Housing could fuel economic growth for the first part of 2020, a new economic outlook from Fannie Mae shows.
Fannie Mae upgraded its economic outlook to a gross domestic product growth of 1.9% in 2020, according to its latest commentary from the Economic and Strategic Research Group. This is due to expected easing trade tensions, stimulative fiscal policies and continued consumer spending
This year, the third quarter added to GDP growth for the first time in more than 1.5 years, Fannie Mae’s data shows. And this growth is expected to continue into the second quarter of 2020.
Fannie Mae explained housing should also continue to function as a positive contributor to growth in the near term, as indicated by both new and existing single-family home sales advancing in the third quarter, as well as pending home sales, permits, and starts. However, persistent supply and affordability constraints continue to hold back household formation, inhibiting housing market activity.
“As we forecasted, housing supported the larger economy in the third quarter, and we expect it to continue to play a productive role through the first half of 2020,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Positive contributions from single-family housing construction, home improvements, and brokers fees pushed residential fixed investment growth to a robust 5.1% annualized pace this past quarter, and we forecast continued but moderating strength as construction activity and home sales growth continue at a slower pace.”
“With mortgage rates normalizing, we expect a decline in refinance activity in 2020, with the refinance share of originations dropping from a projected 37% in 2019 to 31%,” Duncan said. “Of course, the housing market as a whole remains constrained by the persistent supply and affordability issues, which is particularly unfortunate given the current strength of consumer demand for reasonably priced homes.”
Housing is contributing to growth, but consumer spending is expected to remain the primary driver of economic growth for the forecast horizon, and business fixed investment will benefit as additional corporate expenditures work to meet consumer demand.
Read more here: https://www.housingwire.com/articles/fannie-mae-housing-to-help-fuel-economic-growth-in-2020/