Fannie Mae Shares Face Mounting Headwinds as Housing Forecast Darkens

A grim assessment from its own economists has sent shares of mortgage giant Fannie Mae lower, amplifying investor anxiety as the new trading week begins. The report warns that the US housing market is heading for a downturn of a magnitude not witnessed since the 1990s. This internal forecast triggered a significant sell-off, leaving market participants to question whether this is the start of a prolonged period of difficulty for the government-sponsored enterprise.

The core of the pessimistic outlook hinges on a phenomenon known as the "lock-in" effect. Homeowners, clinging to their existing mortgages with historically low interest rates, are demonstrating a strong reluctance to sell. This dynamic is expected to push sales of existing homes in 2025 to their lowest annual level since 1995.

The market's reaction on Friday was swift and volatile. Fannie Mae's stock closed down 3.76% at $9.22. However, the intraday trading session was marked by extreme turbulence, with the share price swinging by more than 15% and testing significantly lower price levels.

The sobering report outlined several critical challenges for the housing sector and the company:

Should investors sell immediately? Or is it worth buying Fannie Mae?

• Persistent High Rates: Investors should not anticipate near-term relief. The forecast suggests the average 30-year fixed-rate mortgage will stabilize at a high 5.9% through the end of 2026.
• Shifting Loan Composition: Despite the depressed sales environment, the total volume for newly originated mortgages is projected to reach $1.88 trillion in 2025. This increase is expected to be driven primarily by refinancing activity rather than purchases.
• Slowing Appreciation: National home price growth is predicted to cool dramatically, decelerating to a mere 2.5% by the conclusion of 2025.

A Dual Challenge for Shareholders

These fundamental warnings coincide with another significant setback for investor sentiment. Recently, prominent investor Bill Ackman tempered speculative excitement around a swift privatization of the company. He indicated in a presentation that an initial public offering (IPO) remains a distant prospect, emphasizing that the path to exiting government conservatorship is long and fraught with regulatory obstacles.

This places Fannie Mae stock in a difficult position, caught between bureaucratic hurdles and a stagnating core market. Although the enterprise continues to operate profitably—it reported a multi-billion dollar profit last quarter—its growth engine is sputtering. With home sales activity grinding to a near halt, the vital revenue stream from guarantee fees is under severe pressure.

Technical and Fundamental Outlook

All eyes are now on the $9.00 support level, which was briefly breached during Friday's trading. A sustained break below this threshold could signal further declines for the stock. With a meaningful recovery in the housing market not anticipated until a sluggish 2026, catalysts for a positive trend reversal appear scarce in the immediate future. Investors should prepare for continued volatility as the market fully digests the reality of a "higher for longer" interest rate environment.