According to the December 2010 Economic Outlook released by Fannie Mae's Economics & Mortgage Market Analysis Group, a number of positive factors are coming together to yield a brighter economic outlook for 2011.
Driven largely by recent reports pointing to improvements in consumer spending and consumer confidence, increased demand for goods and services, and falling unemployment claims, Fannie Mae's forecasted growth for the U.S. economy in 2011 was upgraded from 2.9% to 3.4%.
Downside risks still exist, however, including a weaker-than-expected employment report, the ongoing economic turmoil in Europe and potential inflation problems in China.
The forecast does anticipate improving labor market conditions, despite disappointing figures in November regarding employment. Also, the housing recovery should gain momentum going into 2011 if the expected stronger labor market materializes.
‘Despite rising mortgage rates, our forecast for home sales is stronger than the previous forecast, given our brighter economic growth and labor market outlook,’ says Doug Duncan, Fannie Mae's chief economist. ‘We expect modest increases in home sales, despite recent interest rate rises, due in part to modest additional declines in home prices, and we expect people to take advantage of affordability as their employment and income outlook brightens.’
SOURCE: Fannie Mae