Fannie Mae expects housing sale rut in 2023

“The economy continues to slide toward a modest recession, which we anticipate will begin in the new year, with housing leading the slowdown,” said Fannie Mae senior vice president and chief economist Doug Duncan, who also leads its ESR group. “Higher interest rates have ignited the typical reduction in residential fixed investment, which historically has led into either an economic slowdown or recession. From our perspective, the good news is that demographics remain favorable for housing, so the sector appears well-positioned to help lead the economy out of what we expect will be a brief recession.”

Finally, although inflation cooled in the previous month, Fannie Mae predicted that the strong labor market could contribute to more persistent wage pressures and lead the Federal Open Market Committee to raise the federal funds rate at its next meeting, capping at roughly 5% in early 2023.

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