Following a slowdown in activity over the previous two quarters, Fannie Mae's  Economic & Strategic Research Group  expects economic activity to pick up in the second quarter of this year, bolstered by increases in the housing sector, consumer spending, and business investment.
Fannie Mae expects economic growth in the first quarter to come in around 2.0 percent, but thereafter, the economy should pick up. Economic growth for the year is expected at 2.7 percent, according to Fannie Mae.
The housing market is expected to show a relatively strong performance, according to Fannie Mae’s chief economist, Doug Duncan, with housing starts increasing almost 20 percent to 1.1 million over the year.
As foreclosure inventory declines, new home sales will pick up, Duncan said.
Overall, “we continue to anticipate that the rise in house prices and mortgage rates will take a toll on home sales and homebuilding activity this year, although some modest gains are expected overall,” Duncan said.
Fannie Mae anticipates a continued rise in mortgage rates over the year, with the 30-year fixed-rate ending the year at 4.6 percent.
The median price for a new home in the first quarter should come to about $281,000, according to Fannie Mae’s outlook, while the median price for an existing home will be about $191,000.
Mortgage originations will pick up in the second and third quarters of this year and then dip again in the fourth quarter, while the refinance share of the originations market will decline over the first three quarters of this year and end the year at about 36 percent, according to Fannie Mae.
Rising home prices are increasing household wealth, although consumers are “still rebuilding their wealth following the crisis and perhaps taking on a more conservative consumption pattern,” according to Duncan.
On the other hand, “[f]iscal and monetary policy jitters appear to have waned and the most recent employment numbers came in at reasonable levels,” he stated.