Fannie Mae Expects Economy to ?Drag? Housing Toward Recovery in 2015
On January 22, DS News published an article discussing Fannie Mae’s 2015 Economic Outlook.
Fannie Mae Expects Economy to ‘Drag’ Housing Toward Recovery in 2015
As Fannie Mae sees it, 2015 will be a good year for the housing market, even if residential real estate has to get dragged into the black.
Fannie Mae’s 2015 Economic Outlook, released Thursday, is less a picture of a purely positive housing market than an expectation of an economy so strong across several key growth sectors that it will propel the national housing market to greater heights than in 2014. Or, as Fannie Mae puts it, the economy is strong enough to drag housing behind it and create growth by default.
“Our theme for the year, ‘Economy Drags Housing Upward,’ implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace,” said Doug Duncan, chief economist at Fannie Mae.
Fannie Mae expects strengthening private domestic demand to drive the economy up 3.1 percent in 2015—up from the agency’s earlier prediction for 2.7 percent growth.
While that prediction is still modest, Fannie Mae says it’s strong enough to “drag last year’s unspectacular housing activity upward,” according to the report. Fannie Mae credits projections for continued low gasoline prices, firming labor market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds to usher in a year of steady, if “not yet robust” economic improvement that should lead to a higher rate of household formation in 2015.
“Consumer spending should continue to strengthen due in large part to lower gas prices, giving further support to auto sales and manufacturing,” Duncan said. “We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017.”
Duncan also said he suspects mortgage interest rates to stay low throughout this period, attracting steady supply of new homebuyers.
Fannie Mae’s report echoes the sentiments of the National Association of Home Builders, which also this week spoke of bluer housing and economic skies ahead. Top economists and housing experts in a panel at the group’s International Builders’ Show in Las Vegas predicted a recovering labor market, low interest rates, and improvements in credit availability for borrowers as the three main triggers for growth in the housing market this year.
These assessments, however, are not shared by everyone, at least not blanketly. Earlier this month, Trulia’s chief economist Jed Kolko warned that falling oil process could have a recessive effect on housing in major oil-producing state such as Texas, Oklahoma, and Louisiana.
Kolko did say, however, that lower fuel prices could just as likely stimulate flagging industrial economies in the north and Midwest, where oil production is virtually nonexistent.
Regardless, Duncan and Fannie Mae foresee big things, even if this year will not be a breakout year for housing. “We expect the rising share of new home sales to lead to a healthy increase in single-family construction of about 19 percent, or 765,000 units,” he said.
Please click here to view the article online.
Please click here to view Fannie Mae’s 2015 Economic Outlook online.
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