With weak consumer spending and a lackluster job market, the economy is likely to grow at a slower rate this year than previously forecast, according to the latest monthly economic outlook from Fannie Mae’s Economic & Strategic Research Group.
Fannie Mae economists have cut their projection for 2012 gross domestic product (GDP) growth to 2 percent, down from 2.2 percent in a forecast issued last month. GDP grew 1.9 percent in the first quarter and is estimated to have grown 1.8 percent in the second quarter.
Nonetheless, home sales have risen 9 percent since this time last year, housing starts are up about 20 percent, and residential investment is poised to contribute to economic growth for the first time since 2005, Fannie Mae economists said.
"Despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat, presenting a rare upside boost to the economy," said Doug Duncan, Fannie Mae’s chief economist, in a statement.
According to Fannie Mae’s National Housing Survey, conducted last month, consumers’ attitudes about the housing market are improving, with homeowners optimistic about home prices a year from now. The share of overall respondents who said they would buy a home if they were going to move rose to the highest level in the survey’s two-year history.
"This is likely due in part to low interest rates and the assumption that home prices have hit bottom," the report said.
Fannie Mae upped its home-price expectations this month. While June’s forecast did not expect home prices to reach a bottom until 2013, this month’s forecast anticipates prices will rise 1.1 percent this year and a further 1 percent in 2013.
2012 projections for existing-home sales, new-home sales and single-family housing starts also rose with each expected to jump 8.2 percent, 17.8 percent and 18.6 percent, respectively.