WASHINGTON–Fannie Mae is projecting “modest improvement” in the U.S. economy through the remainder of the year. It is also offering a forecast for the housing market that calls for reductions in mortgage originations during 2016.
Projections from its Economic and Strategic Research (ESR) Group call for the improvements despite “heightened anxiety on Wall Street.”
“Our forecast for the year is largely unchanged despite recent market volatility. Fundamentals are positive, suggesting potential for some improvement in the fourth quarter,” said Fannie Mae Chief Economist Doug Duncan. “While core personal consumption expenditures experienced their weakest gain in more than four years in July, real consumer spending rebounded during the month and August auto sales were stronger than they have been in a decade. Consumers may get an added boost during the year from subdued inflation given the stronger dollar and low oil prices. Overall, we anticipate economic growth of 2.4% for 2015, up slightly from 2.1% in the prior forecast. Consumer and government spending as well as nonresidential and residential investment are expected to contribute to growth while net exports and inventory investment will likely pose headwinds.
“Continued strong performance of year-to-date home sales and modestly weakening leading indicators confirm that our prior forecast of existing home sales this year remains valid,” Duncan continued. “However, lower actual and projected cash sales led us to revise slightly higher purchase mortgage originations. Sub-par single-family new home construction, however, has been somewhat disappointing, and as a result we have lowered our projected single-family starts projection for 2016. We anticipate total mortgage originations to increase approximately 25% for all of 2015, and total production volume to decrease somewhere in the area of 18% in 2016, with the refinance share falling about 15 percentage points.”