Fannie Mae Upgrades Outlook on US Economy
America’s economy is in a better place than previously thought, new Fannie Mae research shows.
The mortgage company’s Economic and Strategic Research (ESR) Group released these findings Thursday (Oct. 17), based on annual revisions to national accounts and improved employment numbers in August and September.
“While the ESR Group still expects economic growth to slow from the robust 3.2 percent pace recorded in 2023, the degree of expected slowing is smaller; growth in 2024 and 2025 is now expected to be 2.3 percent and 2.0 percent, respectively, near the long-run trend growth rate,” Fannie Mae said in a news release.
According to the release, the improved outlook comes largely from major upward revisions in personal income data, showing the “relationship between income and consumption” to be nearer to historical levels.
As such, the ESR Group believes the economy can maintain growth closer to its long-run potential through its forecast horizon, barring an unforeseen shock to consumer or business confidence from an adverse exogenous event.
The group also expects annual home prices to grow 5.8% in 2024 and 3.6 %in 2025, up from earlier forecasts of a respective 6.1% and 3%.
“While potential homebuyers have noticed the decline in mortgage rates over the last few months, they are equally aware that there has been little relief on the home price side, the other primary driver of unaffordability, particularly for first-time buyers,” Fannie Mae Chief Economist Mark Palim said.
“The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale.”
The findings came the same day as the latest government figures on consumer spending, which showed a slight uptick, even as bigger-ticket items saw a pullback.
The data lines up with what earnings season has shown so far, with the likes of JPMorgan and Citi showing “reasonably solid metrics on card spending,” as PYMNTS wrote.
JPMorgan management has said spending is returning to “normal,” in the post-COVID era, while Citi noted the “surprisingly resilient” consumer and Wells Fargo management indicated that rate cuts should ease some pressures on consumers.
That’s especially true for consumers with lower incomes, with PYMNTS consistently documenting the paycheck-to-paycheck pressures confronting those consumers and households.
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