The average 30-year fixed mortgage rate hit 6.55% the week of July 16, according to Freddie Mac. The rate has now surpassed 6.5%, but it’s been hovering in this range for nine weeks.
Stubbornly high mortgage rates — and high housing costs in general — have started to hurt home sales. During the four-week period ending July 12, week-over-week pending home sales in the U.S. dropped by 2.2%, according to a Redfin report.
I know we’ve all felt frustrated with the 2026 housing market. Many people expected a better homebuying season this year.
Will the market become more buyer-friendly over the next few weeks or months?
Fannie Mae has released its July 2026 Housing Forecast. These monthly forecasts from the government-sponsored enterprise (GSE) predict various aspects of the housing market, from mortgage rates to home sales to inventory.
So, what does Fannie Mae foresee for the rest of 2026 and 2027?
Fannie Mae predicts mortgage rates will decrease sooner
In the Fannie Mae June 2026 Housing Forecast, the GSE projected that the average 30-year mortgage rate would be 6.4% through the end of 2026 and Q1 2027. It suggested that the rate would then hold at 6.3% for the remainder of next year.
Looking at Fannie Mae’s July forecast, the company still expects the 30-year rate to stay at 6.4% through the end of 2026. But it now foresees the rate dropping to 6.3% at the beginning of 2027 — so a little earlier than it said in its June forecast.
The GSE predicts that mortgage rates will hold at 6.3% through Q3 2027, then fall to 6.2% in Q4.
Overall, Fannie Mae expects the 30-year fixed mortgage rate to average 6.3% in both 2026 and 2027.
Related: Why mortgage rates are spiking again and what to do
Here’s the thing, though: When making mortgage rate predictions for its July forecast, Fannie Mae uses rates from the last day of June.
It’s hard to say whether this delayed data makes Fannie Mae’s prediction less reliable. On the one hand, the Freddie Mac rate was 6.49% the week of June 30 and the week of July 14, when Fannie Mae released its July forecast. So, no difference there.
On the other hand, as of June 30, the ceasefire between the U.S. and Iran hadn’t yet ended. President Donald Trump made that announcement on July 8.
The longer the Iran war goes on, the longer mortgage rates will stay high. They may even increase.
“Mortgage rates are essentially tied to the outcome of the Iran conflict at this point,” Corey Burr, senior vice president at TTR Sotheby’s International Realty, told TheStreet. “If that situation festers later into the year or into 2027, I anticipate the 30-year, fixed mortgage rate will be range bound in the 6-7% range. If there is a quick resolution to the conflict and oil drops precipitously, then the 30-year fixed should fall below 6%.”
So, it’s hard to say just how accurate Fannie Mae’s mortgage rate forecast is.
To be clear, I’m not bashing Fannie Mae as a source. It’s just that with so much uncertainty as the volatility in the Middle East continues, it’s difficult to make any solid predictions at this point.
Fannie Mae changes home sales predictions
In its July forecast, Fannie Mae predicts that average home sales will total just over 4.76 million in 2026, then nearly 5.09 million in 2027.
This is a decline from its June predictions of 4.81 million in 2026 and 5.13 million in 2027.
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However, the GSE is still expecting home sales to increase overall. The July numbers predict that year-over-year total home sales will be up 0.2% in 2026, then 6.8% in 2027.
Fannie Mae also splits its predictions into sales for new single-family homes, then existing single-family homes, condos, and co-ops. Predicted sales for both of these categories are lower in its July forecast than its June one.
As a journalist who has covered the housing market for years, I think the lower home sales predictions make sense based on recent data.
The National Association of Realtors announced that month-over-month existing-home sales decreased by 2.4%.
“The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” said Lawrence Yun, chief economist for the NAR.
Since Fannie Mae expects mortgage rates to stay well above 6% throughout 2026 and 2027, it’s reasonable that the organization also expects slower home sales.
On July 10, Fannie Mae released its Q2 2026 Home Price Index (HPI). Average home prices increased 3.2% year over year (non-seasonally adjusted), according to the HPI. This is higher than Q1 2026 growth, which was 2.6%.
As a general rule of thumb, homes tend to gain value over time. But the faster price growth in Q2 may signal to Fannie Mae that fewer people will buy homes if this trend continues.
Key takeaways from the July 2026 Fannie Mae Housing Forecast
- Mortgage rates will probably stay over 6%. True, mortgage rates are extremely unpredictable due to the volatile situation in the Middle East. However, I think Fannie Mae’s overall prediction that the 30-year rate will stay above 6% is solid, considering the information we have now.
- Fewer home sales would lead to a stronger buyer’s market. Fannie Mae’s expectations for home sales is lower than its June predictions. Fewer home sales means there’s less buyer demand, which gives sellers less power. If you do want to buy a home in 2026, this could put you in an excellent position.
- Home sales and new inventory are intertwined. Fannie Mae’s July forecast also projects fewer new housing starts than its June forecast. Low inventory is one of the main drivers of the U.S. housing affordability crisis. When there isn’t enough housing to meet demand, prices increase. If Fannie Mae expects fewer housing starts, it makes sense for it to also predict fewer home sales — buyers would have trouble affording homes when inventory is lagging.
