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Fannie Forecasts Declines Over 2011, 2012

""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home released a July ""economic outlook"":http://www.fanniemae.com/media/pdf/economics/2011/Summary_072011.pdf Friday tying a slowdown in the economy at large to a sluggish pace in the housing sector ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô a consequence of tight credit, a dearth in existing-home sales, and weak gains across important industries.

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""Besides restrained credit expansion, the tepid housing recovery is another reason for the modest pace of economic growth seen in the current recovery,"" Fannie said in the report. ""During the two years of the current economic expansion, residential investment has yet to make a contribution to economic growth. This is quite an unusual phenomenon: at this point of an economic expansion, housing has generally added significantly to growth.""

As a consequence, ""[t]he current state of the housing market remains downbeat,"" the report said.

According to the outlook, the mortgage giant presages further declines, with the median price for new homes falling to $216,900 this year from $221,800 over the last. Meanwhile, it expects existing homes to go on the market for $165,600 over the course of 2011, several figures less than $173,000 it recorded last year.

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The mortgage giant predicted a dip in growth over the rest of the year, falling from 2.8 percent to 2.4 percent. Fannie projected that single-family housing starts will amount to some 440,000 overall in 2011, reflecting a 7 percent notch downward from a healthier 471,000 starts in the previous year. The GSE also revised projections for next year, anticipating that 646,000 housing starts would decline to 671,000.

Mortgage rates received a slightly sunnier outlook, with the GSE forecasting a jump to 4.7 percent over the remainder of 2011, with the potential for a 5 percent rise that next year. Fannie projected that total mortgage originations would fall from $1.51 trillion, as reflected from figures last year, hitting $1.07 trillion over this year.

Says Fannie: ""One positive for the existing home market is that pending home sales├â┬ó├óÔÇÜ┬¼├é┬ª rose 8.2 percent in May, suggesting that sales of existing homes, which are recorded at closing, should rebound in coming months.""

The outlook also tied the health of the housing sector to the economy at large, and went on to elaborate on the relative strengths and weaknesses in the economy at large.

""Clearly, the renewed slowdown in hiring underscores the uncertainty surrounding the economic outlook,"" Doug Duncan, chief economist at the GSE, said in a ""statement"":http://www.fanniemae.com/newsreleases/2011/5446.jhtml;jsessionid=IRKIQJXGS2YIZJ2FECISFGI?p=Media&s=News+Releases. ""The lack of sustained, robust job growth continues to push out into the future the time for the housing market to heal, which is crucial to a meaningful economic expansion.""

According to its Web site, Fannie Mae serves low-income homebuyers, families, and communities by backing mortgages at the federal level.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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