Fannie Mae's housing market outlook not very positive

Fannie Mae, the government-sponsored home funding agency, recently adjusted its outlook for the housing market, saying the market will experience an overall downgrade throughout the remainder of the year as it continues to contribute little to economic growth.

According to Fannie Mae, the full year growth is expected to slow to 2.4 percent, down from 2.8 percent in 2010. This number could be higher if the housing market was making any significant contribution to the economic recovery, which it has yet to. While home sales data is slightly mixed, new home sales remain at depressed levels in May, and Fannie Mae predicts home prices have not bottomed out yet.

Inventories of existing homes and foreclosures are still high, clogging the market with low priced homes and preventing a recovery in sale price. The agency also predicts mortgage rates will increase slightly to 4.8 percent by the end of 2011. Single-family house starts will continue to decline to about 7 percent from last year, while multi-family housing starts are expected to increase 30 percent from last year.

Fannie Mae blames the struggling economy on uncertainty over issues such as the European and U.S. debt issues, weak employment reports and a stressed labor market. Fannie Mae chief economist, Doug Duncan, said the slowdown in hiring only worsens the economic outlook.

Reuters recently reported that Fannie Mae plans to sell $2 billion of three-month benchmark bills due October 26, 2011, and $2 billion of six-month bills due January 25, 2012.  

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