Here’s What Fannie Mae’s Latest Forecast Isn’t Telling You
The latest economic forecast from mortgage giant Fannie Mae predicts house prices will fall by over 6% over the next two years. That doesn’t sound like much, but investors, and consumers also need to understand what they are heralding as loudly.
Home Prices Are Already Down 4x More Than They Predicted
Fannie Mae previously predicted that house prices would only fall 1.5% this year, and 1.4% next year. So, we are already talking about 2-4x deeper price drops, and many might argue it hasn’t even really started yet.
Or course this is in direct contrast to Goldman Sachs’ forecast, which says we’ve already seen those levels of drops and should bottom out this summer.
Many property owners, and recent sellers may also tell you that prices are already down even double, triple, or more than this forecast.
They Can Revise Back Data
Just as the Realtor’s Association back revised four years of data to show much lower numbers after 2008, any of these report publishers could go back later and say the cuts have already been 50% or greater more than they announced.
It’s All Local
This 6% number from Fannie Mae is a national ‘average’. Which really means that in some areas prices may still be going up by 30%, and they could be going down by 36% in others.
Make sure you have your own intelligence and pulse on the local market.
Low Interest Rates Are Irrelevant In many Cases
Fannie Mae is using the fact that interest rates have been low to claim there won’t be rate shock like in 2006 to 2008, and in turn no major crisis.
However, in the past year mortgage rates seem to have more than doubled. A much bigger increase than in 2008. Buyers were also paying 125% or more of actual values among the fierce competition. Many will still walk away. Many won’t be able to refinance. Many will fall behind and into default for other reasons.
Defaults Are Already Up
The latest bank data published by DistressedPro shows that defaults on both residential and commercial mortgage loans reverse course and started increasing again in the last three months of 2022.
While there haven’t been a tsunami of REOs yet, expect more defaults and foreclosures coming.
It’s a great time to be wholesaling houses on the way down this ladder, and making substantial profits. With both discounts available, and those buying into these forecasts expecting the market to rebound soon.
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