Fannie Mae forecasts slightly higher home sales in 2012
The improving but still vulnerable economy looks more likely to avoid recession but may only push home sales slightly higher in 2012, Fannie Mae economists said Friday. The group added that by the end of 2011, home sales will have shown little improvement from 2010. According to the National Association of Realtors, existing home sales December 2010 closed at an annualized rate of 5.28 million units. In the third quarter of 2011, the rate had dropped to 4.8 million, but NAR said it was still a 17% increase from the previous three months. Home prices also showed recent pickup at the end of the summer but remain below last year's levels. Housing permits increased in October as well, pushing risk of another economic downturn aside. Still, Fannie Mae Chief Economist Doug Duncan doesn't expect the uptick to be sustainable. "Consumer sentiment is in a holding pattern at depressed levels. In turn, the likelihood of positive developments in the housing market remains a concern," Duncan said. The Mortgage Bankers Association forecasted new mortgage originations would fall to $900 billion in 2012, revised from an earlier estimate of $1.2 trillion. Fears of recession in Europe and still uncertain housing actions in Washington could weigh on any growth seen in the overall U.S. economy, the MBA said. "Any sustained growth will depend on a pickup in employment and consumer confidence and spending," Duncan said. "Unfortunately, a recent increase in consumer spending occurred despite the biggest drop in real personal disposable income since the third quarter of 2009, which resulted in a full percentage point decline in the saving rate in the third quarter." The decline, he said, doesn't bode well for growth in consumer spending next year. Write to Jon Prior. Follow him on Twitter @JonAPrior.