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Press Release

Economic Growth Rebound Is in the Cards, but Fiscal and Monetary Policy Could Shuffle the Deck

June 19, 2017

Katie Penote


WASHINGTON, DC – The current economic expansion, now entering its ninth year, is forecast to continue, with full-year growth at 2.0 percent for 2017, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s June 2017 Economic and Housing Outlook. Incoming data suggest second quarter economic growth will rebound to 2.9 percent annualized from 1.2 percent last quarter. Additionally, despite mixed consumer fundamentals, consumer spending growth is expected to pick up to 3.1 percent this quarter from 0.6 percent in the prior quarter, resuming its traditional role as the biggest contributor to economic growth. Although moderate growth is expected to continue next year, uncertainty surrounding fiscal and monetary policy is clouding the forecast.

“This month marks the eighth anniversary of the U.S. economic expansion, the third-longest of the post-World War II era. While we expect modest growth to continue in 2018, the potential for fiscal stimulus remains a notable wild card,” said Fannie Mae Chief Economist Doug Duncan. “The odds that Congress will enact major pieces of legislation this year and jumpstart meaningful fiscal stimulus have diminished, and the economy also faces another fiscal policy uncertainty in coming months, as Congress will have to raise the debt ceiling to avoid a government shutdown. Monetary policy uncertainty also has heightened. As we expected, the Federal Open Market Committee raised the fed funds rate at the June meeting by 25 basis points. Our June forecast assumes that the Fed will increase the target rate once more this year in September and will begin to taper reinvestment of principal payments from its securities holdings in December. 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.”

“The narrative for the housing market hasn’t changed over the past year. A labor shortage continues to restrain homebuilding, and tight inventory is constraining sales and boosting home prices,” said Duncan. “Although we expect mortgage rates to remain supportive for home buyers, our near-term outlook for existing home sales remains cautious. We expect total home sales to rise 3.2 percent this year and total single-family mortgage originations to drop about 21 percent to $1.62 trillion. A large drop in refinance originations will likely outweigh a modest rise in purchase originations. We expect the refinance share to move down to around 34 percent in 2017 from 48 percent in 2016.”

Visit the Economic & Strategic Research site at to read the full June 2017 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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