Sales and Originations Hitting New Lows, But 2025 Rebound Still Expected
Written By: Joel Palmer, Op-Ed Writer
Home sales are on the decline despite lower mortgage rates and increasing supply, with the latest projections indicating a 30-year low for this year.
Real estate brokerage Redfin reported that existing home sales fell 3.1 percent year over year in August to their lowest mark since May 2020, when the pandemic brought the housing market to a standstill. Removing that month, August sales were the lowest since 2012. Pending sales fell 2.4 percent year over year to their lowest mark since April 2020.
Analysts continue to point to several issues keeping potential buyers on the sideline. One is the lock-in effect, as current many home owners are hesitant to move because they’d be trading a mortgage rate of around 3 percent to one that is above 6 percent.
This has led potential buyers to be more selective. Fannie noted in its report that the rise in homes on the market is not occurring because of a significant increase in new listings. Rather, the pace of sales has been so weak that new listings on average are remaining on the market longer.
“There’s no sense of urgency. Buyers are selective right now, especially if they have a house already. They’re looking for the perfect home at the right price,” said Michael Cendejas, a Redfin real estate agent in Sacramento, Calif. “There aren’t a lot of desirable homes out there right now, and the ones that are in good shape go quickly if they’re priced well.”
Fannie Mae’s Economic and Strategic Research (ESR) Group echoed those observations in its September Commentary. Fannie said soft pending sales and purchase mortgage applications “continue to suggest limited home-purchase demand at current affordability levels.”
Based on current sentiment and data, Fannie is now forecasting that existing home sales for the full-year of 2024 will be the lowest since 1995.
“Although mortgage rates have fallen considerably in recent weeks, we've not seen evidence of a corresponding increase in loan application activity, nor has there been an improvement in consumer homebuying sentiment," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
“We think it's likely that many would-be borrowers are waiting for affordability to improve even further, and that some may be anticipating additional declines in mortgage rates given expectations that the Fed will lower the federal funds target rate. Others may be waiting for household incomes to improve further to offset some of the recent home price growth, or they may be thinking that future supply growth will ease affordability.”
While Fannie has slightly lowered its forecast for 2024 sales and mortgage originations, the ESR Group is projecting significantly more business for mortgage underwriters and processors in 2025.
Fannie forecasts annual existing home sales to increase 9.8 percent between 2024 and 2025. The company said the majority of that growth will occur in the second half of 2025, and that’s based on projections of mortgage rates falling during that period to below 6 percent.
Fannie also expects a sizable jump in purchase mortgages next year, with the annual volume projected to increase 15 percent to $1.5 trillion between 2024 and 2025.
For refinances, Fannie has slightly increased its full-year volume projections for 2024 and 2025. Fannie expects 2025 refinance volumes to come in at $649 billion, which would be 73 percent higher than the projected volume for this year.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
