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Fannie Mae Predicts Higher Growth, Spending in Report

by Chicago Agent

Fannie Mae's Economic & Strategic Research Group is projecting modest, but good, economic developments in 2012.

Despite slower economic activity, Fannie Mae’s Economic & Strategic Research Group still forecasted positive developments in its latest projections.

The economy grew at an annualized rate of 3.0 percent in 2011’s fourth quarter, and Fannie anticipates it will grow by 2+ percent in the first quarter of 2012 and 2.3 percent for all of 2012, an estimation it described as “modest.”

In comments accompanying the Group’s report, Fannie Mae Chief Economist Doug Duncan said durable goods spending has been particularly strong.

“Consumer spending continued its upward trajectory with strong spending on autos and other durable goods, and spending on services showing the largest gain in nearly two years,” Duncan said.

The report also noted the recent trends in housing which have hinted at the market’s potential. In the fourth quarter of 2011, for instance, residential investment contributed to overall economic growth for the third consecutive quarter, the first time that has happened since 2005.

And although recent housing data has indicated some loss of momentum in the first quarter of 2012, confidence among consumers improved in March, and Fannie Mae’s March National Housing Survey found that 33 percent of Americans expect home prices to increase over the next 12 months, up from 28 percent in February.

Commenting on the survey, Duncan said the economic conditions of 2012 seem right for homeownership.

“Conditions are coming together to encourage people to want to buy homes,” Duncan said. “Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice.”

There has even been encouraging signs in the labor market. Though the March employment report did weaken somewhat, adding just 120,000 jobs, initial jobless claims hovered near a new low of the recovery at the end of the month, and the unemployment rate dropped to 8.2 percent, the lowest rate in more than three years.

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