Fannie Mae forecasts change in mortgage rates, housing market

Every spring homebuying season is a little different. But overall, in my years as a real estate reporter, I’ve witnessed spring as an active time for house hunting, closing days, and even bidding wars.

But I think we can all agree that this homebuying season has been weird so far.

Americans didn’t buy as many homes as usual in April, and it was the first month in 2026 that annual home listings outpaced sales. Housing sales price increases were at their most aggressive in 13 months.

And, of course, mortgage rates have been a whirlwind. According to Freddie Mac data, interest rates spiked at the beginning of March, after the U.S. and Israel attacked Iran. Then they dropped, and they’ve been bouncing back and forth for weeks.

Right now, mortgage rates are relatively flat as the market waits for significant economic or geopolitical movement. Homebuyers have no idea what’s going to happen next.

That’s why I’m relieved each time a reliable source releases predictions for the upcoming year’s real estate market. We shouldn’t take these forecasts as gospel, but they are definitely useful. And we all want to know what’s next.

The government-sponsored enterprise (GSE) Fannie Mae released its May Housing Forecast, and the data can provide us with a little clarity.

Fannie Mae predicts mortgage rates will stay higher for longer

In the Fannie Mae April Housing Forecast, the GSE projected that the average 30-year fixed mortgage rate would be 6.3% in Q2 2026, 6.2% in Q3 2026, then 6.1% for the rest of 2026 and throughout 2027.

The Fannie Mae Housing Forecast for May also put the average 30-year mortgage rate at 6.3%. But that’s where the similarities stop.

Related: Mortgage rate gridlock sparks housing market shift

Fannie Mae also expects the rate to stay at 6.3% through Q1 2027, then inch down to 6.2% for the rest of the year. So the GSE predicts that mortgage rates will hold at 6.3% for longer, then at 6.2% for longer, and never reach 6.1% in 2026 or 2027.

It’s worth noting that Fannie Mae bases its mortgage rate predictions based on rates from April 30, 2026, so there is room for error. However, rates have hardly changed since the end of April, and they’ve hovered in the 6.3% range for weeks, according to Freddie Mac. This means there’s reason to believe that Fannie Mae’s latest forecast is based on solid evidence.

Single-family housing starts might look different in 2026 and 2027

New home construction is a vital factor in making housing more affordable. More inventory translates to less scarcity, which leads to lower home prices and sometimes even decreased mortgage rates.

In its April Housing Forecast, Fannie Mae predicted a 4.2% decrease in single-family home construction in 2026, then a 2.7% increase in 2027.

More on the housing market and mortgage rates:

Zillow reveals why spring housing market is turning upside downThe hidden reason mortgage rates won’t drop yetAmericans face major decision after housing market shift

The GSE’s updated forecast for May is a mixed bag. Fannie Mae still expects new single-family unit construction to decrease this year, but on the bright side, it now foresees a 2.4% drop, not 4.2%.

On the other hand, Fannie Mae’s prediction for 2027 has changed from a 2.7% increase in single-family housing starts to just a 0.4% bump. Doing the math, the GSE expects fewer single-home starts overall in by the end of 2027.

What this Fannie Mae Housing Forecast means for homebuyers

We can talk about numbers and percentages all day, but when it comes down to it, what does Fannie Mae’s latest forecast mean for you as a potential homebuyer?

Mortgage rates probably won’t plummet in the near future. So, if you’re holding off on buying until rates go down, expect to wait a while. Meanwhile, you’re losing out on building equity in a home.Don’t try to time the real estate market based on what you think mortgage rates will do. With rates where they are, can you still afford to buy a home? If yes, consider buying this spring or summer — you can always refinance into a lower interest rate later. If not, either brainstorm other ways to afford a home (such as applying for a down payment assistance program) or wait. It might just not be your time yet.If single-family home construction does slow down over the next couple of years, expect housing prices to increase a bit more aggressively than they have been.Fewer houses mean more competition among homebuyers. This could not only drive up home prices, but also give sellers even more advantages. Ask your real estate agent if you need to consider making offers more quickly or finding ways to craft stronger offer letters.

Related: Berkshire Hathaway sends urgent message to home sellers

#Fannie #Mae #forecasts #change #mortgage #rates #housing #market