Despite the slate of bad news that’s started off 2015, Fannie Mae’s analysts predict that the economy is poised for a pickup in growth in 2015.
Fannie’s Economic & Strategic Research Group say they expect a strengthening employment sector, rising income growth, and declining commodity prices.
While many are worried about the faltering start to 2015, other analysts and economists think the down housing market is an anomaly.
the year is off to a bad start for housing in terms of housing starts, completions and permits. Existing home sales tumbled in January, and mortgage applications have been spiraling downward in February, giving away most of the gains made in January.
Fannie’s ESRG say the labor market has started the year on an upbeat note and is expected to lift consumer confidence, in turn helping to boost consumer spending, manufacturing activity, and the pace of the housing recovery.
Economic growth may face some headwinds as a strong U.S. dollar weighs on the trade deficit. However, the economy is expected to climb to 2.9% for the full year, up from 2.5% growth in 2014.
“Our forecast calls for an increase in economic growth to 2.9 percent for 2015, which is a slight downward adjustment from our prior forecast but solid improvement nonetheless,” said Fannie Mae Chief Economist Doug Duncan. “Although we are beginning this year at a more modest pace compared to the above-trend numbers seen at mid-year 2014, the country’s aggregate income has benefitted from the improving labor market, which, combined with low gasoline prices, should help drive higher auto sales and overall consumer spending throughout 2015.”
“We expect housing to shift up a gear in 2015 following the uneven and ultimately disappointing activity last year,” said Duncan. “Our forecast calls for a number of factors, including strong hiring and income growth, stabilized housing affordability, and modestly easing lending standards, to translate into improving housing demand throughout the year. We continue to anticipate that the Fed will begin to hike short-term interest rates later this year, although weak global economic growth and geopolitical headwinds will likely limit the rise in long-term interest rates. We expect total home sales to increase by approximately 6.0 percent for 2015, with total single-family mortgage production climbing to approximately $1.2 trillion. Total single-family mortgage debt outstanding should be relatively flat this year before picking up gradually in 2016 and 2017.”