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Press Release

Economic Recovery Continues at Slower Pace

October 16, 2020
Housing Demand Continues to Outstrip Supply, Compounding Affordability Issues

WASHINGTON, DC – Despite a light rebalancing of third and fourth quarter estimates, full-year 2020 economic output is still expected to contract 2.6 percent, according to the latest commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. Its estimate of third quarter 2020 real GDP growth was revised upward 1.2 percentage points to 31.6 percent annualized, while fourth quarter 2020 growth was revised downward 1.3 percentage points to 4.9 percent annualized. The intertemporal shuffling of growth expectations reflects in part a deceleration of consumer spending and the likely pull-forward of business fixed investment and the restocking of inventories. As with prior months, risks to the forecast remain weighted to the downside, chief among them the potential acceleration of COVID-19 case rates and the subsequent re-imposition of widespread social and economic restrictions.

The housing sector continues to be highly supportive of economic growth and is expected to remain so over the forecast horizon. With forward-looking indicators, including pending sales and new construction, demonstrating strength, the ESR Group now forecasts third quarter residential fixed investment growth at 58.0 percent annualized, a level that, if realized, would surpass pre-COVID figures. As such, annual home sales, mortgage origination volume, and home price growth – as measured by the FHFA index – are all expected to significantly outpace 2019 levels.

“The economy continues to recover, albeit at a slowing pace,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Our view is that the combined decline of GDP in 2020 will likely be regained in 2021 for net zero growth over the two-year period. This suggests that if the labor force grows as expected, then the unemployment rate must also end 2021 higher than pre-crisis levels, as shown in our forecast. Meanwhile, housing continues its multi-year theme of historic supply constraints. Strong demand-side drivers, including low mortgage rates and a surge of millennials looking to purchase homes, are contributing to significant home price appreciation, particularly as many older homeowners continue to age in place and other would-be home-sellers adopt a more conservative posture due to COVID-19 concerns, further limiting supply.”

Visit the Economic & Strategic Research site at to read the full October 2020 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.

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Fannie Mae Newsroom

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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, including assumptions about the duration and magnitude of shutdowns and social distancing, 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.