TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1315471
62 | M REPORT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Market Predictions Fannie Mae Suggests Strong Housing Market Will Continue T he near-future state of the U.S. economy hinges on how policy- makers and the public respond to the increasing num- ber of COVID-19 cases, accord- ing to the latest commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The ESR Group predicts the re - surgence of the virus will impact consumer spending. However, it also anticipates that a more robust domestic labor market and increased household sav - ings would fuel continued real GDP growth—barring significant behavioral shifts and lockdown measures related to a new wave of virus-related chaos. The real GDP growth is currently forecast at 3.3% for full-year 2021, slightly below last month's projection, and 3% for full-year 2022. The ESR Group revised nearer- term projections, including the fourth quarter of 2020 and the first quarter of 2021, in a modest downward projection based on evidence of virus-related changes in consumer behavior. Although strict social distancing mandates remain the most considerable downside risk, economic growth could "substantially surpass the baseline forecast if, alternatively, such measures can be avoided, and the development of a vaccine progresses swiftly." Furthermore, the ESR Group expects housing to show contin - ued strength through the rest of 2020 and into 2021. While forecasts on new and existing home sales revised upward for the fourth quarter of 2020 and the first quarter of 2021, the ESR Group observed that home sales pace might have peaked in September. A moderate slowdown is taking place—pending sales and pur - chase mortgage applications have recently pulled back from highs reached in the spring as pent- up homebuyer demand recedes. Complicating this picture would be a renewal of virus mitigation protocols among prospective buyers and the impact, the ESR Group added. "The continued geographic shift and now resurgence of COVID-19 has raised risks to the pace of growth, though in our view not to the level of a potential second recessionary downturn," said Doug Duncan, Fannie Mae SVP and Chief Economist. "Households appear reasonably well-positioned to weather and cushion the slowdown, but if a strict broad-based lockdown were to be instituted and sustained, then the economy could turn down again. Meanwhile, the housing market continues to thrive in the low-rate environ - ment, particularly refinancing. Still, the sector is showing some early signs of slowing on the pur- chase side as the delayed seasonal effect works its way through the market." "Households appear reasonably well-positioned to weather and cushion the slowdown, but if a strict broad-based lockdown were to be instituted and sustained, then the economy could turn down again." —Doug Duncan, Fannie Mae SVP and Chief Economist.