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62 | TH E M R EP O RT 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 Uncertainty Does Not Dampen Fannie Mae's 2017 Outlook Uncertainty surrounding the presidential election has not clouded the GSE's outlook, though the GSE says its outlook is susceptible to both upside and downside risks from possible changes in policy. T he activity immedi- ately following the presidential election has signaled tons of changes ahead for the political and regulatory landscape start - ing in 2017. The Trump Admin- istration has already announced it will make changes at key cabinet positions, such as HUD Secretary, and also talked about overhauling the CFPB. At this point, the only certainty is uncertainty—no one knows exactly how the pending changes will affect the economy or hous - ing. But the uncertainty has not hurt Fannie Mae's predictions for the economy and for hous- ing both for the second half of 2016 and for the year ahead. In its November 2016 Economic and Housing Outlook, Fannie Mae predicted 1.8 percent growth for the full year of 2016 (with growth for the second half of the year at 2.4 percent, more than double that of the first half's 1.1 percent) with 2017 experiencing a similar rate of economic growth. "We haven't changed the general tone of our forecast at this time, but we will incorporate new policy assumptions as they become more concrete. Given campaign themes, we may see some changes in policies regarding corporate and individual tax rates, infrastructure investment, government spending, health care, and immigration," said Fannie Mae Chief Economist Doug Duncan. "Depending on the in - coming President's policy priorities, our forecast for 2017 is subject to both upside and downside risks. For example, we expect near-term growth would get a boost from any tax cuts and spending increas - es that are made, but if new poli- cies result in sharply higher tariffs on China and Mexico, rethinking the Trans-Pacific Partnership, and renegotiating the North American Free Trade Agreement, it would likely drag on growth." Fannie Mae pointed out that in the third quarter, existing-home sales dropped off while new home sales increased. New home sales are up by 13 percent over the year while existing-home sales were up by 3 percent over the year. Duncan noted that construc - tion spending in the single- family space has shown signs of stabilizing, meaning residential investment will no longer drag on GDP growth. At the same time, he said a significant challenge for single-family housing is a continued shrinking inventory, especially lower-end homes. Overall, the number of existing homes for sale dropped off in the third quarter by 6.8 percent, the largest decline since Q2 2013 and the sixth consecutive quarter of year-over-year declines. Houses on the lower end of the market experienced a faster rate of price appreciation than the national average in Q 3—prices for the low - est price tier, representing up to 75 percent of the median price, and second-lowest price tier, represent- ing between 75 percent of the median price and the median price, jumped by 8.8 percent and 7.6 percent over the year in Q 3, respectively. The average national gain was 6.3 percent. "Demand from first-time buyers has increased with household formation and is outpacing sup - ply, leading to significant price in- creases and affordability challeng- es for entry-level buyers," Duncan said. "Home purchase affordability will be constrained further if the recent pickup in mortgage rates persists, which would present a downside risk to our forecast of housing and mortgage activity." Some recent positives for 2017 are: The Fed indicated in its re - cent Senior Loan Officers Survey that lending standards for GSE and jumbo mortgages relaxed over the three-month period ending in October; and the homeownership rate increased by 60 basis points in Q 3 up to 63.5 percent, up from Q2's 51-year low of 62.9 percent. Despite the recent spike in mortgage rates up to near 4 per - cent, Fannie Mae said its forecast for housing for the full year 2016 is unchanged and it expects im- provements in both housing starts and sales next year. "For all of 2016, we expect total mortgage originations to increase about 8.0 percent to $1.88 trillion with a refinance share declin - ing one percentage point to 46 percent," Duncan said. "Mortgage originations are projected to decline in 2017, falling about 14 percent to $1.61 trillion, as a result of a drop in refinance origina - tions, sending the refinance share lower to 34 percent."