share of consumers in more than a year (35%) expected mortgage rates to go up in the next 12 months.
A brighter 2026? Despite their lowered expectations for 2025, Fannie Mae experts anticipate market conditions will improve in 2026. The April forecast predicts home sales will climb to an annualized rate of 4.56 million by the end of next year, with the 30-year fixed-rate mortgage hovering around 6%.