Housing Market Showing Progress According to Fannie Mae

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

In spite of the uncertainty which looms over the U.S. economy, Fannie Mae economists believe in an ambiguous 2013, with predictions housing market improvement amidst the obstacles of tax and federal policies which have slowed economic recovery.

According to Fannie Mae’s Economic & Strategic Research Group, the third quarter has demonstrated some positive motion in terms of economic activity; however, the economy is expected to remain relatively slow-moving with less than 2% GDP increase expected this year.

Nevertheless, the housing market has improved, regardless of economic doubt in the wider marketplace.

Fannie Mae chief economist Doug Duncan cited the U.S. financial “cliff” and “debt ceiling debt,” in addition to the current global economy, as the main issues standing in the way of significant improvement this year. With these problems looming over the economy, the risks have remained troublesome.

In contrast, Duncan believes that the housing market has made noticeable progress, deeming it a “sustainable, long term recovery.” This opinion matches that of Mark Vitner, senior economist for Wells Fargo, who has faith in the current, sustainable recovery movement within the housing market that has worked against the current economic difficulties.

In addition, housing prices have increased, moving forward toward a positive level when compared with prices a year ago, according to Fannie Mae’s October economic update.

The research team for this government sponsored enterprise (GSE) believes that home prices bottomed out earlier in 2012 but concedes this as a necessary step preceding recovery.

Fannie Mae additionally indicated that, as a result of the record low mortgage rates and the Fed’s Quantitative Easing through the purchase of mortgage-backed securities, consumers will capitalize on low rates, further restoring the housing market. Accordingly, the GSE anticipates a 9% increase in overall home sales for 2012 in comparison with 2011 measurements.

Moreover, Fannie Mae has predicted more mortgage refinances as a result of the currently low mortgage rates, with expectations for refinance originations to reach $1.8 trillion during 2012, illustrating a 20% rise from last year.