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Fannie Looks for Continued Growth in New Home Activity

Recent trends in new home sales suggest the housing sector will double its contributions to the country's economic growth in 2014--though the outlook for existing-home sales isn't as bright.

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""Fannie Mae"":http://www.fanniemae.com/portal/index.html released on Monday its latest ""forecast"":http://www.fanniemae.com/portal/about-us/media/financial-news/2014/6066.html, predicting overall GDP growth of 2.9 percent in 2014 following 2013's expected growth of 2.6 percent. According to Fannie Mae chief economist Doug Duncan, the 2014 forecast accounts for three key drivers: an acceleration in spending activity from the private sector, waning fiscal drag from the government, and the housing market's ongoing recovery.

""Much of the policy uncertainty we saw in 2013 has cleared to some degree, which raises the possibility for a pick-up in growth as consumers and businesses, who held [COLUMN_BREAK]

back on their spending amid those policy concerns, might loosen their purse strings this year,"" Duncan said.

Fannie Mae expects housing to contribute 0.6 percentage points to GDP this year, up from 0.3 percentage points in 2013. Most of that is expected to come from homebuilding activity spurred by recent home sales numbers, which jumped in October to the highest level since July 2008 and remain near recovery highs.

That jump translated to greater activity for housing starts, which in November surpassed the 1 million mark (seasonally adjusted annual rate) for only the second time since the recovery started.

On the other hand, existing home sales have hit a slump, and mortgage application volume for home purchases continues to trend down, sparking concern that the recovery will continue to rely on investor demand.

Still, the forecast shows a mostly optimistic view of the coming year.

""Despite the rise in mortgage rates since the spring, many housing indicators posted strong gains at the end of 2013 and consumer housing statistics are strengthening, all of which bodes well for continued but measured housing recovery in 2014,"" Duncan said. ""Overall, though we don't expect growth to break the 3 percent barrier this year, we believe the economy is on a sustainable path for continued growth with upside potential.""

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