Economic growth in the US is expected to decelerate, potentially leading to a mild recession in 2024, according to commentary by Fannie Mae’s Economic Strategic and Research Group.

However, this anticipated downturn is expected to be followed by a return to growth in 2025.

Despite positive factors such as ongoing employment gains and decelerated inflation, ESR Group emphasized concerns about a slowdown in consumption growth due to an imbalance between spending and incomes. Additionally, the rising real federal funds rate is expected to impact consumer and business activity, making a downturn the most likely outcome.

“The economy is now slowing from the otherwise robust first estimate of third-quarter growth,” Doug Duncan, senior VP and chief economist at Fannie Mae, said in a press release.

Duncan noted the slowdown in employment gains has continued, and stress is growing on consumers' ability to sustain their high levels of spending.

“At the same time, housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity,” Duncan said. “While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025.”