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Fannie and Freddie: Dark Clouds Looming Over Near-Term Outlook

WASHINGTON, Aug. 22, 2011 /PRNewswire/ — The economy was hit by a barrage of disappointing news during the last month, which led to a significant downgrade in the overall macro economic forecast released today by Fannie Mae’s (OTC Bulletin Board: FNMA) Economics & Mortgage Market Analysis Group. While the August 2011 Economic Outlook does not forecast a double dip recession, the downgraded forecast reflects the Group’s view that the probability of another recession is close to a coin toss. For all of 2011, economic growth is expected to downshift to 1.4 percent from 3.1 percent in 2010. Growth is expected to pick up in 2012, but only to about 2.0 percent, compared with 3.1 percent projected in the July forecast.

“Key factors, including revisions to gross domestic product (GDP) data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth,” said Fannie Mae Chief Economist Doug Duncan. “Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels.”

“Macro economic factors are clearly driving the mindset of consumers and housing is being impacted by this,” Duncan continued. “However, housing has moved into second position behind general economic concerns among consumers, which is demonstrated in our National Housing Survey results. Our July data shows that 70 percent of Americans think the economy is on the wrong track, up from 60 percent a year ago. In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house.”

Housing activity is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence and a softening hiring trend. One exception is the rental housing market. The rental vacancy rate (the share of rental housing that is vacant and for rent) plunged from 9.7 percent to 9.2 percent in the second quarter of 2011, the lowest rate in nine years. This is consistent with the declining trend in the homeownership rate, indicating that a rising share of households have shifted to renting over owning.

Rich Mitchell is the Sr. Managing Editor of Conservative Daily News. His posts may contain opinions that are his own and are not necessarily shared by Anomalous Media, CDN, staff or .. much of anyone else. Find him on twitter, facebook and google+
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