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Fannie: 50% Chance U.S. Economy Will Double-Dip by End of 2012

Mortgage giant ""Fannie Mae"":http://www.fanniemae.com/portal/index.html gives the U.S. economy equal chances for a second recession and recovery by the end of 2012.

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""Podcasting"":http://www.fanniemae.com/resources/file/research/emma/mp3/podcast_101711.mp3 the 2011 October Economic Outlook, titled ""Economy at a Crossroads,"" the company forecasted that GDP will stay below 2 percent for the remainder of 2011 into next year.

""The economy remains very vulnerable to any sort of an external shock,"" ""Richard Koss"":http://www.linkedin.com/pub/richard-koss/5/42a/15b, the GSE's director of economics and head of an internal think tank, said in a podcast. ""We remain of the point of view that the odds of a recession that starts by the end of next year is something close to fifty-fifty.""

Koss cited wary consumers, sluggish housing markets, and a wobbly financial sector, stateside and abroad, as reasons why the economy could double-dip by 2012.

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Commenting on the outlook in a ""statement"":http://www.fanniemae.com/portal/about-us/media/financial-news/2011/5527.html, ""Doug Duncan"":http://www.linkedin.com/pub/doug-duncan/4/212/4b0, Fannie's chief economist, said that ""the housing market remains very sluggish and consumers' willingness to dig into their savings to purchase big ticket items is very low.""

He went on to say that ""leading indicators point to housing sales bouncing near the bottom at least through the end of 2011,"" adding that ""we expect home prices to show renewed declines after firming for several months.""

Koss characterized falling home prices as figures that will head south despite all-time highs for housing affordability, made possible by record-low mortgage rates, which fellow GSE ""Freddie Mac"":http://www.freddiemac.com/ ""recently reported falling below 4 percent"":https://themreport.com/articles/mortgage-rates-drop-below-4-for-first-time-2011-10-06 for 30-year and 15-year fixed-rate loans.

He said in the podcast that the potential for more house price declines could capsize the financial sector and measures of consumer confidence across the country ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô downward indicators that accelerated with Fannie's release of the September National Housing Survey.

He said that Fannie's outlook for 2012 remains consistent with revisions this year, given ""a great amount of policy uncertainty, including the possibility of fiscal tightening├â┬ó├óÔÇÜ┬¼├é┬ª and the expiration of temporary tax cuts.""

The outlook arrives amid a bevy of activity in troubled euro zone markets, with ""_The Wall Street Journal_"":http://online.wsj.com/article/BT-CO-20111017-702409.html reporting that ""Moody's Investors Service"":http://www.moodys.com/ placed Slovakia under negative review for political fallout over ratification of the bailout package for Greece.

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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