The U.S. economy will continue to grow—though at a “modest” rate—through the end of this year and into 2017, with President-Elect Trump’s proposed policies prompting Fannie Mae to issue a fair forecast in its recently released November 2016 Economic and Housing Outlook. Notably, the Outlook predicts shrinking housing affordability, especially if mortgage rates follow their post-election surge.
“The lack of homes for sale, particularly at the lower end of the market, continues to be a significant challenge for housing,” said Doug Duncan, Fannie Mae chief economist, in a statement on the Outlook. “Demand from first-time buyers has increased with household formation and is outpacing supply, leading to significant price increases and affordability challenges for entry-level buyers. Home purchase affordability will be constrained further if the recent pickup in mortgage rates persists, which would present a downside risk to our forecast of housing and mortgage activity.”
The Outlook anticipates economic growth overall to average 2.4 percent in the second half of 2016, up from 1.1 percent rate in the first half, with the full-year 2016 and 2017 expectations remaining at 1.8 percent—even as Trump’s policies come into focus.
“We haven’t changed the general tone of our forecast at this time, but we will incorporate new policy assumptions as they become more concrete,” said Duncan. “Depending on the incoming President’s policy priorities, our forecast for 2017 is subject to both upside and downside risks—for example, we expect near-term growth would get a boost from any tax cuts and spending increases that are made, but if new policies result in sharply higher tariffs on China and Mexico, re-thinking the Trans-Pacific Partnership, and renegotiating the North American Free Trade Agreement, it would likely drag on growth.”
Single-family construction, in addition, will not be as major of a factor as it has been in terms of GDP growth due to its more solid footing late this year and into 2017, the Outlook indicates.
Business investment and employment prospects, however, have begun to wane—a “late-cycle phase in which growth tends to moderate,” according to the Outlook.
Source: Fannie Mae
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