Outlook for U.S. Economic Growth Still Solid Even as Global Growth Slows

Housing Faces Upward Grind in 2015

Katie Penote

202-752-2261

WASHINGTON, DC – Real economic growth in the U.S. appears ready to exceed 3.0 percent for the second half of the year, providing a sound basis for growth in 2015, according to Fannie Mae's (FNMA/OTC) Economic & Strategic Research (ESR) Group. The Group’s macroeconomic theme for 2014, Private Forces Move to the Fore, materialized in the second quarter as reduced fiscal uncertainty and slowing monetary intervention helped private sector momentum to build. Although a variety of factors are slowing growth on a global scale, which may discourage the Federal Reserve Board from making any changes in interest rate policy until Q3 2015, the global economic slowdown has had little negative impact on the fundamentals of the U.S. economy so far.

"Given the expected strengthening economic activity in the U.S. in the second half of the year, we continue to expect to finish just above 2 percent growth for all of 2014," said Fannie Mae Chief Economist Doug Duncan. "The risks are tilted to the downside due to current geopolitical events in Russia, Ukraine, Hong Kong, and the Middle East, as well as the economic slowdown in the Eurozone, China, and Japan. However, recent data suggest these factors have not significantly swayed American consumers. Real consumer spending is poised to pick up in the second half of 2014 from the first half, due in large part to improving labor market conditions, continued declines in gasoline prices, and a subdued pace of inflation."

"From a housing perspective, we anticipate that overall home sales will be weaker in 2014 than in 2013. For 2015, we expect only a moderate pickup in total home sales but enough to post the best performance since 2007," said Duncan. "We lowered our expectation for housing starts just slightly to 1 million units for 2014, but our view of mortgage originations has not changed. Our estimate for 2013 was in line with the recent release of 2013 data under the Home Mortgage Disclosure Act, and our projection of total production in 2014 is little changed at approximately $1.1 trillion. For 2015, we are cautiously optimistic that ongoing labor market improvements, low mortgage rates, rising inventories, and some easing of lending standards will boost home sales by roughly 5.0 percent. However, we still believe housing will continue along its upward grind rather than have the breakout year some are expecting."

For an audio synopsis of the October 2014 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full October 2014 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.