Fannie Mae predicts a mild recession for the U.S. in the first half of 2024

  • For the past few years, economists have been predicting a recession for the U.S.
  • With sales frozen by high mortgage rates, Fannie Mae says a mild downturn is coming
  • The Fed is expected to leave interest rates unchanged at its meeting this week
By Jennifer White Karp  |
September 19, 2023 - 3:00PM
New York City Skyline seen from the Empire State Building at Dusk

Fannie Mae's ESR Group says consumer belt-tightening and concerns about the economy, evidenced by “recession-level home sales volumes,” indicate a “mild downturn in the first half of 2024.”


A new forecast from Fannie Mae’s Economic and Strategic Research Group says a mild recession is still on its way for the U.S.—arriving in the first half of 2024.

As recessions go, this one has been late in arriving—and has been hard to pinpoint because of mixed signals from inflation and job market data. Back in May 2022, some economists said that the U.S. was poised to slip into a recession—predictions that later shifted to a “mild recession” or “soft landing” for 2023. However, unexpectedly strong household savings and pandemic stimulus funds helped keep the economy afloat.

But the weak housing market continues to weigh down the economy. Now, Fannie Mae's ESR Group says consumer belt-tightening and concerns about the economy, evidenced by “recession-level home sales volumes,” indicate a “mild downturn in the first half of 2024.”

U.S. buyers “don’t feel great about the overall economy, and the vast majority don’t believe it’s a good time to buy a home, as mortgage rates and home prices continue to constrain affordability,” says Doug Duncan, senior vice president and chief economist at Fannie Mae, the government entity that buys back mortgages loans, in a statement. He points to an elevated share of first-time buyers as a symptom of ongoing housing problems.

“We expect that total housing market activity will remain at a low level into 2024 as the Federal Reserve continues to hold the line on interest rates against inflation,” Duncan says.

All eyes on the Fed

The Federal Reserve is meeting this week, and the big question for housing is: When will the Fed shift to making interest rate cuts, which could in turn bring down record high mortgage rates that have stalled the sales market?

Melissa Cohn, regional vice president of William Raveis Mortgage, says that she expects the Fed to keep interest rates at current levels. The general consensus is that the Fed will leave the benchmark funds rate in the current range of 5.25 to 5.5 percent. [UPDATE: This is what happened, however, Fed officials also suggested that they still expect to make another rate increase before the end of 2023.]

Cohn recommends paying attention to what Fed Chair Jerome Powell has to say about the current economic situation, which will indicate the direction of mortgage rates this fall.

“If the tone of the Fed implies that they are at the end of this rate-hiking cycle, then rates will begin to settle down,” she says. “However, if Powell indicates that the recent spike in the rate of inflation needs to be addressed, and implies another rate hike in the offing, then rates will move higher until such time this rate hiking cycle is concluded,” she says.

When will mortgage rates come down?

When the economy starts to falter, mortgage rates will fall, Cohn says.

“The resilience of the U.S. economy, to date, has defied the 11 rate hikes the Fed has imposed over the past 18 months. At some point it will say ‘uncle,’ show more signs of distress, and [then] mortgage rates will decline in earnest,” she says.

Greg McBride, chief financial analyst at Bankrate, says even if the Fed leaves interest rates unchanged this month, there could still be another interest rate increase in the months ahead.

“Inflation pressures are easing, broadly speaking, but remain well above desired levels with the risk of further increases in oil prices, so the Fed cannot yet declare victory,” McBride says.

Don’t expect interest rates to come down anytime soon, he says.

For that reason, consumers “should be aggressively paying down high-cost credit card debt and variable-rate home equity lines of credit," he says, adding that some "savings accounts [are] currently beating inflation and delivering the best returns in more than 15 years.” 



Jennifer White Karp

Managing Editor

Jennifer steers Brick Underground’s editorial coverage of New York City residential real estate and writes articles on market trends and strategies for buyers, sellers, and renters. Jennifer’s 15-year career in New York City real estate journalism includes stints as a writer and editor at The Real Deal and its spinoff publication, Luxury Listings NYC.

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