Housing Recovery Continuing Amid Economic Uncertainty: Fannie Mae

Even with a September jobs report showing unemployment slipped below 8 percent, combined with an increase in consumer confidence, ""Fannie Mae's Economic & Strategic Research Group"":http://www.fanniemae.com/portal/research-and-analysis/emma.html expects economic growth to ""remain at a sluggish sub-2 percent rate this year.""

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In its October Economic Outlook report, the research group pointed to financial and policy issues in the U.S. and abroad as looming challenges that could restrain meaningful economic growth in 2012.

""The U.S. fiscal cliff and debt ceiling debate as well as the weakened global economic environment are likely to create the strongest headwinds facing any real improvement this year,"" said Fannie Mae Chief Economist Doug Duncan in a release. ""With these issues hanging in the balance, we believe risks remain tilted to the downside.""

While the outlook on the economy was uncertain, the assessment for the housing market was more stable.

""News from the housing sector is more positive, with various indicators showing continued momentum toward a sustainable, long-term recovery,"" said Duncan. ""Notably, home prices are inching back into positive territory on a year-over-year basis.""

With the winter season comes slower activity in the housing market, but the research group still maintains the viewpoint that home prices hit bottom earlier this year, despite an anticipated dip in home prices this winter.

In addition to the bottoming out of home prices, the GSE's research group said record low mortgage rates should encourage more consumers to enter the housing market. As housing activity picks up, the group expects to see total home sales increase 9 percent from the previous year.

More importantly, the low mortgage rate environment, which is being encouraged by the Fed's stimulus, will continue to motivate more consumers to seek refinancing options. As homeowners find themselves with lower monthly payments through lower interest rates, they will have more to spend, save, and to use toward debt, the research group explained.

The drop in mortgage rates also prompted the research group to revise its projection for refinance originations 20 percent higher to $1.8 trillion for 2012.