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Home | Daily Dose | Proceed With Caution: Existing Home Sales and Economic Growth
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Proceed With Caution: Existing Home Sales and Economic Growth

Fannie Mae BHThe U.S. is embarking on its ninth year of economic expansion and Fannie Mae is predicting economic growth rebound. According to their Economic & Strategic Research Group’s June 2017 Economic and Housing Outlook, second quarter economic growth will rebound to 2.9 percent from last quarters 1.2 percent. Consumer spending growth is expected to return to its traditional role as the biggest contributor to economic growth, picking up to 3.1 percent this quarter from 0.6 percent in the first quarter. Fannie Mae said moderate growth is expected to continue into next year, however uncertainty in fiscal and monetary policy makes the forecast a little difficult.

“This month marks the eighth anniversary of the U.S. economic expansion, the third-longest of the post-World War II era. While we expect modest growth to continue in 2018, the potential for fiscal stimulus remains a notable wild card,” said Fannie Mae Chief Economist Doug Duncan. “The odds that Congress will enact major pieces of legislation this year and jump-start meaningful fiscal stimulus have diminished, and the economy also faces another fiscal policy uncertainty in coming months, as Congress will have to raise the debt ceiling to avoid a government shutdown.”

Duncan said the Federal Open Market Committee’s June decision to raise the fed funds rate by 25 basis points has increased the uncertainty of monetary policy.

“Our June forecast assumes that the Fed will increase the target rate once more this year in September and will begin to taper reinvestment of principal payments from its securities holdings in December. However, the recent slowdowns in hiring and inflation could lead the Fed to hold off on the September rate hike in order to gather more data.”

According to Duncan, the housing market hasn’t changed all that much in the last year. Labor and inventory shortages are constraining sales and therefore increasing home prices.

“We expect total home sales to rise 3.2 percent this year and total single-family mortgage originations to drop about 21 percent to $1.62 trillion,” Duncan said. “A large drop in refinance originations will likely outweigh a modest rise in purchase originations. We expect the refinance share to move down to around 34 percent in 2017 from 48 percent in 2016.”

For more details on Fannie Mae’s June 2017 Economic and Housing Outlook, click here.

About Author: Brianna Gilpin

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Brianna Gilpin, Online Editor for MReport and DS News, is a graduate of Texas A&M University where she received her B.A. in Telecommunication Media Studies. Gilpin previously worked at Hearst Media, one of the nation's leading diversified media and information services companies. To contact Gilpin, email [email protected]

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