As real estate professionals, staying ahead of market trends is crucial for guiding clients through their buying and selling journeys. Fannie Mae’s latest housing forecast for 2025 reveals a more cautious outlook, signaling key challenges and opportunities for agents. With higher-than-expected mortgage rates and subdued existing home sales, the report underscores affordability as the primary constraint on housing activity for the foreseeable future.

Here’s a breakdown of the forecast and what it means for your business.

Fannie Mae no longer expects mortgage rates to dip below 6% in 2025. The updated projections include:

• Q4 2024: Average 6.6%

• Q4 2025: Average 6.3%

• Q4 2026: Average 6.1%

This marks a significant revision from earlier predictions, which anticipated rates dropping to 5.7% by 2025. Higher rates are attributed to rising 10-year Treasury yields and market uncertainty following the 2024 elections.

Fannie Mae slashed its 2025 existing home sales growth projection from 11% to just 4%. Total home sales are expected to:

• 2024: 4.71 million

• 2025: 4.93 million

• 2026: 5.68 million (a rebound)

The ongoing “lock-in effect,” where homeowners with low mortgage rates are reluctant to sell and take on higher rates, continues to constrain inventory levels.

Refinancing volume is expected to decline due to persistent higher rates:

• 2025 Refinancing Projections: $527 billion, down from $600 billion in the previous forecast.

• 2024: $1.64 trillion (purchase: under $1.3 trillion)

• 2025: $1.94 trillion, revised down from $2.14 trillion.

• 2026: Expected to recover to $2.4 trillion.

The lock-in effect will likely continue limiting inventory in 2025. This means buyers will face stiffer competition for available properties. Agents should:

• Work closely with sellers to identify the right timing and pricing strategy.

• Highlight the value of upgrading or downsizing, even in a higher-rate environment, to unlock inventory.

Affordability will remain a key constraint. Buyers may struggle with the combination of higher home prices and elevated mortgage rates. To address these challenges:

• Educate buyers on financing options, such as rate buydowns or adjustable-rate mortgages (ARMs).

• Partner with mortgage professionals to provide clients with pre-approval guidance tailored to the current rate environment.

With fewer refinancing opportunities and tight inventory, first-time homebuyers represent a key market. Focus on:

• Entry-level homes and neighborhoods.

• Creative solutions, such as down payment assistance programs, to help first-time buyers overcome affordability barriers.

While 2025 may bring challenges, Fannie Mae predicts a recovery in home sales and mortgage originations in 2026. Agents should:

• Build strong client relationships now to capitalize on the future rebound.

• Stay informed about long-term trends to position themselves as trusted advisors.

1. Leverage Market Knowledge

   Use insights from Fannie Mae’s forecast to guide your clients. Share realistic expectations about rates, inventory, and market conditions.

2. Expand Your Network

   Collaborate with mortgage professionals and financial advisors to offer comprehensive solutions to buyers and sellers.

3. Market Smarter

   Focus on targeted marketing for motivated sellers, such as those looking to relocate or downsize, and buyers seeking opportunities despite higher rates.

4. Stay Resilient

   The market may be slower in 2025, but your adaptability and expertise will position you for success when the market rebounds in 2026.

Fannie Mae’s cautious 2025 housing forecast highlights affordability and tight inventory as ongoing challenges for the real estate market. However, with preparation and a focus on building long-term relationships, real estate agents can navigate these headwinds and position themselves for growth in the years ahead. By staying informed and proactive, you’ll be ready to guide clients through the current landscape and beyond.