Economy Embarking on Period of Expansion According to Fannie Mae's Economic & Mortgage Market Analysis Group

Housing Market Struggling to Gain Traction

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Feb 25, 2011, 09:35 ET

WASHINGTON, Feb. 25, 2011 /PRNewswire/ -- Continued improvements in economic activity driven by strong growth in consumer spending are moving the economy beyond the recovery phase and into a period of expansion, according to the February 2011 Economic Outlook released today by Fannie Mae's (OTC Bulletin Board: FNMA) Economics & Mortgage Market Analysis Group. For 2011, economic growth is projected to accelerate to 3.7 percent, up from 2.8 percent economic growth in 2010.

Housing has yet to see robust movement and continues to lag the rest of the economy, according to the group. On the upside, the excess supply of housing appears to have peaked. In addition, the rental vacancy rate fell, indicating the excess supply of housing is being worked off slowly – a trend necessary for housing to return to stability. The downward trend in the rental vacancy rate is consistent with the downward trend in the homeownership rate, which implies a rising share of households have chosen renting over owning. The homeownership rate fell to 66.5 percent in the fourth quarter of 2010, down from a peak of 69.2 percent in late 2004.

"We have confidence that the economy is on stronger legs with a sustainable growth path. Our projected annual growth rate for 2011 is nearly a full percent higher than the annual growth rate for 2010, which is a significant event," said Fannie Mae Chief Economist Doug Duncan. "Economic cross currents such as the lack of sustained strong job growth, state and local fiscal issues, and geo-political uncertainty in the Middle East present downside risks. Nevertheless, the positives outweigh the negatives."

For an audio synopsis of the February 2011 Economic Outlook, listen to the podcast on the Economics & Mortgage Market Analysis site at www.fanniemae.com. Visit the site to read the full February 2011 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, and Housing Forecast.

Also available via link from the Economic Developments Commentary is the Multifamily Market Commentary by Kim Betancourt, Director, Multifamily Economics and Market Research. The Commentary provides information on current multifamily market conditions. The February 2011 Commentary projects continued, but modest, improvement for the multifamily market in 2011 with normalized rent growth of one to two percent for the first half of the year.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economics & Mortgage Market Analysis (EMMA) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the EMMA group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the EMMA group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

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SOURCE Fannie Mae