Mortgage rates seem to be on every homebuyer’s mind, especially as we’re in peak home-buying season in most parts of the U.S.
Mortgage rates are only one factor in housing affordability. Inventory levels, new construction, and existing home sales also play a significant role in shaping price trends.
In covering the real estate market over the years, I’ve found that affordability is rarely driven by a single variable.
The government-sponsored enterprise (GSE) Fannie Mae has released its May Housing Forecast, providing its latest expectations for the 2026 and 2027 real estate markets.
These projections give homebuyers and investors insights into factors that could impact how much competition they will face when house hunting, what types of housing might be available, and — ultimately — how affordable housing will be in the next year and a half.
Fannie Mae expects slightly higher home sales
In the Fannie Mae April Housing Forecast, the GSE projected that year-over-year total home sales would increase by 1% in 2026 and 7.6% in 2027.
Those numbers shifted slightly in the May forecast. Fannie Mae now expects an annual increase of 2.1% in 2026 and 6.7% in 2027 — so, a little higher this year and a bit lower next year.
As it all shakes out, the organization’s May Housing Forecast has a slightly higher expectation for home sales than its April one. It also foresees sales gradually increasing each quarter until the end of 2027.
Related: Fannie Mae forecasts change in mortgage rates, housing market
How does this break down by housing type? Fannie Mae expects new-construction single-family home sales to decrease by 0.9% in 2026, but existing homes (including single-family homes, condos, and co-ops) to increase by 2.6%.
In 2027, the GSE predicts new single-family housing sales will climb by 3.7%, and the existing home sales will soar by 7.2%.
The new-construction home sales predictions are likely more modest than existing sales because experts predict that new-home construction will see small, gradual improvements this year.
Builders are dealing with inflation and labor shortages. The National Association of Home Builders (NAHB) expects construction to grow in 2026, but not drastically, according to an NAHB report.
“The housing outlook in 2026 is one of cautious optimism as builders contend with rising material and labor prices and policy uncertainty,” Robert Dietz, chief economist at the NAHB, said in a press release.
Fannie Mae’s update for single-family and multifamily housing starts
Since the NAHB has been conservative in its new construction projections, it makes sense that Fannie Mae’s expectations for new housing starts is also on the low side.
In its May Housing Forecast, Fannie Mae predicts single-family housing starts to decrease by 2.4% nationwide in 2026. The good news is that this is an improvement over the April Housing Forecast, when the GSE projected a 4.2% decline this year.
The May forecast also expects single-family housing starts to inch up by 0.4% in 2027.
“Materials might be cyclical, but lot costs, availability, and labor are not,” Maor Greenberg, co-founder and CEO of the AI-powered structural engineering platform for residential construction Spacial, explained in a statement.
“Land entitlement takes years — five years is typical,” he continued. “Labor is even more locked in. Trades depend on immigrant workers, and immigration policies have been unfavorable the last few years. Permits are taking longer than others. All of these add up.”
More on housing and the real estate market:
- Non-QM loans are helping more self-employed Americans become homeowners
- Mortgage rate gridlock sparks housing market shift
- Redfin unveils huge shift in home sales, housing market
Real estate investors or those with large families might be interested in the future of multifamily housing starts. Fannie Mae expects multifamily home construction to increase by 5% in 2026, a 1% increase from its April forecast.
The organization’s 2027 prediction for multifamily housing starts hasn’t changed this month — it’s still looking at 5.5% decrease.
Overall, Fannie Mae’s May Housing Forecast predicts a 0.4% decrease in new housing construction this year and a 1.5% decline in 2027.
How Fannie Mae’s predictions could impact homebuyers and investors
So, Fannie Mae’s May Housing Forecast has new projections for home sales, single-family housing starts, and multifamily housing starts. What can homebuyers and real estate investors expect over the next year and a half?
- Looking at 2026 and 2027 combined, Fannie Mae expects annual increases of 0.2% in home sales. This is a small uptick, so while your local housing market might be more competitive at certain times of the year, you shouldn’t necessarily expect a more competitive market overall.
- The homebuilding labor shortage doesn’t show any signs of improving in the near future, which could keep new-construction housing production low.
- Homebuilding could pick up a little if issues such as inflation and political strife improve.
- Due to these construction costs and slowdown, real estate investors should expect longer wait times and higher costs. Renters might see these higher costs bleed into a bump in rental prices.
Related: Zillow reveals why spring housing market is turning upside down
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