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Fannie Mae: lethargic economy expected to hasten

Posted by The Aramco Group on Thu, Oct 27, 2016 @ 14:10 PM

Lackluster jobs reports, Brexit and a slowdown in construction spending have all contributed in part to the sluggish economy seen during the first half of 2016. Yet, a new report from Fannie Mae says the economy should see a small bounce as the latter part of the year comes to a close.

Residential construction spending is being described as "lackluster" in the report, even as multi-family building continues to rise. Single-family home construction has fallen for the sixth consecutive month largely due to land and labor constraints.

Nonetheless, economic growth is expected to climb to 2.4 percent by year's end, up from 1.1 percent seen in the first two quarters of 2016. The improved economic outlook could weigh heavily on the decision by the Federal Reserve to raise short-term interest rates. Currently, Fed Funds Futures place the odds at 65 percent that the benchmark rate will increase by December.

While the economy is expected to pick-up, mortgage rates remain near historic lows. Conforming no-point 30-year fixed rates are averaging 3.375 percent while the 15-year rate is near 2.75 percent.

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