Strong homebuyer demand is providing more support for home prices than economists at Fannie Mae had expected at the beginning of the year, but forecasters at the mortgage giant expect tight for-sale inventory will keep sales “subdued” for the rest of the year.

In their latest monthly forecast, economists with Fannie Mae’s Economic and Strategic Research (ESR) Group said they expect the Federal Reserve to implement a final 25-basis rate hike in May and then begin bringing rates back down by the end of the year as the economy enters a “modest recession.”

“The economic slowdown has resumed – whether the end result is a modest recession or simply a soft landing remains unanswered – although we continue to expect the former, as we have since April of last year, when we first made our 2023 recession call,” Fannie Mae Chief Economist Doug Duncan said in a statement.

Source: Fannie Mae Housing Forecast, April 2023.