Weak housing market prompts Fannie to lower growth estimates
Fannie Mae tempered growth estimates or the rest of this year and most of 2011 because of continued high unemployment and lax consumer spending. The GSE's economics and mortgage market analysis group now expects economic growth of 2.2% for 2010 and 2.5% next year, as a "housing bottom proves elusive." In a monthly economic outlook, Fannie Mae analysts said housing normally spurs economic growth at this point in a post-recession cycle, but Americans are worried about personal finances and weak employment prospects. So record-low interest rates and declines in home prices haven't sparked increases in demand for housing. "We continue to see a supply and demand imbalance in the housing sector with very low levels of sales activity," Fannie Mae chief economist Doug Duncan said. "This is further delaying housing’s return to normalcy. Very low mortgage rates are spurring refinance activity, but we don’t expect low rates to boost purchase activity as long as the labor market remains weak." Write to Jason Philyaw.