Fannie Mae sees home sales surging as rates tumble in 2026

Fannie Mae projects a significant rebound in the U.S. housing market by 2026, driven by an anticipated decline in mortgage rates to 5.9% by year-end, the lowest level since 2022. This forecast suggests a substantial increase in activity, with mortgage originations expected to surge by $470 billion to $2.32 trillion in 2026, alongside a rise in total home sales to 5.16 million, signaling a thawing of the previously frozen market.

Analysis

Fannie Mae's latest quarterly outlook projects a significant revitalization of the U.S. housing market by 2026, driven by an anticipated decline in mortgage rates to 5.9% by the end of that year. This forecast, which carries a strongly positive sentiment score of 0.8, suggests a material thawing of the market that has been largely frozen by high borrowing costs. The government-sponsored enterprise's economists predict this easing will unlock substantial activity, with mortgage originations projected to surge by $470 billion to reach $2.32 trillion in 2026. Concurrently, total home sales are expected to climb to 5.16 million units, reflecting a robust year-over-year increase of 9.6% in existing home sales and 6.9% in new home sales for 2026. This outlook points to a gradual normalization from the peak 7.7% mortgage rates seen in 2023, representing a notable inflection point for housing-related sectors after a multi-year period of suppressed transaction volumes.

Key Decisions for Investors

• Investors should consider increasing exposure to sectors with high sensitivity to housing turnover, such as homebuilders, building materials suppliers, and mortgage lenders, ahead of the projected 2025-2026 activity surge.
• The forecast is heavily contingent on interest rates falling as predicted; therefore, it is critical to monitor inflation data and Federal Reserve monetary policy signals, as any deviation could significantly alter this housing market outlook.
• Given the two-year horizon of the forecast, long-term investors may view the current environment as an opportunity to build positions in residential real estate investment trusts (REITs) and other housing-related assets before the market fully prices in the anticipated recovery.