The housing market is expected to make a positive contribution to gross domestic product for the first time in seven years in 2012, albeit a very modest one, Fannie Maesaid Tuesday.
The government-sponsored enterprise reported GDP growth of 2.8% in the fourth quarter of 2011 and predicted a growth rate of 2.3% in 2012, up from 1.6% last year. Fannie said any contributions from the housing sector will be modest.
Housing also showed signs of improvement late last year with existing home sales rising in December for the third consecutive month. Improvements in home sales going forward are expected to be tepid, considering the weak sales levels and the persistent belief that home prices will continue to decline, challenging demand in the housing market, the report said.
The economy was buoyed by business inventory increases and modest consumer spending improvements in the final three months of 2011, Fannie said. In addition, the economy benefited from higher performances in the manufacturing and services segments late last year.
Fannie says economic indicators suggest a pickup in construction of apartment buildings and a modest uptick in single-family construction. Still, there are challenges that could emerge derailing 2012 growth projections.
“Risks to the forecast are more balanced between the upside and downside since our January forecast,” said Fannie Mae Chief Economist Doug Duncan. “The economy appears to be more resilient than in previous months, and should be less vulnerable to shocks, including any spillover from the European sovereign debt crisis.”
“However, economic growth will remain constrained by various headwinds, such as a potential spike in oil prices due to tension in the Middle East; an expected decline in net exports from the global slowdown; and an expected increase in fiscal drag, including the fading of federal spending from the stimulus and a decline in defense spending for operations in Iraq and Afghanistan,” according to Duncan.
The author of this article is: Kerri Panchuk
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