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Fannie Mae: Housing’s falling momentum will impede 2015 growth

Despite housing slump, economy forecast improves

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While the forecast for the economy is positive, the outlook for the housing market has deteriorated as housing activity lost momentum and near-term indictors only suggest minor improvement, Fannie Mae said in its latest economic outlook report.

The 2014 full-year growth expectations received a boost thanks to a broad-based rebound in the second quarter economic growth and the upward revision to first quarter economic activity.

“The August outlook supports our expectation that the economy will grow in the second half of the year at slightly above trend and push full-year growth into positive territory, albeit still weak by historical standards,” said Fannie Mae Chief Economist Doug Duncan.

But when it comes to housing’s contribution to the economy, Duncan said, “We have downgraded our outlook following the disappointing housing activity seen during the first half of the year.” 

The first half of the year struggled to overcome tapering’s impact on the market, along with the weather in the first half of 2014.

“In the first six months of the year, total sales have run below last year’s pace," Duncan said. "Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes."  

And next year does not look to be too much better. “We currently estimate that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting,” Duncan continued.

Despite housing’s lack of contribution to the overall economy, improvements in consumer spending, inventories and employment helped support an upward revision in growth expectations to approximately 3% for the second half of 2014, raising the forecast for all of 2014 by four-tenths to 1.9%.

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