Due to better net exports and stronger inventory that originally reported for the second quarter of 2013, Fannie Mae economists have upgraded their forecasted growth from sub 2 percent to 2.5 percent for the housing market.
Fannie Mae’s (FNMA/OTC) Economic & Strategic Research Group revised the last quarter results upward but then neutralized the previously anticipated strengthening forecast for this quarter, faced with potential downside risks from monetary and fiscal policy concerns, rising oil prices, and further mortgage rate increases. The Group is expecting growth to pick up again in the fourth quarter as fiscal drag fades and household wealth continues to rise. Despite the choppy quarterly pattern, the Group’s full-year growth forecast of 2 percent remains unchanged from the beginning of the year.
Incoming data for the current quarter paint a mixed picture, but overall we expect economic growth to slow from the surprising pace seen last quarter," said Fannie Mae Chief Economist Doug Duncan. “On the bright side, consumer spending appears to be improving from the tepid pace seen at the beginning of this quarter. Although Americans may continue to exercise caution, real consumer spending growth should improve modestly to slightly over 2 percent in the current quarter.
Duncan also stated that the Group expected the Federal Reserve to scale back its asset purchase program this week. Explaining that mortgage rates have increased more than 100 basis points (one percent rate hike) since early may, the group expects the this increasing interest rate trend to continue, although gradually during the next year. He expects the housing recovery to continue despite the rise in mortgage rates with the market shifting from refinancing to purchase activity.
Yesterday, the FNC Residential Price Index™ (RPI) showed that U.S. home prices continued to climb slightly, going up 0.7 percent in July over the June report. “The rapid declines in foreclosure sales and new foreclosure filings have diminished the impact of distressed properties on home prices,” according to their report. FNC’s RPI is built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes.
About the author: Fred Chamberlin was a senior loan officer with Guild Mortgage Company in Oak Harbor. He was in the mortgage origination business for over 20 years and in the lending business for over 30 and authors a number of mortgage related blogs.