Economists at Fannie Mae expect a significant drop in sales of existing single-family homes this year, along with a significant jump in the start of construction on multifamily buildings.

The secondary mortgage market titan’s latest monthly economic forecast says that nationwide, America will see 16 percent fewer sales of existing single-family homes and 16.2 percent fewer sales of both new and existing single-families this year than in 2021 as rising prices and interest rates take their toll on housing affordability.

That represents a drop from last month’s forecast of a 15.6 percent year-over-year decline for new and existing single-family sales combined. The latest forecast also projects total mortgage origination activity at $2.47 trillion in 2022, down from $4.47 trillion in 2021, and then a further reduced $2.29 trillion in 2023.

At the same time, the forces pushing buyers out of the housing market – which are also keeping investments in new multifamily buildings attractive despite oscillating building costs – will lead to a 14.6 percent jump in multifamily starts, the Fannie Mae forecast says. That figure will drop in 2023, however, the forecast predicts, from 543,000 new units begun to 451,000.

“Housing remains clearly on the downtrend – and has been for several months now – due to the combined effects of outsized home price increases and the significant and rapid run-up in mortgage rates,” Fannie Mae chief economist Doug Duncan said in a statement. “The question for many market observers is how quickly, and with how much additional tightening, the core inflation rate will come down to the Fed’s preferred target. In our view, the labor market’s continued strength suggests that the Fed is likely to maintain its aggressive posture through the end of the year.”

Overall, the economy remains at risk from rising interest rates and continued – albeit slowing – inflation despite strong job growth, Fannie Mae said. The forecast also predicts a mild recession in 2023.

“The economy is progressing largely as we’d previously forecast,” Duncan said. “The near-term decline in gas prices has given consumers a chance to catch their breath and shift some spending elsewhere. Likewise, lower interest rates at the longer end of the yield curve should be supportive of the economy through the end of 2022, which is why we’re forecasting modest economic growth in the second half. However, we maintain the view that a modest recession is likely to emerge in the new year as the labor market softens and the effects of tighter monetary policy are more acutely felt.”