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Fannie Mae Predicts A 'Rapid Acceleration In Economic Growth'

Navi Persaud
Apr 16, 2021
Photo of a couple moving into a new home.

Full-year 2021 real GDP growth expectations improved to 6.8%, including 9.1% annualized growth in the second quarter, according to the April 2021 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The group attributes its estimates primarily to the continued easing of virus-related social restrictions and stimulus-driven consumer spending.

"The ramp-up we'd previously forecast for the economy is underway, as evidenced by, among other measures, increasing airline passenger reservations and restaurant bookings," said Doug Duncan, senior vice president and chief economist. "Vaccinations are continuing to roll out, and consumers appear to be increasingly looking toward post-pandemic life. While inflationary pressure is growing, our latest forecast update suggests that in the near term interest rates will remain steady at borrower-friendly levels. In fact, despite the recent increases, mortgage rates remain near historical lows, which we expect will help maintain strong housing demand in 2021.

As the cold weather subsided and more states began to pull back on restrictions economic activity began to see an uptick in activity. The ESR group expects this acceleration to continue through the second quarter before tapering in the second half of the year. The group is using last year's pull-back towards the end of the year as its benchmark for plans moving forward.

According to the report, uncertainties to the forecast include the extent of consumers' willingness to tap into their accumulated savings and return to previously COVID-restricted activities; they also include well-publicized supply chain disruptions, the pace of inflation, and both monetary and fiscal policy uncertainty.

The ESR Group also revised its annual home sales forecast which now reflects a slightly lower prediction, due to continued supply constraints and a modestly higher outlook for mortgage rates. Despite the adjustment, home sales and purchase mortgage originations in 2021 are expected to rise 6.2% and 14.5%, respectively, year-over-year.

The ESG Group predicts home prices are forecast to rise 8.0% in 2021 – up from the previously forecast 4.2% – before decelerating to 2.9% annualized in 2022, as measured by the FHFA Home Price Index, according to the report.

Click here to read more from the latest ESR Group report. 

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