Freddie Mac's predictions for the economy, housing, and mortgage markets in 2024 are cautiously optimistic, acknowledging several dynamic factors. Here's a summary of their key forecasts based on the latest outlook:
Economic Growth: The U.S. economy showed resilience in 2023, with significant job growth, though there's an expectation for this to moderate in 2024. The labor market's normalization suggests a potential for economic growth to slow as consumer spending fades. Despite this, inflation is trending towards the Federal Reserve's target rate of 2%. However, reaching this goal might take longer than expected due to factors like home price reacceleration and high average hourly earnings growth.
Mortgage and Housing Market: Mortgage rates, after peaking in 2023, have begun to stabilize, encouraging both potential homebuyers and builders. Sales of new homes have seen an uptick, contrasting with the overall decline in home sales to levels not seen since 2012. The inventory remains low, continuing to pressure prices upwards. Freddie Mac anticipates mortgage rates to ease throughout the year but to stay in the 6% range, with a potential recovery in home sales. However, any growth in home sales is expected to be modest due to the persistent need for more inventory.
Mortgage Rates Forecast: A detailed outlook from October 2022 highlighted the challenges the housing market faces, including rapidly rising mortgage rates and declining demand. This historical perspective underscores the volatile nature of mortgage rates and their impact on the housing market dynamic.
Freddie Mac's outlook indicates a complex interplay between economic growth, inflation, labor market conditions, and the housing market's response to interest rate changes. Their predictions suggest a cautious approach to navigating 2024, focusing on the year's second half for potential rate cuts by the Federal Reserve, which could further influence mortgage rates and housing market activity.