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Press Release

Record U.S. Expansion Likely Undone by COVID-19

April 15, 2020
Housing Expected to Slow Due to Increased Consumer Caution, Financial Uncertainty

WASHINGTON, DC – April 15, 2020 – The longest economic expansion in U.S. history has likely come to an end amid the unprecedented impacts of COVID-19, according to the latest commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. With consumers staying home, many businesses shutting, and household financial stress growing, the ESR Group now projects back-to-back quarters of negative real GDP growth in the first half of 2020, meeting the commonly accepted definition of a recession. The updated forecast includes expectations of a historically large contraction in the second quarter of approximately 25 percent annualized amid sizeable declines in employment, consumer spending, and business investment. While full-year 2020 output is expected to contract 3.1 percent, the ESR Group anticipates a growth rebound of 4.8 percent in 2021. Risks to the forecast remain skewed heavily to the downside, with the length and magnitude of virus-related shutdowns ultimately determining the likely contraction’s severity.

The ESR Group also expects housing to slow significantly in the months ahead, despite starting the year in a strong position. Declines in purchase mortgage originations and new for-sale listings are indicative of the caution being demonstrated by homebuyers and sellers, due in part to financial and social uncertainty. As a result, the ESR Group is forecasting a sharp decline in total home sales and housing starts in both the second quarter and all of 2020. However, the low interest rate environment should continue to support refinance activity this year, which the ESR Group now projects to account for 56 percent of total mortgage originations volume.

“The historically rapid decline in economic activity, the accompanying employment loss, and our limited, though improving, understanding of COVID-19 make this a particularly challenging forecast environment,” said Doug Duncan, Senior Vice President and Chief Economist, Fannie Mae. “Our baseline forecast of a 3.1 percent contraction in real GDP in 2020 acknowledges the economic downdraft and, considering the unprecedented monetary and fiscal policy responses, suggests a solid-but-incomplete recovery exiting 2020. The variability around this forecast is wide, and is dependent on the incidence, severity, and duration of the virus, as well as the response of the public and policymakers to new information. In the background and contributing to the economic stress is the drop-off in demand and the negotiations over supply constraints in the oil industry.”

“Amid job losses and employment stability concerns, we expect the housing market to also experience a downside shock,” Duncan continued. “In our view, the negative shock will apply to both the home purchase and rental markets. On the demand side, early indications are that the purchasing benefit of lower interest rates are being offset by the downturn in employment. On the supply side, the number of listings is falling, as those with homes to offer may either be hesitant to allow strangers to tour their home or worry that the lack of demand is placing downward pressure on the sales price they might otherwise receive. On net, the expected effect is about a 15 percent decline in home sales in 2020, translating into a decline in purchase originations from $1.28 trillion in 2019 to $1.11 trillion in 2020. On the flip side, compared to 2019, refinances are expected to pick up in 2020 by approximately $400 billion to $1.41 trillion.”

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