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Fannie Mae Forecasts ‘Sluggish’ Growth in 2012

Despite some slowdown in housing activity at the end of the first quarter, ""Fannie Mae"":http://www.fanniemae.com/portal/index.html projects that home sales will rise and the economy will continue to grow in 2012.

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Though the first quarter of the year saw substantial housing activity compared to last year, Fannie Mae's internal think tank noticed a drop in momentum late in the quarter. According to the group, this drop may be mirroring many economic indicators and may be a result of the year's unusually warm weather pulling activity slightly forward.

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""Despite the loss of momentum as we move through the spring months, we expect that home sales will rise slightly more than 7 percent during 2012,"" Fannie Mae Chief Economist ""Doug Duncan"":http://www.fanniemae.com/portal/about-us/company-overview/leadership/duncan.html said in a statement.

""Our outlook is bolstered by improvements in consumer sentiment seen in our National Housing Survey results, which show that consumer views of housing market conditions have become more supportive of home purchases and their outlook on home prices,"" he added. ""Interestingly, we're seeing a pick up from depressed levels in the 'good time to sell' category, suggesting rising optimism about the housing market.""

Economic growth is at 2.2 percent, down from 3 percent in 2011's final quarter but still stronger than it was the year before and accompanied by a better balance of upside and downside risks. The group found that strong consumer spending primarily drove growth but doubts that it will be sustainable because of the lack of income support.

With no expected changes in Fed rates to come, the report predicts that the pace of activity will continue to be sluggish until it firms up in the year's second half. Fannie Mae maintains its original prediction from earlier this year that economic growth in 2012 will come in at 2.3 percent.

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