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Mortgage industry forecasters are likely to stay longer before they see the impact of the Trump administration’s trade, tax and immigration policies on inflation, mortgage industry forecasters are likely to stay longer. I’m predicting.
Fannie May economist said Thursday that he does not expect interest rates on a 30-year fixed-rate mortgage to fall below this year or next year or the next 6.5%.
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Economists and bond market investors who fund most mortgages were surprised by the continued strength of the economy and the possibility of tariffs, tax cuts and deportation advocated by the Trump administration.
Kim Bae-Tangkot
“Economic growth was strong to start the year as fourth quarter consumer spending data exceeded our expectations,” Fannie May economist Kim Bettancourt said in a statement. “We expect the economy to slow down slightly as consumer spending slows down to a level consistent with its historic relationship with revenue. However, the continued uncertainty regarding trade policy is due to GDP and inflation. Adds risk to the outlook. This can affect mortgage rates, but the direction – up and down depends on many factors.
In their final forecast before the November election, Fannie Mae and MBA economists had envisioned that mortgage rates will fall to a low six this year, and immerse themselves in the Five in the second half of 2025.
However, mortgage rates moved in the opposite direction when the Fed stopped its 2% target as the Fed cut its short-term interest rates all the way late last year.
It is expected to rise this year and next year.
Source: Fannie Mae and Mortgage Bankers Association Forecast, February 2025.
Fannie Mae’s latest forecasts assume the 30-year fixed-rate mortgage fees that fell to 6.6% in the fourth quarter of 2025 and remain close to that level within the next year. Similarly, the MBA’s forecast mortgage rate is below 6.5% this year and will not fall 6.4% in 2026.
Fannie May economists expect inflation (measured by the consumer price index) to rise 2.8% in the fourth quarter of 2025 (measured by the consumer price index) from 2.5% in January’s forecast. I say that.
“We expect the federal fund rate to be reduced only once this year, in line with financial markets, to accommodate inflation data that is more “sticky” than previously expected,” Fannie Mae said. Forecasters state in the commentary with the latest predictions.
Investors believe central banks are better than the chance to implement at least two rate cuts this year, but federal funding is up until at least June, according to the CME FedWatch tool that tracks and measures expectations through Futures Market Maintain the rate. of the future Fed’s movements.
According to a University of Michigan consumer survey, Republicans who support Trump aren’t too worried, but consumers are also more wary of inflation.
Consumer sentiment indicators have declined for the second consecutive month in February, falling 9.8% from January, and the index has fallen 15.9% from a year ago.
Joanne Hsu
“The sentiment was declining for both Democrats and independents, but it was constant for Republicans, reflecting on the ongoing differences of opinion over the outcomes of new economic policies,” said a survey by consumer Joan Huss. He said in a statement.
The survey showed that inflation expectations rose to 4.3% in February, the highest reading since November 2023, despite a slight decline among Republicans.
There is considerable uncertainty about how the Trump administration’s policies will affect the economy. This is because it is unclear what those policies actually are.
After announcing tariffs on goods from Canada and Mexico, home builders warned that they could increase the issue of affordability, and Trump put them on hold as trade negotiations continued.
The Trump administration has announced that it will increase its commodity duties from China by 10% and expand tariffs on steel and aluminum imports will take effect next month. The president also warns that countries with tariffs in place on US goods can expect retaliatory tariffs.
Fannie May said their latest forecasts include additional tariffs on imports from China, reducing economic growth forecasts by 1.10 points and increasing inflation forecasts for the same amount He said.
“Other tariff proposals that are not currently implemented are not included in our basic forecasts, but the current outlook shows a higher risk than normal risk,” said Fannie May’s economist. I said that.
Trump’s promise to extend and extend the tax cuts he signed into law in 2017 depends on Congress’ actions and is not considered in many forecasts, including Fannie Mae. Some economists say extending taxes without proportional spending cuts could be inflation.
The Non-Parent Committee for Responsible Federal Budget estimates that the Trump administration’s tax proposal could cut federal revenue by $11.2 trillion to $5 trillion over the next decade, and proposed by the House Budget Committee 2025 The annual budget is estimated to be up to $4 trillion. Additional debt despite spending cuts.
Fannie May’s economist said it is unclear how the tariffs that were ultimately implemented will affect broad fiscal policy.
“If tariff revenues are used to reduce the fiscal deficit, they will be converted into contractive fiscal policies, requiring a lower Fed funding rate to maintain double employment and a 2% inflation target. It suggests that it will be.” “However, if revenue is used to fund additional expenditures or other tax cuts, the impact on aggregate demand in economic and monetary policy responses will be different.”
Appearing on Thursday’s Bloomberg surveillance, Treasury Secretary Scott Bescent argued that “everything that President Trump’s administration is doing will be flashy.”
Long-term interest rates “have been falling every week since Donald Trump became president,” Bescent said. “So if we can continue doing that for 52 weeks, that would be great.”
To achieve that, the Trump administration must achieve “non-inflammatory growth” by curbing the fiscal deficit and lowering energy prices and reducing regulations, Bescent said.
Bescent argued that the Trump administration’s Office of Government Efficiency (DOGE) will cut federal spending, while tax cuts and employment laws will stimulate the economy and increase incomes.
(Tad Dehaven, a policy analyst at the conservative Kato Institute, noted that some of Doge’s cost-cutting claims were found to be “inaccurate or misleading.” As “fantasy mathematics.” It could generate a deficit reduction of $3 trillion.)
Scott Bescent
“I think it’s really a shame (doge) is sad that it was lampooned and attacked the way it has, but… when you’re running people’s cheese, they don’t like it. It tells me there is a lot of established interest in the point,” Bescent said. “It’s not their cheese — it’s American cheese.”
Similarly, Bescent questioned traditional wisdom among many economists, questioning that deportation might promote inflation by putting upward pressure on wages.
“I’ll point out that 10 or 20 million people have come across the border, depending on the number they want to use (and) there was the worst inflation in 40 years,” he said. “So I don’t know why people say it’s inflation when they tell people to go home.”
Fannie May’s economist has revised its mortgage rate forecast upwards, but the mortgage giant’s forecast for home sales, mortgage rates and home openings remain largely unchanged since last month, with some continuing It is thanks to its economic strength.
Home sales could have hit bottom in 2024
Source: Fannie Mae Housing Forecast, February 2025.
Existing home sales increased 2.4% in December to a seasonally adjusted annual rate of 4,245 million, with a recent increase in the purchase mortgage application, Fannie Mae Conomist said sales of existing homes increased 2.9% this year. has increased to 4.18 million people. This is slightly up from last month’s 2025 forecast of home sales of 4.15 million.
Fannie Mae’s forecast for 2026 sales of existing homes has been revised slightly to 4,459 million due to expectations that mortgage rates will stay longer.
“We hope that the lack of affordability and the effects of lock-in will further limit the pace of sales in the near future,” Fanny May’s forecaster said.
New home sales increased 5% this year to 717,000, and by 2026, it rose 2.6% to 736,000.
“We have revised our new home sales outlook downward due to high mortgage fee outlook, but we continue to believe that the new home sales market will be a bright spot for comparison in the 2025 housing market,” Fannie Mae Forecasters He said.
A rise in home prices means a big mortgage
Source: Fannie Mae Housing Forecast, February 2025.
With national home prices increasing by 5.8% in 2024 and expected to increase by another 3.5% this year, Fannie Mae has seen a 9.4% increase in originating loan volume and 1.42 It’s going to be trillion dollars.
The amount of refinance is expected to rise nearly 20%, downgraded by $32 billion from January’s forecast.
The construction of the house is predicted to be flat
While the shortage of housing supply in many markets has contributed to the problem of affordability, the start of both single-family and multi-family homes is expected to be relatively flat this year and next year.
“The Multifamily Starting Series is well-known, but demographic trends continue to believe that once the current high-level units in the construction pipeline are completed, they will support multifamily construction in the long run,” Fannie Mae Conomist said. I said that.
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