(Source: Fannie Mae) WASHINGTON- Fannie Mae’s (OTC Bulletin Board: FNMA) Economic & Strategic Research (ESR) Group’s theme for the economy and housing market in 2016 centers on the challenge of housing affordability coupled with expected modest economic growth, as the expansion progresses through its seventh year. In their January 2016 Economic & Housing Outlook, the ESR Group expects that further labor market tightening will lead to increased household income and job security amid more relaxed lending standards and easier access to mortgage credit.
However, strong home price gains, especially in the lower-end of the market, continue to outpace household income growth, eroding affordability. Consumer spending is expected to underpin economic growth again this year, while residential investment and government spending should help drive growth despite some drag from net exports. Overall, the ESR Group expects the economy to grow 2.2 percent for all of 2016, with China’s deteriorating economic activity, a stronger dollar, geopolitical turmoil, and uncertainty about monetary policy remaining downside risks to the outlook.
“We ended 2015 with a positive jobs report, an annual record high for auto sales, and the housing market poised to be the strongest since 2007,” said Fannie Mae Chief Economist Doug Duncan. “The first fed funds rate hike since 2006 has had a minimal impact on mortgage interest rates so far, and we believe mortgage rates will edge up only gradually, ending the year around 4.2 percent. Despite our expectation of only a small rise in mortgage rates, home price and income dynamics should inhibit home purchase affordability.
In addition, continued rent increases will hinder renters’ ability to save for down payments. Therefore we believe the pace of improvement in total home sales should moderate to 4.0 percent in 2016. However, we expect the increase in single-family starts to accelerate to 17 percent this year, if easing housing supply shortages and a continued strong pace of household formation pan out.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full January 2016 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
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SOURCE Fannie Mae