WASHINGTON—Mortgage rates are expected to fall further, spurring a slight uptick in housing activity, according to the March 2025 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group.
Fannie Mae said it expects mortgage rates to end 2025 and 2026 at approximately 6.3% and 6.2%, respectively, each downward revisions of three-tenths from its prior forecast.
For home sales, the lower mortgage rate forecast offsets the softer economic outlook. “We have revised upward our outlook for total home sales to 4.95 million in 2025, up slightly from 4.90 million in our prior forecast,” Fannie Mae said.
Single-family mortgage originations are expected to total $1.94 trillion and $2.28 trillion in 2025 and 2026, respectively. “These represent slight upward revisions from our prior forecast,” Fannie Mae said.
“Incoming data and greater clarity on trade policy has led us to reduce our growth outlook for 2025 to 1.7% (2.2% previously) and 2026 to 2.1% (previously 2.2%), with modest corresponding impacts to our labor market forecast,” Fannie Mae said.
Inflation, as measured by the Consumer Price Index (CPI), is now expected to end 2025 at 3.2% on a Q4/Q4 basis, Fannie Mae said.
“This is an upward revision from 2.8% in our prior forecast that largely reflects the expected pass-through of tariffs to consumer prices, though the impact is partially offset by slower economic growth and a downward revision to the energy price outlook,” Fannie Mae said.
“We expect the recent pullback in mortgage rates will provide a small boost to home sales this year,” said Mark Palim, fannie mae senior vice president and chief economist. “While our latest forecast calls for a period of modestly slower economic growth, historically, interest rates have been the most important driver of home sales. We think mortgage rates will move even lower within the next quarter and ultimately close the year at approximately 6.3%, which could be low enough to generate some extra sales from any would-be buyers still waiting on the sidelines.”