Housing’s contribution to the GDP is expected to double in 2014 despite rising mortgage rates, according to Fannie’s Economic & Strategic Research Group.
“The continued housing recovery … is expected to contribute to GDP, doubling from 0.3 percentage points in 2013 to 0.6 percentage points in 2014, due in large part to new homebuilding activity,” said Fannie Mae Chief Economist Doug Duncan. “Despite the rise in mortgage rates since the spring, many housing indicators posted strong gains at the end of 2013 and consumer housing attitudes are strengthening, all of which bodes well for continued but measured housing recovery in 2014.”
Overall economic growth is expected to see a boost too. The group forecasted that labor market improvement would support income growth and that 2014 would see an increase in consumer and business spending. Growth in 2014 was expected to hit 2.9%, up from an estimated 2.6% in 2013.
“Our full-year 2014 economic forecast accounts for three key growth drivers: an acceleration in spending activity from private sector forces, waning fiscal drag from the federal government, and continued improvement in the housing market,” Duncan said. “Much of the policy uncertainty we saw in 2013 has cleared to some degree, which raises the possibility for a pick-up in growth as consumers and businesses, who held back on their spending amid those policy concerns, might loosen their purse strings this year. We expect the contribution from consumer spending to rise to about 2.0 percentage points, up from an estimated 1.6 percentage points last year. In addition, as consumer demand climbs, business confidence should improve and add to growth in the form of stronger hiring and capital investment.”
The housing market’s contribution to the gross domestic product is expected to increase in 2014, following a general trend of economic improvement, according to data released Monday by Fannie Mae.