Fannie Mae warns of nearing double-dip recession
Fannie Mae stopped short of forecasting another double-dip recession for the U.S. economy Monday, but warned recent indicators show one could be nearing.
"Key factors, including revisions to gross domestic product data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth," Fannie Mae Chief Economist Doug Duncan said. "Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels."
Fannie expects economic growth to drop to 1.4% this year, down from a 3.1% growth last year. In 2012, Fannie doesn't expect the economy to grow at the rate measured in 2010.
Duncan said concerns over the mortgage market took a backseat to more macroeconomic factors in the minds of many consumers. In a survey conducted in July, Fannie found 70% of Americans believe the economy is on the wrong track, up from 60% the year before.
There is one exception: rentals. The rental vacancy rate — or the share of rental housing vacant for renting — dropped 50 basis points in the second quarter to 9.2%. It's the lowest rate in nine years.
The Obama administration wants to take advantage of the new demand, putting out a request for information in recent weeks for ideas to rent out previously foreclosed properties held by Fannie, Freddie Mac and the Department of Housing and Urban Development.
Still, Duncan echoed a Standard & Poor's analyst note over the weekend, when he said demand for buying new homes remains elusive.
"In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house," Duncan said.
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