Fannie Mae sees volume near $2.5T by 2027

Fannie Mae's economic division has released its first origination forecast for two years from now and it projects a rebound to levels that haven't been seen since the 2021 by then, but at a gradual pace.

Following projected increases of almost 11% this year and nearly 25% next year, originations could rise another 6.5% by 2027 and stop just shy of $2.5 trillion, a number last seen in 2021. 

While rates and other market conditions can be volatile, making it likely the forecast could change over time, for now the government-sponsored enterprise's 2027 projection suggests lenders may want to prepare to bank any 2026 gains ahead of what could be a slower 2027.

Longer-term forecast remains focused on purchase

The new 2027 forecast projects the bulk or $1.63 trillion in originations will come from homebuyers with the average rate slated to bottom out around 5.9% that year after falling to that level by the fourth quarter of 2026. 

Rates could decline by a steeper 60 basis points in the coming year, but with many outstanding loans from the pandemic a long way from being exposed to refinancing incentive, Fannie's forecast also anticipates purchases loans will make up $1.49 billion of next year's $2.3 trillion.

The administration also has been pushing builders to release a greater quantity of cheaper homes to bolster purchase lending.

Fannie has forecast that home sales recently pegged at around 4.7 million for 2025 could top 5 million by next year and grow more incrementally to 5.3 million in 2027.

Other recent reports have been more pessimistic about the housing market's strength, with Fitch reporting that it could remain cooler for the next two years.

Rate politics also will play a role in what happens in 2027

Much could depend on the degree to which the Trump administration has influence over rates, which are governed by independent policymakers but which it has strongly advocated lowering.

Some officials like Federal Reserve Governor Stephen Miran have called the fed funds' current trajectory, which can have a similar effect on financing costs for long-term mortgage obligations, "too restrictive," but he faces some disagreement among his peers.

Mortgage Bankers Association Chief Economist Mike Fratantoni said recently that the latest job numbers suggest there will be another 25 basis-point cut in the Fed's short-term rate at the next meeting in December but he anticipates "a number of dissenting views."

A recent inflation indicator could make policymakers wary of lowering rates if they thought the move could raise prices. That indicator, the Consumer Price Index, has been delayed by the government shutdown that recently ended and will arrive after the next Fed meeting.

The administration is expected to be able to exert more influence over the FOMC as time passes, which could change the forecast notably by then. The president nominates members of the rate-setting Federal Open Market Committee and the Senate confirms them.

However, the Trump administration may be somewhat hesitant to exert too much influence over the independent Fed board as the market has had a negative reaction to it in the past.