Revisions to Fannie Mae’s housing forecast in June call for more multifamily starts in 2025 than in last month’s forecast. Fannie Mae is now predicting 397,000 starts in 2025 with 392,000 starts in 2026.
The quarterly forecasts for single-family housing starts were generally lowered in 2025 but raised slightly in 2026.
Interest rates (somewhat) higher for longer
Fannie Mae’s forecasters are now estimating that the Fed Funds rate will fall more slowly than they predicted in last month’s forecast. They predict the Fed Funds rate will fall from its current level of 4.3 percent to an average of 4.0 percent in Q4 2025. This is up slightly from last month’s prediction of an average rate of 3.9 percent in Q4, implying that a rate cut will come in Q4, but later. The predicted average Fed Funds rate for Q4 2026 is now 3.4 percent, up from 3.1 percent in last month’s forecast.
Higher rates are also foreseen for the 10-year Treasury. The forecasters raised their predicted interest rate in Q4 2025 by 0.2 percentage points to 4.4 percent. They now expect the rate to average 4.4 percent in 2025 and average 4.5 percent in 2026.
Multifamily starts forecast higher in 2025
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 for every quarter of 2025 were to the upside this month, the third consecutive forecast in which this has been the case. However, the quarterly starts forecasts for 2026 were lowered slightly.
The Q2 2025 forecast rose 51,000 annualized units this month. It has been raised by a total of 109,000 annualized units since the January forecast. After surging to 419,000 annualized units in Q2 2025, multifamily starts are forecast to decline to a low of 383,000 annualized units in Q1 2026, before rising again.
For reference, the most recent new residential construction report from the Census Bureau had multifamily starts running at a seasonally-adjusted annualized rate of 386,000 units in Q1 2025. Multifamily starts ran at an annualized rate of 402,000 units in the first two months of Q2, although May’s starts were down significantly from the exceptionally high level of starts in April.
Looking at yearly forecasts, the predicted number of multifamily starts for 2025 was revised higher by 26,000 units to 397,000 units. The forecast for multifamily starts in 2026 was revised lower by 4,000 units to 392,000 units.
Single-family starts forecast lower in 2025
The current forecast for single-family housing starts is shown in the next chart, below, along with three other recent forecasts.
The single-family starts quarterly forecasts for Q2 and Q3 2025 were revised lower, with the Q2 forecast falling by 31,000 annualized units. The forecasts for single-family starts for Q4 2025 through Q4 2026 only saw relatively small revisions, most of which were to the upside.
The low point for single-family starts going forward is now predicted to be Q3 2025 at 925,000 annualized units. Starts are forecast to rise from that point and are predicted to reach an annualized rate of 982,000 in Q4 2026. This is up 1,000 units from the level predicted last month.
Looking at full-year predictions, Fannie Mae now expects 9,000 fewer single-family starts in 2025 than forecast last month at 950,000 units. Fannie Mae now expects 2,000 more single-family starts in 2026 than forecast last month at 961,000 units.
GDP growth for Q2 2025 revised sharply higher
The next chart, below, shows Fannie Mae’s current forecast for Gross Domestic Product (GDP) growth, along with other recent forecasts.
The forecast for Q2 2025 was revised sharply higher, rising 1.5 percentage points to +3.2 percent. The April forecast for Q2 was only 0.8 percent GDP growth as economists struggled to predict the course and impact of President Trump’s tariffs program.
The Q3 2025 GDP growth forecast was also revised sharply higher, rising by 1.3 percentage points to 1.7 percent. The only period whose predicted GDP growth rate was revised lower was Q4 2026, with predicted growth falling 0.1 percentage point to 2.2 percent.
Fannie Mae’s forecasters now expect year-over-year GDP growth to be 1.4 percent in 2025, up 0.7 percentage points from the rate predicted last month. They expect 2.2 percent growth in 2026, up 0.2 percentage points from their last prediction.
For reference, the June 18 release of the GDP Now estimate from the Atlanta Fed indicates that Q2 2025 GDP growth is currently running at 3.4 percent. However, incoming data may change this estimate.
PCE Inflation forecasts mostly lower
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.
While Fannie Mae’s forecasters had been raising their inflation forecasts for 2025 in every forecast released this year, they broke that pattern in this month’s forecast. They raised their year-over-year inflation forecast for Q2 2026 but lowered or left unchanged their inflation forecasts for every other quarter from Q2 2025 through the end of 2026. Their prediction for the year-over-year inflation rate in Q2 2025 was revised 0.6 percentage points lower, while their predicted inflation rates for Q3 2025 through Q1 2026 were each lowered 0.2 percentage points.
Fannie Mae now expects year-over-year PCE inflation of 3.3 percent in 2025, falling to 2.4 percent in 2026.
Employment growth forecast higher
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.
Note that the population estimates upon which the employment data is quoted were updated in January, so the figures from some of the earlier forecasts may not be directly comparable to those from the more recent forecasts.
The forecasters revised their estimates for employment growth in Q1 2025 lower again, decreasing it by 22,000 jobs per month to 111,000 jobs per month. This matches the figure derived from the business survey in the June Employment Situation Report from the Bureau of Labor Statistics.
The forecasters revised their predictions for employment growth higher through the rest of the forecast horizon. Revisions ranged from an additional 44,000 employees per month in Q3 and Q4 2025 to an additional 24,000 employees per month in Q4 2026. For the first time, Fannie’s forecasters are predicting employment growth of at least 100,000 jobs per month for every quarter of 2025 and 2026.
For reference, the business survey in the June Employment Situation Report indicates that the economy added an average of 143,000 jobs per month in the first two months of Q2 2025.
Employment growth in 2025 is now expected to be 1,400,000 jobs, up by 300,000 jobs. The employment growth forecast for 2026 calls for the economy to add 1,300,000 jobs, also up by 300,000 jobs from last month’s estimate.
The Fannie Mae June forecast can be found here. There are links on that page to the detailed forecasts and to the Economic Developments Commentary.
