Fannie Mae’s December housing forecast calls for multifamily housing starts to bottom out in mid-2025 and then to steadily increase through the rest of the forecast horizon.
The forecast for single-family housing starts was revised marginally higher in 2025 but lower in 2026, although single-family housing starts are still predicted to grow throughout the forecast period.
Fannie Mae’s forecasters expect the Fed Funds rate to average 4.6 percent in Q4 2024, the same as in last month’s forecast. Fannie Mae’s forecasters expect the rate to be 0.1 percentage point higher in Q1 and Q2 2025 than predicted last month. However, from that point, the Fed Funds rate forecasts are the same. The rate is forecast to average 3.9 percent in Q4 2025 and then to slowly decline though 2026, reaching a level of 3.4 percent in Q4.
Estimates for the 10-year Treasury rate were revised slightly lower this month. It is now predicted to have reached a low of 3.9 percent in Q3 2024 and to go up from there. The rate is expected to rise to 4.2 percent in Q4 and to stay at that level through Q3 2026, at which point it ticks up to 4.3 percent. The 2025 rates are generally about 0.1 percentage point lower than those predicted in last month’s outlook.
Multifamily starts forecasts mixed
The current forecast for multifamily housing starts is shown in the first chart, below, along with three other recent forecasts. Fannie Mae considers any building containing more than one dwelling unit to be “multifamily”, including both condominiums and rental housing units.
Revisions to Fannie Mae’s multifamily housing starts forecasts were relatively small and had no clear direction this month. The largest revision to last month’s forecasts was a 9,000 (annualized) unit increase in the starts forecast for Q4 2024. The starts forecasts for Q2 through Q4 2025 were lower for the fourth monthly forecast in a row, but the revisions this month were 3,000 units or less. Every other quarterly starts forecast was either unchanged or revised slightly higher.
The low point for multifamily starts is now seen as being in Q2 2025 at 332,000 annualized starts. The forecast then calls for multifamily housing starts to rise throughout the remainder of the forecast period, ending at 405,000 annualized unit starts in Q4 2026.
For reference, the most recent new residential construction report from the Census Bureau has multifamily starts running at a seasonally-adjusted annualized rate of 320,000 units in the first two months of Q4 2024.
Looking at yearly forecasts, the predicted number of multifamily starts for 2025 was revised higher by 1,000 units to 338,000 units. The forecast for multifamily starts in 2026 was revised higher by 3,000 units to 390,000 units.
Single-family starts forecast lower
The current forecast for single-family housing starts is shown in the next chart, below, along with three other recent forecasts.
While the mid-2025 single-family starts forecasts were revised slightly higher, the majority of the revisions made called for fewer single-family housing starts. All of the quarterly starts forecast for 2026 were revised lower by double digits with the Q4 forecast being revised 51,000 units lower
As in last month’s forecast, the low point for single-family starts is expected to be in Q3 2024 at 963,000 annualized units. Single-family starts are then forecast to end 2025 at 1,003,000 annualized units and end 2026 at 1,014,000 annualized units.
Looking at full-year predictions, Fannie Mae now expects 2,000 fewer single-family starts in 2024 than forecast last month. Single-family starts in 2025 are forecast to be 994,000 units, unchanged from the level forecast last month. The forecast for full-year single-family starts in 2026 is for 1,012,000 units, down 36,000 units from last month’s forecast.
GDP growth forecasts generally lower
The next chart, below, shows Fannie Mae’s current forecast for Gross Domestic Product (GDP) growth, along with other recent forecasts.
Fannie Mae’s forecasters have been uncertain about the near-term prospects for the economy, and this has played out in their forecast for Q4 2024 GDP growth. In the September forecast, they predicted growth of only 1.4 percent. The next two forecasts raised this projection to 2.1 percent and 3.0 percent growth respectively. However, the latest Q4 2024 forecast revised the GDP growth projection sharply lower, back to only 2.3 percent. In addition, the latest forecast revised the projected GDP growth for Q1 2025 0.2 percentage points higher to 2.2 percent. No other revision was greater than 0.1 percentage point and GDP growth is expected to stay in the 2.0 percent to 2.2 percent range through the end of 2026.
The full year forecasts for GDP growth for 2024 and 2025 were left unchanged at 2.4 percent and 2.1 percent respectively. The full-year GDP growth forecast for 2026 was lowered 0.1 percentage point to 2.1 percent.
PCE Inflation forecast revisions all higher
The next chart, below, shows Fannie Mae’s current forecast for the chained personal consumption expenditures (PCE) inflation rate, along with three other recent forecasts.
Fannie Mae’s forecasters see inflation falling more slowly than they did last month. They revised their forecasts for PCE inflation in Q4 2024 and Q1 2025, each higher by 0.2 percentage points to 2.5 percent and 2.1 percent respectively. PCE inflation is forecast to briefly hit the Fed’s target of 2.0 percent in Q4 2025 but to then trend slowly higher. It is predicted to rise to 2.2 percent year-over-year in Q4 2026.
Employment growth forecast lower in 2025 and 2026
The next chart, below, shows Fannie Mae’s current forecast for employment growth, along with three earlier forecasts. Employment growth is our preferred employment metric since job gains, along with productivity gains, drive economic growth. By contrast, the unemployment rate depends on employment but also on the labor force participation rate. Either rising employment or falling labor force participation can drive the unemployment rate lower, but only the former would contribute to economic growth.
The revisions to this month’s quarterly employment growth forecasts shifted by date. The forecasters called for much higher monthly employment growth in Q4 2024 at 125,000 jobs per month but lower employment growth in each quarter of the following 2 years. The slowest quarter for monthly job growth is now expected to be Q3 2026, with only 86,000 jobs per month created.
For reference, the business survey in the Employment Situation Report from the Bureau of Labor Statistics indicates that the economy added an average of 132,000 jobs per month in the first 2 months of Q4.
Compared to last month’s forecast, the expected full year forecast for employment growth in 2024 was revised higher by 200,000 jobs while employment growth for 2025 and 2026 were revised lower by 300,000 jobs and 100,000 jobs respectively. Employment growth in 2024 is expected to be 2,100,000 jobs. Employment growth in 2025 is expected to be 1,300,000 jobs. The employment growth forecast for 2026 called for the economy to add 1,100,000 jobs.
The Fannie Mae December forecast can be found here. There are links on that page to the detailed forecasts and to the monthly commentary.
