Fannie Mae: Real GDP to contract sharplyChristian Fernsby ▼ | May 14, 2020
Following a first quarter decline, real GDP growth is expected to contract even further in the second quarter due primarily to an unprecedented slowdown in consumer spending, according to the latest commentary from the Fannie Mae Economic and Strategic Research (ESR) Group.
Expenditures Fannie Mae Economic and Strategic Research
Topics: Fannie Mae GDP
A partial recovery is forecast for the second half of the year due to supportive monetary and fiscal policies, resumed consumer spending following an elevated savings rate, and expected relaxing of virus-related restrictions and social distancing measures.
Risks to the downside include greater consumer caution during the recovery period than expected, as well as a potential second wave of the virus in the fall or winter, while upside risks include a more pronounced and rapid rate of recovery than currently anticipated.
On housing, recent data suggest existing home sales slowed earlier in 2020 than previously forecast.
Even so, the ESR Group expects full year 2020 existing home sales to decline approximately 15 percent, a figure largely unchanged from last month's forecast, as homebuying activity is showing signs of stabilizing, including recent upticks in mortgage applications and sales listings.
While job losses and economic uncertainty have almost certainly held back prospective home buyers, the ESR Group believes that declining sales are more strongly a function of supply dynamics, pointing to the recent downturn in Fannie Mae's Home Purchase Sentiment Index as evidence specifically the "good time to sell" survey component, which fell much more sharply than its buy side equivalent.
There also remains anecdotal evidence that sellers are reluctant to cut prices and are opting instead to take their homes off the market until fears of contagion subside and social-distancing measures are eased. ■