By: Krista Franks Brock
Housing continues to be a bright spot in the economy, contributing positively to GDP. In fact, Fannie Mae cited the sector as “the most likely source of upside to our forecast” in its April 2013 Economic Outlook.
According to the GSE, residential investment—once a drag on the economy—has contributed positively or neutrally to the nation’s economic growth for the past seven quarters. The GSE expects this trend to continue this year.
Home sales charted their highest levels in recent years at the start of this year.
Overall, economic growth in the first quarter outpaced expectations, rising at a rate of 3.2 percent. Business inventories contributed to this growth, but the “one-time boost” is not expected to contribute again, according to Fannie Mae.
“The April forecast reflects the growing realization that 2013 is off to a good start from a GDP perspective, but we expect the stronger-than-expected first quarter pace to slow somewhat in the second quarter,” said Doug Duncan, chief economist at Fannie Mae.
Additionally, March’s disappointing employment report, amid other economic headwinds, leads Fannie Mae to label first-quarter growth “unsustainable.”
“On the downside, tax hikes, sequestration, and the euro-zone crisis still pose significant risks to our forecast, and the fiscal tightening will likely affect consumer spending and other economic activity in coming months,” Duncan said.
Fannie Mae’s economists expect GDP to land around 2.3 percent for the year, slower than the pace reached in the first quarter, but still higher than last year’s 2 percent and the previous year’s 1.7 percent.