The housing market prognosis for 2023 is getting worse by the month, with the most recent research expecting a million-plus drop in existing house sales. Fannie Mae’s Economic and Strategic Research (ESR) Group now estimates overall single-family home sales will fall by 18.1% to 5.64 million units this year from 2021, a further decrease from the 17.2% drop forecasted in September.

The most recent prediction also projects that overall mortgage origination activity will be $1.6 trillion in 2022, a $78 billion decrease from the previous month’s forecast. Moreover, according to the government-sponsored enterprise, the mortgage market will fall to $1.3 trillion in 2023.

Markets have increasingly, and perhaps grudgingly, reflected the Fed’s determination to reduce inflation through quick tightening of monetary policy, according to Doug Duncan, senior vice president and chief economist at Fannie Mae. As a result, Fannie Mae anticipates a 1.5% fall in average home prices in 2023. Moreover, given the current state of tension between potential homebuyers and property sellers, we expect the pace of sales will fall even further, he added.

Fannie Mae reduced its prediction of existing home sales to 5.02 million in 2022 and 3.93 million in 2023 in response to the ESR group’s revised interest rate forecast and degraded predicted home price increase. While affordability criteria are stretched, and median home prices have strayed significantly from their historical link to average household incomes, Fannie Mae does not expect home price falls to repeat the Great Financial Crisis.

Fannie Mae’s ESR group predicted that real GDP would expand 2.3% in the third quarter of 2022 due to robust net export and inventory investment activity before declining 0.7% year on year in the fourth quarter. To read more on further predictions, click here.