Housing is a bright spot: Fannie Mae

Aug. 22, 2012 -- Housing is a bright spot in the U.S. economy, despite slowing economic activity in general in the first half of 2012according to Fannie Mae’s August 2012 Economic Outlook.

Home prices are expected to continue their rise, and home sales are projected to be 9 percent above year-ago levels, according to Fannie Mae economists. A shrinking inventory of for-sale homes on the market has also led to a gradual pickup in homebuilding in many housing markets across the market.

What’s more, residential investment is projected to contribute about 0.2 percentage points to the real gross domestic product this year -- which could mark its first annual contribution since 2005, Fannie researchers note.

Still, Fannie economists caution that the pace of the real estate market recovery will likely stay modest, due to factors like tight credit standards and a high number of foreclosures that continue to plague many markets.

Also, the overall economic recovery continues to face several challenges. Consumer spending dropped nearly a percentage point in the second quarter, and the labor market remains sluggish, according to Fannie Mae’s August report. However, retail sales did pick up in July and last month’s job report did have the strongest gain in five months.

"The July data hasn't changed our forecast for slow growth in 2012, but we're increasingly focused on the looming 'fiscal cliff' near year-end," Doug Duncan, Fannie Mae’s chief economist, said in a public statement. "The debt ceiling debate, as well as current legislation that could create a drag of more than 4 percent on GDP in 2013, may spur further caution among consumers and businesses alike. On the bright side, we continue to see positive trends in the housing sector, which is showing signs of a durable, long-term recovery."