WASHINGTON (8/28/15)--A drop in nonresidential investment, a strong dollar and declines in crude oil prices led Fannie Mae to predict slower growth in the second half of the year, it announced this week. Fannie’s Economic and Strategic Research Group found that the second quarter economic outlook was weaker than expected, leading to the diminished expectations for the remainder of the year.
“While consumer spending growth picked up as we expected in the second quarter of this year, other components disappointed,” said Fannie Mae Chief Economist Doug Duncan. “However, incoming data suggest some upward revisions may be in the cards for the second quarter. Furthermore, job creation remains steady, with full-time employment getting closer to pre-recession numbers, and household net worth continues its gradual rise. On balance, our full-year growth outlook remains unchanged from the prior forecast at 2.1%."
Duncan added that income growth needs to strengthen, particularly for younger households, in order to drive significant housing growth.
Home sales are trending up and inventories are down, leading to strong home-price appreciation, Duncan said. A combination of uncertainties in Greece and China, continued global monetary easing and an expected slow pace of monetary tightening by the Federal Reserve, will mean that mortgage rates will rise “only gradually through next year, which should continue to help support mortgage demand,” Duncan said.