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The gained momentum of economic activity posted in the third quarter is starting to slow, resulting in a sluggish recovery for the fourth quarter due to Hurricane Sandy and the effect on consumer and business confidence as a result of the fiscal cliff, Fannie Mae’s Economic & Strategic Research Group said Tuesday.
While full data regarding the impacts of Hurricane Sandy and the uncertainties of the fiscal cliff — economic changes experienced as a result of austerity measures mixed with increased taxes — are not available, both are expected to restrain growth during 4Q and near term, resulting in a 1.2 percentage point drag.
However, housing continues to remain resilient as the industry continues to show signs of a strong recovery, chief economist Doug Duncan of the government-sponsored enterprise said.
"Mortgage rates remain close to historic lows and home sales and home prices are trending positively. For the first time since 2005, residential investment is poised to contribute to annual economic growth this year, albeit on a small scale," he said.
Barclays posted its 2013 outlook report on housing, which supports the same key factors for a improved housing market.
Falling inventories, continued pick up in housing demand, low mortgage rates and improved affordability are key factors that will continue to underpin home prices.
If the fiscal cliff were to hit, the housing industry would likely slow, but not enough to a point where it would become particularly vulnerable to a sharp contraction, the Barclays report said.
The future looks a bit brighter for the new year, with an estimated modest growth of sub-2%, resulting in potential economic activity picking up in the second half of 2013, the GSE said.
"Despite unsteady macroeconomic conditions, we anticipate housing and mortgage activity to gain momentum in 2013," Duncan said.
Mortgage rates are expected to remain low next year, continuing to support the market. Total home sales are also projected to increase by 8% in 2013, but not before home prices rise by an estimated 10% for the remainder of the year.
"Although home prices have dipped during the seasonally weak fall and winter seasons, year-over-year gains have strengthened significantly above 2011 levels, and we expect that trend to continue in coming years," Duncan said.
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