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Press Release

Real GDP Growth Expected to Contract Sharply in the Second Quarter

May 13, 2020

WASHINGTON, DC – May 13, 2020 – Following a first quarter decline, real GDP growth is expected to contract even further in the second quarter due primarily to an unprecedented slowdown in consumer spending, according to the latest commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. The ESR Group attributes much of the shift in its forecast to the sharp  decrease in elective healthcare expenditures, which it believes is short-term, and the ESR Group now predicts second quarter 2020 GDP growth of negative 36.6 percent and full-year 2020 growth of negative 5.3 percent, compared to last month’s forecast of negative 25.3 percent and negative 3.1 percent, respectively. A partial recovery is forecast for the second half of the year due to supportive monetary and fiscal policies, resumed consumer spending following an elevated savings rate, and expected relaxing of virus-related restrictions and social distancing measures. Risks to the downside include greater consumer caution during the recovery period than expected, as well as a potential second wave of the virus in the fall or winter, while upside risks include a more pronounced and rapid rate of recovery than currently anticipated.

On housing, recent data suggest existing home sales slowed earlier in 2020 than previously forecast. Even so, the ESR Group expects full-year 2020 existing home sales to decline approximately 15 percent, a figure largely unchanged from last month’s forecast, as homebuying activity is showing signs of stabilizing, including recent upticks in mortgage applications and sales listings. While job losses and economic uncertainty have almost certainly held back prospective home buyers, the ESR Group believes that declining sales are more strongly a function of supply dynamics, pointing to the recent downturn in Fannie Mae’s Home Purchase Sentiment Index® as evidence – specifically the “good time to sell” survey component, which fell much more sharply than its buy-side equivalent. There also remains anecdotal evidence that sellers are reluctant to cut prices and are opting instead to take their homes off the market until fears of contagion subside and social-distancing measures are eased.

“We expect the contraction in the second quarter of 2020 to represent the floor of the sudden and historic drop in economic activity associated with the coronavirus,” said Doug Duncan, Senior Vice President and Chief Economist, Fannie Mae. “The timing and pace of recovery remains in many ways unknown, as it depends on the dissipation or treatment of the disease and the reaction of the public to its incidence, duration, and severity. Thus, most forecasts are more accurately characterized as scenarios. We present a base case scenario in our May forecast of an approximately 5-percent decline in real economic activity in 2020. While we expect housing to stage a solid recovery starting later this year, we still predict a 15 percent decline in existing home sales. Very low interest rates offer some support to the demand side of the housing market, while the supply side recedes via the unwillingness of homeowners to offer properties for sale under the current public health conditions. In the near term, this implies support for home prices. Low interest rates also present a refinance opportunity for millions, and as a result we expect the highest level of annual refinance activity since 2012.”

Visit the Economic & Strategic Research site at to read the full May 2020 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. 

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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.