Posted on Sunday, 22nd May 2011 by Charlotte W
A sharp slowdown in economic growth in the first quarter of the year is expected to be only temporary, as markets shake off the effects of one-time events like the Japanese tsunami and oil prices stabilize.
The long-term outlook for economic growth calls for continued sustainable growth above 3 percent a year over the next few years, according to the May Economic Outlook released today by Fannie Mae. However, sustained growth in the residential housing market remains elusive, despite good affordability conditions created by low prices and interest rates. Overall economic growth dropped to an annual rate of 1.8 percent in the first quarter of the year, down from 3.1 percent previously. However, Fannie Mae analysts attribute that decline to factors such as harsh winter weather, disruptions caused by the Japanese earthquake and tsunami, unrest in the Middle East and North Africa, and higher gas prices, whose effects are expected to be short-term. Housing sales are expected to remain weak over the next two years, with only moderate but steady growth despite good affordability conditions created by low prices and interest rates. The lender does not expect home sales to return to the recent highs reached in 2009, spurred by the homebuyer tax credit, until 2013 at the earliest. “The confluence of low interest rates, historically low home prices, and improving employment has not yet reached all the way through to consumer attitudes, which we continue to survey on a regular basis,” said Doug Duncan, Fannie Mae Chief Economist. “In spite of the positives surrounding the housing market, we see that consumers are still hesitant to take on a large financial obligation.” The lender predicts a slow but steady rise in home sales from an annual rate of 5.43 registered in the first quarter of this year to 6.20 million in the fourth quarter of 2012. The recent peak in home sales was an annual rate of 6.28 million in the fourth quarter of 2009. Mortgage rates are expected to remain relatively low through the remainder of the year, following steady declines in recent weeks that have returned 30-year rates to around the 4.6 percent mark. Rates are expected to increase to around 5.2 percent by the end of the year, then gradually rise to about 5.5 percent through 2012.
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Tags: Expected, Expected Home
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