The housing market might have had a rough start to the year, but according to Fannie Mae’s Economic and Housing Outlook released on Monday, this quarter seems to be a temporary headwind as a stimulative fiscal policy is expected to boost the economy in 2018. The report comes as the Federal Reserve meets this week with the markets expecting further hikes in rates.
Pointing to rising household net worth, upbeat consumer confidence, and a strong labor market that are being buoyed by the legislative stimulus, the report found that the downshift in economic and housing statistics in the first quarter are expected to temporary as the economic fundamentals remain positive. Based on these indicators, Fannie Mae has also raised its full-year GDP growth forecast to 2.8 percent and its full-year GDP forecast for 2019 to 2.5 percent.
The fiscal and monetary policy continues to frame the economic landscape the report found. “While we expect the economy to shift temporarily into a lower gear in the first quarter, the pace of growth should accelerate through the remainder of this year and into the next,” said Doug Duncan, Chief Economist at Fannie Mae. “Beyond the obvious downside risks, the economy appears poised to build on a foundation of strong consumer spending and a historically healthy labor market following the recent passage of the discretionary spending bill on top of tax reform.”
While the challenges related to the supply of homes will remain during the year, and the Fed is expected to raise rates again, the report forecasts 30-year mortgage rates ranging between 4.4 percent and 4.6 percent in 2018 and 2019 respectively. The five-year ARMs are expected to see greater swings in the rates that are expected in the range of 3.8 percent in 2018 and 4.1 percent in 2019.
“On housing, home sales got off to a rough start in 2018, bottle-necked by the persistent challenges of the inventory shortage. Of course, there’s a flipside to the demand-supply imbalance, and strong home price appreciation continues to come as welcome news to existing homeowners,” Duncan said.