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Strengthening Employment, Rising Incomes Fuel Fannie Mae’s Positive Economic Forecast

Fannie Mae Economic Outlook HousingEconomic growth is expected to climb to 2.9 percent this year, up from 2.4 percent in 2014, according to Fannie Mae's February 2015 Monthly Economic Outlook released on Thursday. Fannie Mae predicts this economic growth will boost the sluggish housing market into recovery.

"Our forecast calls for an increase in economic growth to 2.9 percent for 2015, which is a slight downward adjustment from our prior forecast but solid improvement nonetheless," Fannie Mae Chief Economist Doug Duncan said.

The strengthening employment sector, declining commodity prices, and rising income prices are some reasons 2015 is set for a pickup, according to Fannie Mae’s Economic & Strategic Research (ESR) Group.

"Although we are beginning this year at a more modest pace compared to the above-trend numbers seen at mid-year 2014, the country’s aggregate income has benefitted from the improving labor market, which, combined with low gasoline prices, should help drive higher auto sales and overall consumer spending throughout 2015," Duncan said. "Our forecast calls for a number of factors, including strong hiring and income growth, stabilized housing affordability, and modestly easing lending standards, to translate into improving housing demand throughout the year."

However, the strong U.S. dollar weighs on the trade deficit, which may slow some growth efforts. Despite possible shortfalls with the global economy and future limited interest rate hikes, Duncan feels positive the housing industry will begin to see gradual increases.

"We continue to anticipate that the Fed will begin to hike short-term interest rates later this year, although weak global economic growth and geopolitical headwinds will likely limit the rise in long-term interest rates," he said. "We expect total home sales to increase by approximately 6.0 percent for 2015, with total single-family mortgage production climbing to approximately $1.2 trillion. Total single-family mortgage debt outstanding should be relatively flat this year before picking up gradually in 2016 and 2017."

About Author: Samantha Guzman

Samantha Guzman is an award-winning visual journalist and graduate of the University of North Texas Mayborn School of Journalism. She specializes in visual storytelling and has skills in video, audio and photography, in addition to news writing. She has traveled to Mexico and Bosnia as an assistant for multiple multimedia projects and taught news writing, photojournalism, and narrative storytelling in the past.
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