Housing is well-positioned for a come-back says Fannie Mae

by Steve Randall22 Jan 2020

Housing should regain its place as growth driver of the US economy in 2020 despite facing some challenges.

Fannie Mae’s Economic and Strategic Research Group says that housing will play a part alongside consumer spending and business fixed investment.

The group is forecasting growth of 2.1% for the US economy this year down from 2.4% in 2019.

“Simmering geopolitical tensions, trade concerns, potential equity overvaluation, and weakening manufacturing data suggest the risks to our forecast are skewed slightly to the downside, while accelerating global growth and consumer spending power offer upside and greater balance than in previous forecasts,” said Duncan. “We also continue to expect the Fed to maintain its hands-off approach to monetary policy in the new year, with no changes to the target federal funds rate despite persistently low inflation.”

Housing market gains
For the housing market, the ESR expects single-family housing construction to continue the momentum seen at the end of 2019, while low mortgage rates and the strength of the labor market should continue to support demand.

“Strong consumer demand and low mortgage rates – as well as moderate improvements to supply – have housing well-positioned for a come-back year in 2020,” Duncan continued. “While we expect housing to regain its place as an economic growth driver after a period of relative sluggishness, we recognize that the problems of affordability and inventory are likely to persist for the forecast horizon. Homebuilders have begun to accelerate the pace of single-family construction, including in the much-needed affordable space, but supply constraints still exist. In many areas, that demand-supply imbalance continues to contribute to entry-level home prices outpacing wage gains, exacerbating the affordability challenge.”

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