The economy is expected to slow for the remainder of the year – but positive signs are out there for the mortgage market, says industry expert
Fannie Mae now expects a slower pace of growth in the US economy for the remainder of the year – but its revised forecasts offer cause for cautious optimism and point to a resilient housing market, according to one industry expert.
The government-sponsored enterprise (GSE) said at the end of April it expected a reduction of forecasted GDP growth for the rest of 2025 and a slight decrease in projected growth for 2026. The updated projections forecast expected GDP growth of 0.5% for the remainder of this year, down from 1.7% growth in the previous forecast, and 1.9% growth in 2026, down from 2.1% previously.
However, a reduction in forecasted interest rates, coupled with an expected increase in home prices, has George Carrillo (pictured top), co-founder and chief executive officer of the Hispanic Construction Council, hopeful of improvement.
Carrillo said that while optimism is to be found in the projections, the ongoing volatility caused by the Trump administration’s tariffs must temper some of that hope.
“Fannie Mae’s revised projections tell a complex story,” he told Mortgage Professional America. “While the downward revision in GDP growth to 0.5% for 2025 is concerning, the modestly higher outlook for home prices and sales suggests resilience within the housing sector.
“However, we must acknowledge that these forecasts rely on an unstable economy heavily impacted by an ongoing trade war. The tariffs and uncertain trade policies create volatility that trickles into every part of the economy.”
Carrillo has concerns about how the confidence shown by the administration in policies that many are questioning could leave brokers and borrowers in a challenging spot.
“Adding to this is the pressure from the current administration to project confidence despite economic challenges tied to failed policies, which leaves businesses and consumers navigating murky waters,” he said. “These uncertainties mean we have to approach the projections with cautious optimism and prepare for possible ripple effects in the market.”
Originations to increase, rates lower than the previous forecast
The updated projection indicated an expected increase in mortgage originations compared to the previous projection. The new forecast projects $1.98 trillion for 2025 and $2.33 trillion in 2026. These are up from the previous forecast of $1.94 trillion in 2025 and $2.28 trillion in 2026.
A decrease in forecasted interest rates could fuel this increase in originations. Fannie Mae expects rates to end 2025 at 6.2% and 2026 at 6.0%. These are both down from the previous forecast of 6.3% to end 2025 and 6.2% to end 2026.
Carrillo said Fannie Mae’s projections line up with what he’s currently seeing in the market.
“The projections align closely with what I’m observing in my market, but they also highlight potential challenges,” Carrillo said. “When interest rates drop, it improves debt-to-income ratios, allowing more buyers to qualify for homes. This is positive for affordability but introduces a different issue in today’s tight inventory market.”
The different issue is a continued increase in home prices. Fannie Mae expects a 4.1% jump in home prices for the remainder of 2025, up from its previous projection of 3.5%. The projection also saw an increase in 2026 from the previous forecast, as the new projection includes a 2.0% increase next year compared to the prior projection of 1.7%.
As home prices continue to climb, Bob Driscoll of Rockland Trust warns that many buyers are settling or stepping out of the market entirely. https://t.co/Y54S25Xj1F
— Mortgage Professional America Magazine (@MPAMagazineUS) May 9, 2025
“With more qualified buyers in the mix, the competition intensifies, driving up prices as buyers outbid each other,” Carrillo said. “Essentially, the same factor that provides relief to some buyers can create frustration for others who get priced out due to bidding wars. It underscores the importance of finding balance, both in policy and in the strategies we use as professionals to guide our clients.”
Alternative financing set to grow in the years ahead
Carrillo notes that brokers and loan officers will need to remain resourceful to help customers navigate the ongoing challenging market and believes alternative financing options could help customers who are struggling with affordability issues.
“This market demands resourcefulness,” he said. “I’d recommend that brokers familiarize themselves with alternative funding options beyond traditional banking. Local credit unions, community development financial institutions, and crowdfunding platforms can provide flexible options for buyers or developers who face traditional financing barriers.
“Exploring loan products like FHA 203(k) renovation loans or construction-to-permanent loans can also help clients achieve homeownership in challenging conditions.”
Brokers can also provide guidance to borrowers to ensure they understand their financial situation and plan a path that best suits their needs.
“By offering workshops or personalized guidance, you can help clients understand their financing options, calculate affordability, and prepare competitive offers,” Carrillo said. “Building relationships with industry stakeholders, including lenders, builders, and policymakers, can position you as a trusted partner in navigating the current market.”
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