Housing Market Softens As Economy Shifts

Fannie Mae’s Economic and Strategic Research Group releases a forecast each month detailing their outlook for the economy and housing market in the months ahead. The group looks at things like consumer spending, GDP growth, home sales, and mortgage originations and predicts where they’re headed through the end of this year. Their August release contains few surprises for anyone thinking about buying or selling a house. In short, it says the housing market has been softening due to rapid home price increases and the recent spike in mortgage rates. Fannie Mae believes the shift in affordability conditions will cause home sales to fall 16.2 percent this year from the year before. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the broader economy, and the Fed’s response to it, will determine how quickly things level off. “The question for many market observers is how quickly, and with home much additional tightening, the core inflation rate will come down to the Fed’s preferred target,” Duncan said. “In our view, the labor market’s continued strength suggests that the Fed is likely to maintain its aggressive posture through the end of the year.” (source)

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