U.S. Economic Footing Firmer Than Previously Thought, Projected to Expand 2.3 Percent in 2024

WASHINGTON, DC – Following annual revisions to the national accounts and an improvement in payroll employment growth in both August and September, the economy now appears to be on firmer footing than previously thought, according to the October 2024 commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. While the ESR Group still expects economic growth to slow from the robust 3.2 percent pace recorded in 2023, the degree of expected slowing is smaller; growth in 2024 and 2025 is now expected to be 2.3 percent and 2.0 percent, respectively, near the long-run trend growth rate. The improved economic outlook stems in large part from significant upward revisions to recent personal income data. Previously, the ESR Group expected consumption growth to retrench, as it had grown unsustainably relative to incomes, but revised data now show the relationship between income and consumption to be closer to historical levels. As such, the ESR Group believes the economy can maintain growth closer to its long-run potential through its forecast horizon, barring an unforeseen shock to consumer or business confidence from an adverse exogenous event.

Following data revisions and recent employment data, bond market expectations for rate cuts have moved into closer alignment with the dot plot from the Federal Reserve’s latest Summary of Economic Projections. As a result, the 10-year Treasury is currently up more than 40 basis points from its mid-September low. This represents upside risk to the ESR Group’s latest mortgage rate forecast, which now sees the 30-year mortgage rate ending the year at 6.0 percent, down from last month’s 6.2 percent projection, and to decline steadily to 5.7 percent by the end of 2025. Meanwhile, the ESR Group expects annual home prices to grow 5.8 percent in 2024 and 3.6 percent in 2025, both slight adjustments to their previous forecasts of 6.1 percent and 3.0 percent, respectively. While the general low level of homes available for sale is expected to continue to exert upward pressure on prices, the ESR Group expects ongoing affordability constraints and rising inventories of homes available for sale to help moderate the magnitude of home price growth moving forward.

“While potential homebuyers have noticed the decline in mortgage rates over the last few months, they are equally aware that there has been little relief on the home price side, the other primary driver of unaffordability, particularly for first-time buyers,” said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. “The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale. Of course, continued strong homebuilding activity will also play a significant role as the shortage of national housing stock remains the primary impediment to affordability.”

Visit the Economic and Strategic Research site at fanniemae.com to read the full October 2024 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic and Strategic Research Group, please click here.

About the ESR Group
Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Mark Palim, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets.

Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.