Modest Housing Recovery Will Continue -Fannie

The theme for the economy and thernhousing market’s in 2014 has been set for months; the economy willrncontinue to slowly strengthen; the modest recovery in housing will bernsustained. Each monthly or quarterly report or round of economicrnanalysis seems to merely join the chorus. Fannie Mae’s most recentrnentry on Wednesday merely added a new note. Growth is expected tornstrengthen during the second half, but not enough to save thernyear. </p

Katie Penote, a member of Fannie Mae’srnEconomic & Strategic Research (ESR) Group, writes that therneconomy experienced the worst performance in five years in the firstrnquarter and incoming data for the second quarter suggests only arnmoderate improvement. The first quarter’s problems are attributed torna significant downward revision in healthcare spending. During thernthird and fourth quarters, she says, economic activity is expected tornaccelerate, driven principally by consumer spending with help fromrnbusiness, capital investment, and residential investment. Governmentrnspending may also contribute to growth for the first time in fivernyears but inventory investment and exports will be a drag. </p

But the third and four quarter growthrnwon’t be enough to overcome what happened in the first and second andrnPenote’s group is revising its full year forecast for the DGP down tornreal growth of approximately 1.5 percent from 2.1 percent in itsrnprior forecast.rn</p

“Our findings in the July forecast suggest that full-year growthrnin 2014 likely will be weaker than 2013,” said the company’srnChief Economist Doug Duncan. “We expect the economy to growrnapproximately 3.0 percent in the second half of the year, althoughrnthere is an element of uncertainty given government statisticians’rndifficulty in assessing the full scope of healthcare expenditures. </p

“Overall,rnour forecast calls for growth to come in at around 1.5 percent forrnthe year, which would be the worst performance of Q4-over-Q4 growthrnin the current economic expansion. On the bright side, real personalrnincome grew for the fifth consecutive month in May and hiring hasrncontinued on an upward trajectory, which should help boost consumerrnspending during the remainder of 2014.”</p

 The housing data, Duncan said, points to a continued but modestrnrebound, in line with Fannie Mae’s prior estimate. He noted thatrnrecent housing activity had taken a seasonal bounce as predicted butrnmany indicators remain were they were a year ago if not lower. “Forrnall of 2014, we continue to expect total home sales to decline aboutrn2.0 percent and total mortgage originations to decline approximatelyrn41.0 percent,” he said. “We also expect total single-familyrnmortgage debt outstanding to rise slightly this year beforernstrengthening further in 2015.”</p

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