Sentiment measures have surged to multi-year highs moving into next year, but FY2017 is projected to offer another year of unexciting growth, according to the Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA) ESR Group’s Economic and Housing Outlook for December 2016.
Long-term interest rates persist to trend higher subsequent to the U.S. election and the FOMC meeting in December, which stated members’ aggressive fed funds rate estimates. As a result, mortgage rates surged to over two-year highs, leading headwinds for housing segment. At the same time, home price appreciation continues to be strong, and bullish shareholders have helped drive equity prices higher, lifting household net worth and offering support to clients.
In addition, increasing oil prices helped minimize drags on the energy division. Regardless of these promising improvements, policy indecision inspires ESR’s estimate of 1.8% growth in 2017. It would mark the third consecutive year of such modest development.
Doug Duncan, who is the Chief Economist of Federal National, said that the tenor of their estimate effectively continues to be unchanged. The indications of cautious clients this quarter, increasing interest rates, the transformed jump of U.S. currency to a 14-year high, and increased insecurity in the political sphere indicate conservatism in their outlook.
While they are thrilled that confidence is increasing across consumers, investors, economists, homebuilders, and businesses, much of it seems to be in expectation that the approaching Administration and the new Congress will endorse fiscal strategies and deregulation that will assist spur growth. While they consider that some pro-growth guidelines could be adopted upcoming year, it would consume time for them to advantage the economy, obstructing any offsetting measures such as more obstructive trade policies.
The recent increase in interest rates amid sustained strong home price increase are likely to bring affordability challenges to house buyers, particularly for young grownups who are seeking to enter the housing industry for the first time.