Factoring in the slowing economy, Fannie Mae said unemployment will likely rise to 4.4% by year-end and increase to 5.4% by the end of 2024. The group expects the headline and core consumer price indices close 2023 at around 3.3% and 3.9% annually. As such, Fannie Mae now anticipates the Federal Reserve to start easing its monetary policy, with only a single 25-basis point hike in May.
While housing demand and home prices have remained stronger than previously forecasted, the group expects a slight pickup in sales for the spring homebuying season and a smaller decline in house prices in 2023. Fannie Mae’s home price index forecasted a -1.2% growth compared to its previous -4.2% projected growth.
“The greater-than-expected resilience of the housing sector to the affordability pressures of higher home prices and mortgage rates is central to our expectation that the recession will be modest,” said Fannie Mae chief economist Doug Duncan.
“In our view, while it would be premature to expect no further difficulties in the banking sector other than credit tightening, we’re maintaining our baseline expectation of a modest recession as we see signs of a weakening employment market, slowing retail sales, and declining manufacturing activity. However, the rapid response of hopeful homeowners to periodic declines in mortgage rates, even from the current higher rates, gives us additional confidence in our use of the word ‘modest.'”
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Source: mpamag.com