Fannie Economists More Optimistic After Q3 Activity


Fannie Mae economists have upgraded their forecast for economic activity next year, saying that improving financial conditions and recent encouraging signs from the labor market should set the stage for an above-par growth trend by mid 2011.

The company's Economics & Mortgage Market Group predicts economic activity will likely occur at a gradual pace moving into 2011.

The economy showed a slight pickup in growth in the third quarter to 2% at an annualized pace (up from 1.7 % in the previous quarter), and consumer spending posted the best showing since the end of 2006. But even with stronger-than-expected economic growth in the third quarter, Fannie's Economics & Mortgage Market Group predicts in its monthly commentary that growth will still be sluggish at least through the first quarter of 2011.

Foreclosure issues are expected to keep home sales subdued through the remainder of this year, but the group expects to see a gradual improvement in 2011.

‘For all of 2010, total home sales are projected to decline by about 8 percent from 2009, marking the bottom of annual total home sales in this cycle,’ says Fannie Mae Chief Economist Doug Duncan. ‘We expect home sales to increase by about 3 percent in 2011. However, the pace of recovery will largely be determined by labor conditions. If hiring improves at a faster pace than expected, home sales will likely see a stronger gain in 2011 and vice versa.’

SOURCE: Fannie Mae

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