09/20/2024 | Press release | Distributed by Public on 09/20/2024 11:09
Helping lenders serve homebuyers and homeowners with affordable mortgages
Financing for quality, affordable rental housing in every market, every day
Reducing risk and enhancing housing finance liquidity
All Resources to Manage Financial Uncertainty
All Resources for Recovering from a Disaster
Recovery Assistance for Homeowners
Recovery Assistance for Renters
Key Takeaways:
Control group retail sales, which feed directly into the Bureau of Economic Analysis's estimate of personal consumption expenditures (PCE), has PCE tracking a bit above our Q3 estimate. Looking beyond the third quarter, we continue to expect some slowing in consumption growth to better align with the current rate of real income growth. Still, there may be some upside risk to this forecast as the Fed cut interest rates by more than we had expected. While most monetary policy works with long lags, interest rates for auto loans and other durable goods categories have already come down in expectation of an easing in monetary policy, which could spur some additional consumption in those categories by the end of the year.
Ongoing weakness in existing home sales is in line with our most recent forecast, which called for the lowest annual level of existing sales since 1995. It's worth noting that August sales, which were mostly closed in June and July when rates were still around 6.9 percent, don't reflect most of the recent decline in mortgage rates. However, most real-time indicators have continued to show sluggish demand at current affordability levels even recently, when rates fell below 6.5 percent. The one exception is the most recent reading of weekly mortgage purchase applications, which rose 5.4 percent from a week prior. If sustained, this presents some upside risk to our year-end forecast, but we continue to believe there is little demand at current affordability levels. On the new home side, the jump in single-family starts confirms our theory that last month's decline was due to the effects of Hurricane Beryl. Additionally, after steadily declining from January through June of this year, single-family permits have now increased for the second consecutive month, perhaps indicating that homebuilders are again willing to ramp up activity, presenting some upside risk to our forecast.
Nathaniel Drake
Economic and Strategic Research Group
September 20, 2024
Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & 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.