Fannie Mae lowers single-family mortgage origination forecasts through mid-2027

In a sign of the economic headwinds facing the real estate finance industry, government-sponsored enterprise Fannie Mae lowered its single-family mortgage origination forecasts this week, with projections for both purchases and refinances dipping through mid-2027.

In August, Fannie’s economists had predicted total single-family origination volumes of $530 billion in the third quarter of 2026 and $538 billion in the fourth. The September forecast downwardly revised those figures to $508 billion and $502 billion.

Likewise, the first and second quarters of 2027 also saw downward revisions, with the first quarter dipping from $467 billion to $445 billion and the second quarter from $612 billion to $605 billion.

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It isn’t until the back half of 2027 that Fannie Mae’s Economic and Strategic Research (ESR) Group foresees a rebound in single-family originations, which the company defines as properties with one to four units. Fannie boosted its forecasts for those quarters, predicting a slight uptick in third-quarter volumes from $613 billion to $614 billion, followed by a larger revision to $615 billion in the fourth quarter compared with the prior forecast of $602 billion.

On a full-year basis, that brings the overall mortgage origination forecast down to $2.12 trillion in 2026 versus the previous forecast of $2.17 trillion. The 2027 prediction fell to $2.28 trillion from the $2.29 trillion cited in the August housing forecast.

The ESR Group now thinks the refinance share of originations will dip to 24% in the third quarter of 2026 and 30% in the fourth. In the August forecast, those percentages stood at 25% and 34%.

Fannie predicts slight mortgage rate improvement in 2027

On Thursday, Fannie’s government-sponsored sibling Freddie Mac reported a weekly average of 6.95% for the 30-year fixed-rate mortgage, up from 6.76% the prior week.

That gain of 19 basis points represents the largest weekly jump since October 2024, according to Freddie data.

In the August forecast, Fannie Mae economists predicted 30-year rates would end 2026 around 6.8% and stay there through the end of 2027’s first half.

Now, the ESR Group still sees the 30-year ending 2026 around 6.8%, but it believes it will improve to 6.7% in the first quarter of 2027 and stay anchored in that range for the remainder of the year.

On Wednesday, the Federal Reserve executed its first interest rate hike since 2023. The quarter-point increase brought the benchmark federal funds rate to a target range between 3.75% and 4%.

Sixteen of the 18 members of the Federal Open Market Committee (FOMC) who participated in the central bank’s quarterly Summary of Economic Projections penciled in at least one additional rate increase in 2026. Four Fed officials made the case for two more quarter-point hikes this year, which would put the fed funds rate in the range of 4.25% to 4.5%.

Fannie’s forecast sees the fed funds rate averaging 4% in the fourth quarter and 4.1% throughout next year, which implies one additional rate hike in 2026 and none in 2027.

That viewpoint is shared by six FOMC members, while eight Fed policymakers predict a half point of monetary tightening between now and the end of 2027.