Fannie Mae and Goldman Sachs have cut their 2027 housing outlooks – here’s what the data means for mortgage rates
Inflation fears and economic jitters are seeing prominent forecasters revise their expectations for the housing market downward as the mortgage industry tempers its expectations for 2027.
Fannie Mae’s Economic and Strategic Research Group now sees the 30-year average fixed mortgage rate holding steady at 7.5% throughout all four quarters of next year, while Goldman Sachs projects existing-home sales to total 3.9 million in 2027 – compared to an estimated 4 million in 2026, and a full 26% lower than 2019 levels.
For some mortgage industry watchers, it may feel like the market is stuck in a holding pattern for the next while, with little sign that homebuying and refinance activity is about to burst into life anytime soon.
But there are still plenty of clues industry members are looking out for as they assess whether better conditions for homebuyers and owners could be on the way.
Among the closest watched will be labor market data, which offers a strong sign of how the economy is faring and influences both bond market confidence and the Federal Reserve’s approach to interest rates.
Fresh data released Tuesday by the Labor Department offered a positive sign on the jobs outlook: September job openings climbed to 7.52 million, beating forecasts by 420,000 in yet another signal that the labor market is in no hurry to cool.
Inflation still driving the agenda
Labor market data is important, but the single biggest factor driving financial market and Fed sentiment remains the inflation outlook – especially with the war in Iran still rumbling on, putting continued pressure on oil prices.
In September, the consumer price index (CPI) remained well above the Fed’s 2% target, coming in at 3.7% and seemingly keeping rate hikes on the table (even if the central bank opted against an increase last Wednesday).
Inflation remains the “number one” data point to watch, according to Sonoran Lending president and senior loan officer Jay Lessard (pictured top), while fiscal policy and government borrowing, geopolitical risk, tariffs and energy prices all remain on his radar.
Those can have a significant impact on the direction of bond yields – which, although influenced in part by Federal Reserve decisions, have more of a say on mortgage rates than central bank decisions do.
That’s a consideration Lessard is constantly underlining to customers. “The important point for consumers is that mortgage rates aren’t determined by one Fed meeting,” he told Mortgage Professional America. “They’re being influenced every day by what investors believe inflation, economic growth, and Fed policy are going to look like six or 12 months from now.”
‘The path to lower mortgage rates isn’t going to be a straight line’
Despite the continuing economic storm clouds, Lessard said his overall outlook is cautiously optimistic over the longer term – but his near-term view has become more guarded, influenced mainly by the dramatic runup in rates seen in recent weeks.
“We’ve seen mortgage rates move higher since early September as inflation concerns have returned and Treasury yields have risen,” he said. “That has been a good reminder that the path to lower mortgage rates isn’t going to be a straight line.”
While rates have remained resolutely above 7% for weeks, Lessard is optimistic about the prospect for a gradual tick lower, even if he doesn’t see a rapid drop on the way.
“I still believe there’s an opportunity for mortgage rates to improve as we move forward, particularly if inflation continues to moderate and economic growth and the labor market begin to cool,” he said.
“But I wouldn’t expect a dramatic move lower overnight. We’re probably going to continue seeing volatility where rates can improve quickly on favorable economic data and move right back up when inflation concerns return.”
The next big data release to watch: the Bureau of Labor Statistics’ nonfarm payrolls employment report, scheduled to arrive at 8:30 a.m. ET on Friday (November 6).
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