Fannie Mae’s Economic and Strategic Research group modestly downgraded its GDP and housing growth forecasts for the remainder of 2021. This is because of a weaker than previously anticipated second-quarter real GDP reading, COVID-19 related disruptions, and supply chain concerns.
“While the recent surge of COVID-19 cases appears to be affecting consumer behavior, the economic response so far has been modest compared to last year’s outbreak, and its impact on our latest forecast is similarly slight, albeit to the downside,” Mark Palim, Fannie Mae vice president and deputy chief economist, said in a release.
“For the housing market, at current case levels, the lack of inventories of homes for sale and continued supply chain bottlenecks experienced by homebuilders remain the primary constraints on home purchase activity. Moreover, while mortgage rates have drifted downward and in theory provide greater purchasing power to potential borrowers, in practice, given current supply-side and affordability challenges, we expect that benefit to be limited.”
The ESR group’s projected forecast in July was 7 percent. August’s forecast decreased to 6.3 percent. This downgrade was partially offset by an upgraded 2022 growth forecast from 2.8 percent to 3.2 percent. Inflation, as measured by the Consumer Price Index, is expected to stay around 5 percent through the end of 2021 as “broader inflationary pressure from wage and home price growth replaces some of the more transitory factors driving the recent upward movement.”
For full-year single-family home sales, the ESR forecast decreased from 6.71 million in July to 6.66 million in August. This would still represent a 3.1 percent increase compared with 2020. When looking at the refinance share of mortgage origination activity, the group forecasts refinances will be 28 percent of mortgage originations in 2020, up from the projected 56 percent last month. It is expected to fall to 42 percent in 2022. Home prices are projected to increase 14.8 percent in 2021.