Fannie Mae economist on the probability of a recession

Duncan explained that the Fed’s rate hike would likely push mortgage rates to around 5%. Consequently, refinances will continue to decline, and the pace of home sales will slow down. However, Duncan expects the upward trend in house prices to continue, becoming more of a constraint to higher interest rates.

“Unquestionably, the probability of recession is higher today than it was even two months ago,” he said. “How high is it? It’s certainly not 50%, but we’re lowering our forecast. I don’t know exactly what the number will be, but you should expect that our forecast for growth for 2022 and 2023 will be lower than it was with regard to a hyperinflation. If we should probably define terms, something over 10% annualized, but I wouldn’t expect that.

“I do believe the Fed will act against it. And there are some supply issues that are being resolved gradually, which have contributed to the underlying rate of inflation, and those are starting to move in the right direction. So, I don’t think we’ll get to that 10% plus range, but it will be a while before we get back to 2%.”

Watch the full MPA TV episode here: Will there be another recession?

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