Fannie Economists Expect Housing Activity To Remain Level

While low interest rates are expected to continue driving growth in the Fannie Mae mortgage and the mortgage refinance markets, economists believe that housing activity will remain flat …

While low interest rates are expected to continue driving growth in the Fannie Mae mortgage and the mortgage refinance markets, economists believe that housing activity will remain flat in the second half of 2010. In addition, uncertainty in the US economy is expected to negatively impact the housing market for the remainder of the year. See the following article from HousingWire for more on this.

Fannie Mae expects second-half housing activity to remain flat with the year ago, as a tax credit pulled a number of sales into the second quarter.

The GSE also said continued uncertainty and a slower-than-normal recovery points to overall GDP growth of 2.5% for the rest of the year. In July, analysts at Fannie Mae’s economics and mortgage market analysis group projected growth of 2.8%, which was down from a June estimate of 3.2%.

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The agency expects the low, 30-year, fixed-rate mortgages to boost refinance activity but not result in any sort of refinance boom. The current average rate of 4.5% is expected to remain throughout 2010.

“The inability of the financial sector, business, and households to determine the likelihood of events on the economic horizon is making planning for the future difficult,” Fannie Mae chief economist Doug Duncan said.

“It is particularly difficult to know how the economy will evolve given recent and forthcoming policy changes,” Duncan said. “Because of this uncertainty, downside risks are trumping upside potential. Corporate profits are strong, but uncertainty around future labor costs is hindering near-term hiring. The Fed is reinvesting maturing MBS into Treasuries as a strategy to keep long-term interest rates low, but uncertainty about reform in the financial sector is constraining credit availability. Consumers are lowering their leverage and positioning themselves to resume consumption, but they face uncertainty about employment and the renewal or expiration of tax cuts. The upside possibilities are there, however the key sectors are reticent to contribute meaningfully to expansion.”

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.

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