A new report highlights adjustments to growth, inflation, and housing trends
Fannie Mae now expects average 30-year fixed mortgage rates to end 2025 at 6.5%, up from its original forecast of 6.4%, before falling to 6.1% by the end of next year.
A new analysis released this week by the government-sponsored enterprise's Economic and Strategic Research Group paints a revised, more modest picture of the US economy and housing market for late 2025 and into 2026. The report, titled Economic Developments - August 2025, revises key forecasts, including for economic growth, inflation, home sales, and mortgage rates.
This increase in expected mortgage rates, combined with the broader economic environment, has led to a downward revision in projected home sales and mortgage originations. Total home sales for 2025 are now forecast at 4.74 million units, a drop from the prior projection of 4.85 million. The 2026 outlook was similarly reduced to 5.23 million, down from 5.35 million.
The volume of new mortgage loans is also expected to be lower. Mortgage originations are now projected at $1.85 trillion for 2025 and $2.26 trillion for 2026, compared to the earlier forecasts of $1.92 trillion and $2.34 trillion.
According to the analysis, led by senior vice president and chief economist Mark Palim, the US economy’s gross domestic product (GDP) growth is now expected to be slower than previously forecasted. The 2025 outlook was revised down to 1.1% on a Q4/Q4 basis, a slight decrease from the prior 1.3%. The projection for 2026 also saw a minor trim, from 2.3% to 2.2%.
This cooling economic outlook is accompanied by an uptick in expected inflation. The report forecasts the Consumer Price Index (CPI) to rise 3.3% in the final quarter of 2025, up from a previous forecast of 3.0%. For 2026, the CPI outlook was slightly lowered to 2.6%. Similarly, core CPI, which excludes food and energy, is now expected to increase by 3.3% in 2025, a small revision from the 3.2% previously anticipated.
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