Fannie Mae’s Economic and Strategic Research (ESR) Group recently released its July 2021 commentary, finding that second-quarter growth is now expected to be 8.1%—a revision from last month’s 10.1% forecast.
The details:
– The third and fourth quarter growth projections increased—to 7.1% and 6.6%, respectively—signaling that economic recovery will occur mostly in the second half of the year.
– The research group predicts an increase in near-term economic growth as well, driven by inventory investment and government spending.
– Inflation is still a concern. The group expects “higher-than-consensus levels of inflation” through the end in 2022. This could be due, in part, to more temporary price pressures giving way to housing-driven inflationary pressure, according to Fannie Mae.
The takeaway:
Home price appreciation could slow some and balance out through the rest of the year and into 2022, experts said.
“On the supply side, we think homebuilders will be able to increase production as supply chain disruptions and labor shortages alleviate, which should add to the inventory of new and existing homes available for sale,” Mark Palim, Fannie Mae vice president and deputy chief economist said. “On the demand side, we expect the increase in housing demand we saw over the past year to ease, as the impact of unique recent factors lessens, including adjustments to accommodate pandemic-related remote work arrangements, stimulus checks bolstering household savings and record-low mortgage rates.”
“However, demographic trends remain favorable for a strong housing market over the next few years, and, combined with the chronic undersupply of homes built over the last decade, upward pricing pressure is likely to remain through the forecast horizon—just not at the rate seen this spring,” added Palim. “Nevertheless, we expect home price growth to become one of the more persistent drivers of inflation going forward, as other, more transitory factors diminish.”
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
