WASHINGTON—While consumer sentiment remains high, a new forecast from Fannie Mae for 2017 sees pretty modest growth.
According to the Fannie Mae Economic & Strategic Research (ESR) Group’s December 2016 Economic and Housing Outlook, long-term interest rates will continue to trend higher due to both the election and recent moves by the Federal Open Market Committee meeting, which will mean higher mortgage rates that will temper housing. Oil prices will also continue to rise. Offsetting that trend, says Fannie, are strong housing prices and household net worth, including home equity. As a result, the ESR is projecting 1.8% economic growth in 2017.
“The tenor of our forecast effectively remains unchanged: signs of cautious consumers this quarter, rising interest rates, the renewed increase in the U.S. dollar to a 14-year high, and heightened uncertainty in the political sphere suggest conservatism in our outlook,” said Fannie Mae Chief Economist Doug Duncan in a statement. “While we are encouraged that confidence is rising across investors, consumers, businesses, economists, and homebuilders, much of it appears to be in anticipation that the forthcoming Administration and the new Congress will enact fiscal policies and deregulation that will help spur growth. While we believe that some pro-growth policies could be adopted next year, it would take time for them to benefit the economy, barring any offsetting initiatives such as more restrictive trade policies.”