TheMReport

TH E M R EP O RT | 61 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 Policy Uncertainty Makes Fannie Forecast Difficult The GSE expects economic growth to rebound in the short term, but longer-term predictions are harder to come by. T he U.S. is embarking on its ninth year of economic expansion, and Fannie Mae is predicting economic growth will rebound. According to its Economic & Stra - tegic Research Group's June 2017 Economic and Housing Outlook, second-quarter economic growth will rebound to 2.9 percent from last quarter's 1.2 percent. Consumer spending growth is expected to return as the biggest contributor to economic growth, picking up to 3.1 percent this quarter from 0.6 percent in the first quarter. Fannie Mae predicts moderate growth to continue into next year. However, uncertainty in fiscal and monetary policy makes the forecast a little difficult. "This month marks the eighth anniversary of the U.S. economic expansion, the third longest of the post-World War II era,' said Fannie Mae Chief Economist Doug Duncan. "While we expect modest growth to continue in 2018, the potential for fiscal stimu - lus remains a notable wild card. The odds that Congress will enact major pieces of legislation this year and jump-start meaningful fiscal stimulus have diminished, and the economy also faces an - other fiscal policy uncertainty in coming months, as Congress will have to raise the debt ceiling to avoid a government shutdown." Duncan said the Federal Open Market Committee's June decision to raise the fed funds rate by 25 basis points has increased the uncertainty of monetary policy. "Our June forecast assumes that the Fed will increase the target rate once more this year in September and will begin to taper reinvest - ment of principal payments from its securities holdings in December," Duncan said. "However, the recent slowdowns in hiring and inflation could lead the Fed to hold off on the September rate hike in order to gather more data." According to Duncan, the housing market hasn't changed all that much in the last year. Labor and inventory shortages are constraining sales and therefore increasing home prices. "We expect total home sales to rise 3.2 percent this year and total single-family mortgage origina - tions to drop about 21 percent to $1.62 trillion," Duncan said. "A large drop in refinance origina - tions will likely outweigh a mod- est rise in purchase originations. We expect the refinance share to move down to around 34 percent in 2017 from 48 percent in 2016." Americans Want to Sell, But Not Buy A Fannie Mae report reveals the sentiments of today's homebuyers and sellers. A mericans are slightly less optimistic about the housing market, according to the recent Fannie Mae Purchase Sentiment Index (HPSI). According to Fannie Mae, the HPSI's 0.5 percentage point decrease to 86.2 is largely due to decreases in three of the six HSPI components, including the net share of Americans who think now is a good time to buy a home, which fell eight percentage points to a new record low. The number who said it is a good time to sell also reached record highs, increasing six per - centage points. This is the second time in the survey's history that the net share of those saying it's a good time to sell surpassed the net share of those saying it's a good time to buy. The share of Americans who be - lieve mortgage rates will go down over the next 12 months rose five percentage points to 52 percent. More Americans are feeling secure about their job, accord- ing to the HPSI. The net share of Americans who say they are not concerned with losing their job fell six percentage points to 71 percent, back near the level seen in March. Eighteen percent of Americans said their household income is significantly higher than it was 12 months ago. "High home prices have led many consumers to give us the first clear indication we've seen in the National Housing Survey's seven-year history that they think it's now a seller's market," said Doug Duncan, SVP and Chief Economist at Fannie Mae. "However, we continue to see a lack of housing supply as many potential sellers are unwilling or unable to put their homes on the market, perhaps due in part to concerns over finding an affordable replacement home. Prospective homebuyers are likely to face continued home price in - creases as long as housing supply remains tight." "This month marks the eighth anniversary of the U.S. economic expansion, the third longest of the post-World War II era." —Doug Duncan, Chief Economist, Fannie Mae

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