WASHINGTON, Might 19, 2021 /PRNewswire/ — Expectations for full-year 2021 financial progress have been revised upward in Might to 7.0 p.c, a modest enchancment from final month’s projection of 6.8 p.c, attributable primarily to stronger-than-expected first quarter actual GDP progress and an improved near-term outlook for client spending, in response to the May 2021 commentary from the Fannie Mae (OTCQB: FNMA) Economic and Strategic Research (ESR) Group. The extra energy in client spending was beforehand projected to happen later in 2021 or early 2022, however current incoming information more and more factors to eagerness on the a part of customers amid continued progress mobilizing COVID-19 vaccinations and waning virus-related restrictions. With stronger progress anticipated within the present yr, the ESR Group barely downgraded its expectations for 2022 actual GDP progress by 0.2 share factors to 2.8 p.c. Regardless of expectations that the financial system will proceed to develop over the forecast horizon, draw back dangers to the forecast are rising and embody provide chain disruptions, labor shortage, and rising inflationary stress.
On housing, the ESR Group expects house gross sales in 2021 to extend 6.3 p.c because the business continues to grapple with robust demand and restricted provide. Whereas a scarcity of present houses on the market is heightening the demand for brand new houses, provide constraints – most notably lumber – and a dearth of buildable heaps, in addition to hiring difficulties, are limiting homebuilders’ tempo of single-family building, which remains to be forecast to be 24.8 p.c greater in 2021 than 2020. The ESR Group’s mortgage origination forecast stays largely unchanged at $4.1 trillion in 2021, however the lately decrease mortgage charge surroundings contributed to a slight shift in its composition, with the anticipated refinance share ticking up a pair share factors to 55 p.c.
“Whereas most indictors level towards brisk financial progress over the second quarter, the mix of a disappointing employment report and an unexpectedly robust burst of inflation has raised within the minds of many market contributors the potential confluence of broad-based provide restraints, very robust home worth progress, and the posture of financial and financial insurance policies,” mentioned Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Provide constraints throughout a number of sectors are pointing towards ongoing worth stress, most prominently in microchips and the auto sector. This has but to considerably have an effect on mortgage charges, besides to the extent that the rise within the 10-year Treasury because the starting of the yr accommodates an elevated anticipated inflation element and has prevented mortgage charges from retreating farther from their non permanent current peak.”
Duncan continued: “Stronger inflation and a resultant transfer in rates of interest are dangers that we imagine needs to be monitored. As the consequences of expansionary financial coverage proceed to work their means by the financial system, inflationary expectations could proceed to rise. This might result in costs rising additional even with progress concurrently slowing within the presence of diminished labor market slack and waning fiscal coverage help. If such a state of affairs have been to play out, the query then turns into whether or not this necessitates a response by the Federal Reserve. Whereas momentum within the housing market will seemingly proceed within the close to time period, that is an more and more essential consideration for 2022.”
Go to the Economic & Strategic Research website at fanniemae.com to learn the complete Might 2021 Financial Outlook, together with the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To obtain e-mail updates with different housing market analysis from Fannie Mae’s Financial & Strategic Analysis Group, please click here.
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Opinions, analyses, estimates, forecasts, and different views of Fannie Mae’s Financial & Strategic Analysis (ESR) group included in these supplies shouldn’t be construed as indicating Fannie Mae’s enterprise prospects or anticipated outcomes, are based mostly on plenty of assumptions, and are topic to alter with out discover. How this data impacts Fannie Mae will rely on many components. Though the ESR group bases its opinions, analyses, estimates, forecasts, and different views on data it considers dependable, it doesn’t assure that the data offered in these supplies is correct, present or appropriate for any explicit goal. Adjustments within the assumptions or the data underlying these views may produce materially totally different outcomes. The analyses, opinions, estimates, forecasts, and different views printed by the ESR group signify the views of that group as of the date indicated and don’t essentially signify the views of Fannie Mae or its administration.
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