Uncertainty Rattles Financial Markets According to Fannie Mae's Economics & Mortgage Market Analysis Group

Despite Increased Risks, Economic Growth Expected to Continue; Housing Still Faces Headwinds

New Economic Outlook Podcast Available

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Jun 17, 2010, 02:05 ET

WASHINGTON, June 17 /PRNewswire-FirstCall/ -- Concerns about European sovereign debt and ensuing international financial market volatility are pushing capital markets to a flight to quality according to the June 2010 Economic Outlook released today by Fannie Mae's (NYSE: FNM) Economics & Mortgage Market Analysis Group. A resulting decline in U.S. Treasury yields has helped bring mortgage rates to historic lows and opened a window for mortgage refinancing activity, however rates will need to move closer to 4.5 percent in order to sustain the recent surge. Consumer spending slowed recently but is expected to remain healthy and serve as the biggest driver of continued economic growth, buoyed by an increase in personal income and falling oil prices which should free up cash for consumers and contribute to sustainable consumer consumption.

"We continue to project modest economic growth for 2010, despite various risks," said Fannie Mae Chief Economist Doug Duncan. "On the downside, private sector payrolls disappointed and our housing outlook was clouded by a precipitous drop in purchase applications. Clearly, housing still faces headwinds but housing starts are expected to increase slightly by year end," said Duncan. "On the upside, employment is growing, which is a key indicator of economic growth and stability. The average workweek lengthened to 34.2 hours, increased corporate profits point to strength in near-term hiring, and small businesses' confidence rose in May with indications of positive plans for hiring during the next three months."

For an audio synopsis of the June 2010 Economic Outlook, listen to the new Economic Outlook podcast on the Economics & Mortgage Market Analysis site at www.fanniemae.com. Visit the site to read the full June 2010 Economic Outlook, including the Economic Developments commentary, Economic Forecast, and Housing Forecast.

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.

SOURCE Fannie Mae