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Fannie Mae: Housing healthy despite slowing economy

The U.S. economy still appears to be headed toward a slowdown this year, but the housing market is buttressed by declining interest rates and wage growth, according to a new report from Fannie Mae.

HouseAn April study from Fannie’s Economic and Strategic Research (ESR) Group forecast gross domestic product (GDP) growth at 2.2 percent in 2019, down from 3 percent in 2018. This sluggishness is due to a variety of factors, the ESR study said, including slowing business investment, reduced consumer spending and the overall diminishing impact of last year’s fiscal stimulus.

“Incoming data continue to support our call for slower economic growth in 2019,” Fannie Mae chief economist Doug Duncan said. “Domestic demand growth has slowed as businesses and consumers exert greater caution amid trade uncertainty and capital-markets volatility. The predominant downside risks — the U.S.-China trade dispute and slowing global growth — are expected to ease later this year, which should help bolster growth in the second half.”

Indeed, the ESR study projects stronger GDP growth in the latter half of 2019, as residual impacts of stock-market volatility in the fourth quarter of 2018 and the government shutdown in the first quarter of 2019 ebb. Duncan expects that second-half growth will trigger a rate hike from the Federal Reserve at the end of the year.

Still, ESR predicts 2019 home sales to hold steady at last year’s levels, buoyed by wage growth, low rates and decelerating prices. In particular, low rates are expected to push refinance volume higher than previously projected, although still “down modestly” year over year. Purchase volume, on the other hand, is anticipated to see a more moderate year-over-year increase.

Inventory remains a big issue, Duncan said.

“The greatest impediment to both sales and affordability continues to be on the supply side, as new inventory, particularly among existing homes, is being met quickly by strong demand — as evidenced by the already thin months’ supply hitting a new one-year low,” he said.


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