• US home sales are headed for the largest slowdown since 2011, according to Fannie Mae.

• That's due to headwinds like higher mortgage rates, amid a weakening US economy.

• The mortgage finance giant expects the US to slip into a recession in the first half of 2024.

US home sales are headed for the biggest slowdown since 2011, according to Fannie Mae.

The government-sponsored mortgage finance company forecasted total home sales to slump to just 4.8 million this year, marking the slowest sales environment since 2011. That figure will only improve slightly in 2024, with total home sales expected to hit 4.9 million, Fannie Mae economists said.

The slump in sales is partly being influenced by high mortgage rates,with the average rate on the 30-year fixed mortgage rising to 7.18% over the last week, according to Freddie Mac data. That means prospective home buyers are facing the highest cost of borrowing since 2001, which has heavily hindered demand over the past year.

Those dynamics are also taking shape in the backdrop of a weakening US economy, which is poised to enter a slowdown within the first half of next year, Fannie Mae economists predicted. The Fed has aggressively hiked interest rates over the past year to lower inflation, a move experts have warned could drive the economy into a recession.

An economic downturn spells trouble for the overall housing market. Though central bankers will likely pull back interest rates in event of a downturn -- which could influence mortgage rates to fall -- a weakening labor market and a crunch in credit conditions will likely slam housing demand, Fannie Mae said in a prior note.

And the economy is already already showing signs of slowing. Optimists who say the US is on track to avoid a recession have pointed to still-robust consumer spending, but current trends look unsustainable when considering incomes, Fannie Mae said. Real personal consumption expenditures jumped 0.6% in July, though real disposable personal income dipped 0.2%.

Meanwhile, the latest credit card transactions data and auto sales data show a weakening US consumer, with car sales falling 4.6% last month. The personal savings rate also dipped to 3.5% in July while wage growth slowed -- a sign that the consumption propping up the US economy is about to slow down.

Revised economic statistics also show a weaker picture of the US economy than previously thought. Real GDP over the last quarter was revised down to 2.1%, according to the Bureau of Economic Analysis, down 0.3 percentage points from the original estimate.

But even if the US avoids a recession next year, the housing market will likely struggle for a "long time," Fannie Mae economists said previously, as the Fed will likely keep interest rates high to keep inflation in check, which will influence mortgage rates to remain elevated. Experts say housing affordability and sales are unlikely to improve until mortgage rates dial back more significantly, likely to around the 5% range.

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