Fannie Mae Expects Modest Economic Growth in 2015

Author: Brian Honea November 20, 2014Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services37

Despite slower economic growth in recent months following a strong showing in mid-2014, Fannie Mae's Economic and Strategic Research Group said in a report released Thursday that it still expects 2015 to be a slightly better year overall economically in the U.S.

The group's current forecast was based on continued improvements in employment, income, and consumer and business spending. The group predicted that economic growth will come in at 2.5 percent for 2015, which is a slight improvement over the 2.1 percent predicted for 2o14.

"The pace of growth around the middle of the year was well above trend, driven by an unsustainable rebound after a weak first quarter, and we anticipate that the fourth-quarter numbers will presage a more modest pace for 2015," Fannie Mae chief economist Doug Duncan said. "We are still seeing some conservatism on the part of consumers, who remain hesitant to take on significant credit and mortgage debt in the wake of the economic downturn. However, recent data show that their confidence is growing amid strengthening employment numbers and household incomes, which we expect to continue next year and eventually drive stronger consumption."

Duncan said the housing market "continues to grind its way upward" and that due to muted fundamentals, he does not expect the market to have a breakout performance in 2015. Duncan predicted the state of the housing market and mortgage industry in 2015 will be similar to that of 2014 based on Fannie Mae's current view of home sales, housing starts, and price trends, which is largely unchanged from the research group's previous forecast.

"Homebuilding activity improved during the third quarter due primarily to the multifamily segment, which we expect to grow further next year, but the single-family segment has been relatively flat for some time," Duncan said. "Although interest rates still are relatively low, the temporary burst in refinance activity appears to have subsided, and we expect that the market will turn more toward the purchase market in 2015."