The Fannie Mae Economic and Strategic Research Group expects that as vaccines deploy and social lockdown measures continue to ease U.S. economic expansion will accelerate. (Fannie Mae)
Q2: They expect real GDP growth hitting 8.4% in the second quarter of 2021
2021: They expect 6.6% GDP growth for the full year before moderating in 2022
ESR expects that housing activity will remain resilient in the near-term even in the face of further modest increases in mortgage rates.
- Refinance activity is forecast to dip to 54% and by 2022 it is predicted to drop to 39% “as mortgage rates creep higher and the pool of outstanding mortgages with an incentive to refinance continues to decline.”
- Purchase demand is expected to remain steady over the forecast horizon with an increase to $1.82 trillion expected in 2021 and a slight drop to $1.80 trillion in 2022.
Unfortunately, ESR does expect some adverse impact for loan originators due to the weakening of refi demand.
Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, said in a statement “Perspective is helpful here: While we forecast some continued upward movement, mortgage rates remain historically low, as they are still 0.8 percentage points below the 2019 average.
Even though we aren’t out of Q1, market indicators are already turning positive. The Philadelphia Federal Reserve’s business activity index jumped to 51.8 in March from 23.1 in the prior month. That’s the highest reading since 1973 (MW)
The Wall Street Journal reported that consumers are starting to spend again. “Restaurant and hotel bookings are up. Airplane tickets are selling fast. Consumers spent more on gyms, salons and spas in recent weeks than they have since the coronavirus pandemic began.” (WSJ)
The one negative indicator was Thursday’s jobs report. First-time claims for jobless benefits jumped to 770,000 surprising economists who had predicted claims would fall to around 700k.
- Ben Casselman writes over at The New York Times about new evidence from California may offer a partial explanation. “According to a report released Thursday by the California Policy Lab…nearly 80 percent of the unemployment applications filed in the state last month were from people who had been laid off earlier in the pandemic, gotten back to work, and then been laid off again.” (NYT)
Housing had a great year in 2020, so a little cooling off while the rest of the economy heats up makes sense from an economics stand point and is probably better for everyone in the long run.