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Policy Uncertainties Influencing Growth Expectations

In the February 2017 Economic and Housing Outlook [1] from Fannie Mae released on Thursday, there are moderate growth expectations for the market in 2017, as experts continue to debate on developing policies and regulations from the Trump administration.

According to the report, the full-year economic growth forecast remains unchanged from last month's projection of 2.0 percent, which is slightly above the 1.9 percent growth registered for all of 2016,”

Doug Duncan, Chief Economist at Fannie Mae, noted that timing will play an integral role in the positioning of policies and regulations from the Trump administration.

"Last month we revealed our theme for the year, 'Will Policy Changes Extend the Expansion?' That question still hovers as the month-old Administration begins enacting its agenda," he said. "Timing effects make it unlikely that we'll see materially positive impacts stemming from any fiscal stimulus or deregulation this year, while immigration and trade policy pose downside risk.”

Although job growth was one of the highlights last month, wage growth hindered people from re-entering the workforce. The unemployment percentage rate decreased to 4.7 last month from 5.0 in 2016.

There was also an uptick in home sales, with new single-family home sales saw an increase of 552 from last year and total existing home sales increasing from 5,300 to 5,437.

“Mortgage rates have moderated slightly but remain 60 basis points higher than before the election. Still, leading indicators of home sales are encouraging with pending home sales rebounding and purchase mortgage applications holding up,” the report stated.

Duncan remarked that although a multitude of factors are preventing the economy from moving forward, expansion is on the horizon, and it is coming sooner than expected.

"We expect the housing expansion to continue, albeit at a more moderate pace than last year given continued pressure on affordability. Depressed inventory, particularly in the more affordable segments, will likely constrain sales and push home price gains that outpace income growth. A faster pace of monetary tightening, unless accompanied by a stronger increase in household income, also poses downside risk to housing," said Duncan.

To read the full report, click here [2].