Housing remains constrained as economy picks up in Q2

Fannie Mae raised its economic growth outlook for the year

By Francis Monfort

18 Jul 2018

Housing affordability and sales continued to be constrained by inventory issues in the second quarter even as economic growth is estimated to have picked up strongly, according to an economic and housing outlook released by Fannie Mae for July.

Although home prices continue to rise as demand outstrips supply, Fannie Mae slightly upgraded its June economic forecast and now expects full-year real GDP growth of 2.8%. Fannie Mae also said it raised the forecast despite rising trade tensions.

Fannie Mae said it believes the second quarter's estimated 4.2% annualized growth pace is unsustainable for the balance of the year, as the contribution from trade was likely temporary. For 2019, it estimates full-year growth to moderate to 2.2% on expectations that impacts of fiscal policy will begin to fade in the second half of next year.

"As we celebrate the ninth anniversary of the economic expansion with what's likely to be a robust second quarter, we're also examining whether last quarter's headline growth will mark a high point for the remainder of the cycle," Fannie Mae Chief Economist Doug Duncan said. "Along with ongoing tightening of monetary policy, we expect fiscal stimulus, which has supported consumer, business, and government spending, to weaken as we move into 2019. And while trade provided a meaningful lift last quarter – owing in part to overseas firms pulling forward their imports from the US ahead of the announced tariffs – we expect trade will likely once again be a drag on growth moving forward.”