Fannie Mae Report Predicts Economic Slowdown
The GSE estimates 2.2 percent GDP growth in 2019—a 90 basis-point year-over-year decline largely attributed to the fading impact of the 2017 tax cuts—as well as decelerating business investment and consumer spending.
Federal mortgage lender Fannie Mae just released an outlook report that expects GDP growth to come in at 2.2 percent in 2019, significantly down from 2018’s growth rate of 3.1 percent. The decrease is largely attributed to the fading stimulus brought on by the Tax Cuts and Jobs Act, in addition to sluggishness in business investment and consumer spending.
The Fannie Mae Economic and Strategic Research Group March 2019 study also forecasts homes sales to stabilize in 2019, as a solid labor market and strong household formation support housing demand. Purchase mortgage originations are expected to expand in 2019 while refinancings contract.
Fannie Mae Chief Economist Doug Duncan expects the Fed will wait until the fourth quarter of 2019 to raise rates, if they do at all.
“While inventory has improved, it remains low by historical standards—particularly among existing homes—and threatens to derail the spring homebuying season, though a recent jump in single-family starts suggests that new supply is on the way,” said Duncan, in prepared remarks. “Considering the general inventory shortage and strong demand for housing, affordability remains a key challenge facing the industry, particularly in the conforming space.”
Fannie Mae and Freddie Mac are the leading source of multifamily mortgage originations, responsible for about $143 billion out of the $261 billion of mortgage banker originated loans. Since 2018, proposals to reform the GSEs Fannie Mae and Freddie Mac by privatizing them have been a hot topic among elected officials and the finance community.