Fannie Mae economist: Economic momentum will boost housing markets

Still expect to see 2.8% boost in economic activity in 2015

Economic activity was suppressed in the first quarter due largely to the West Coast port disruptions and difficult weather patterns across the Northeast, but the economy is expected to gain momentum throughout the spring and reach previously anticipated levels by year-end, according to Fannie Mae’s Economic & Strategic Research Group.

While they have adjusted downward first-quarter growth from the prior forecast, the ESR Group’s full-year 2015 growth projection remains unchanged at 2.8%. Risks remain tilted to the downside, however, as consumer spending may be weaker than anticipated and the financial markets are likely to experience some volatility leading up to the Fed’s first expected rate hike in the coming months.

“We have downsized our first-quarter economic growth expectations in light of several transitory factors that weighed on consumption, but our outlook is largely the same as what we forecasted in March,” said Fannie Mae Chief Economist Doug Duncan.

“Although some momentum was lost in the first quarter as consumers remained cautious in their spending, perhaps putting an emphasis on repairing their personal balance sheets and replenishing savings, we expect that consumer spending will catch up during the second quarter and continue in subsequent months, supporting our forecast of 2.8% growth for the year,” Duncan said. “We believe this momentum will carry over into the housing market, as well, particularly if strong consumer income growth continues.”

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