As per the Federal National Mortgage AssctnFnni Me (OTCMKTS:FNMA) Economic & Strategic Research Group’s latest Economic and Housing report, the economic growth stance for 2H2016 remains unchanged from the earlier forecast at nearly 2%. Consumer spending is projected to boost growth for 2H2016 as businesses face tough times from weak productivity, rising labor costs and shrinking profits due to uncertainty arising from the U.S. presidential election and Brexit.
Residential investment and Government spending should be promising contributors to economic growth in 2016, while inventory and nonresidential investment along with net exports are projected to negatively impact growth. While job creation has showed growth at the end of 2Q2016, the hiring trend has decelerated significantly from the start of the year.
The experts speak
Doug Duncan of Federal National said that financial volatility arising from Brexit has resulted in some uncertainty in the market as there is a considerable decline in yields on government bonds. Treasury yield curves are not encouraging, and the Chinese Yuan has declined to a 6-year low level against the U.S. dollar.
Moreover, the view on interest rates remains to be ‘low for long’ as they believe a Fed verdict to hike interest rates will probably be on hold until next year. The economic impact due to Brexit on the U.S. will possibly be limited, particularly from a trade perspective. It should be an impending positive for the mortgage and housing market as declining mortgage rates have led to new refinance demand.
Federal National’s ESR Group estimates a 2.2% increase in mortgage origination volume in this year from last year to $1.75 trillion, compared a 2.8% decline in the prior forecast. The group projects moderate housing expansion in this year. Although new home sales have are not so encouraging, existing home sales surged to the highest level in over 9 years amidst the largest YoY decline in for-sale inventory since last October.