Fannie’s economic growth forecast rose one-tenth from its prior forecast to 2.5%. The rise was due to the government’s improved third-quarter growth estimate and an expected strong Q4 finish, according to Doug Duncan, chief economist for Fannie Mae.
“The economy appears poised to finish 2017 on a cheerful note as fundamentals increasingly align with strong business and consumer sentiment,” Duncan said. “Domestic demand is building momentum, job growth is solid and broad-based, and consumer spending looks likely to strengthen. If enacted, tax reform should be a net positive for GDP growth next year, which we currently have pegged at a modest 2.1% in the absence of tax-law changes.”
Mortgage originators can expect more rate hikes in 2018 as the economy strengthens – and low supply and affordability are still slowing housing recovery, Duncan said.
As expected, the Fed raised rates one more time last week and, barring inflationary pressure, is expected to tighten two more times in 2018. Finally, the housing market continues its upward grind, as it struggles to balance strong demand and price appreciation with inventory shortages and affordability concerns.
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Fannie Mae is projecting that 2017 will end “on a cheerful note” for the economy as it upgraded its economic forecast. The housing market, however, is predicted to continue to struggle on that upward path.