Fannie Mae Predicts Housing Will Boost Economy in 2014

A report from Fannie Mae said while the nations economy may be growing, it hasnt reached its full potential yet due to fiscal headwinds.

But as those headwinds go by the wayside, growth should move in a positive direction with an ongoing recovery in housing, rising household wealth and expanded energy production.

At the outset of the year, we forecasted that 2013 would witness sustainable but below-par growth as the economy begins its transition to more normal levels. Halfway through the year, our view is little changed, said Fannie Mae chief economist Doug Duncan. This latest report echoes statements he made in May.

We expect approximately 2.1% growth over the course of 2013, up from the anemic pace of 1.7% in 2012. This is consistent with the incremental improvement seen over the past few years but still below the economy’s potential. Our forecast calls for growth to push past 2.5% in 2014, boosted largely by tailwinds from the strengthening housing market.

Housing was largely positive entering the spring/summer season, Fannie Mae said, with home prices, home sales and homebuilding activity showing signs of long-term improvement toward normal levels. Despite rising mortgage rates during the past month, which have affected refinance originations, affordability conditions remain high and should not present a significant obstacle to potential homebuyers.

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