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DS News December 2020

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Page 73 of 100

72 72 INVESTMENT GOVERNMENT PROPERTY PRESERVATION INDUSTRY UPDATES Journal HOUSEHOLDS 'REASONABLY WELL- POSITIONED' TO HANDLE ECONOMIC DOWNTURN e near-future state of the U.S. economy is predicated on how policymakers and the public respond to the increasing number of COVID-19 cases, according to the latest commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. e ESR Group predicts the resurgence of the virus will impact consumer spending. However, it also anticipates that a stronger domestic labor market and increased household savings would fuel continued real GDP growth—barring significant behavioral shifts and lockdown measures related to a new wave of virus-related chaos. e real GDP growth is currently forecast at 3.3% for full-year 2021, slightly below last month's projection, and 3% for full-year 2022. e ESR Group revised nearer-term projections, including the fourth quarter of 2020 and the first quarter of 2021, in a modest downward projection based on evidence of virus-related changes in consumer behavior. Although strict new lockdown or social distancing mandates remain the largest downside risk, the ESR Group stated economic growth could "substantially surpass the baseline forecast if, alternatively, such measures can be avoided, and the development of a vaccine progresses swiftly." Furthermore, the ESR Group expects housing to show continued strength through the rest of 2020 and into 2021. While the group revised its forecasts on new and existing home sales upward for Q4 2020 and Q1 2021, the ESR Group observed that home sales pace might have peaked in September. A moderate slowdown is taking place—pending sales and purchase mortgage applications have recently pulled back from highs reached in the spring as pent-up homebuyer demand recedes. Complicating this picture would be a renewal of virus mitigation protocols among prospective buyers and impact, the ESR Group added. "e continued geographic shift and now resurgence of COVID-19 has raised risks to the pace of growth, though in our view not to the level of a potential second recessionary downturn," said Doug Duncan, Fannie Mae SVP and Chief Economist. "Households appear reasonably well-positioned to weather and cushion the slowdown, but if a strict broad-based lockdown were to be instituted and sustained, then the economy could turn down again. Meanwhile, the housing market continues to thrive in the low-rate environment, particularly refinancing, but the sector is showing some early signs of slowing on the purchase side as the delayed seasonal effect works its way through the market."

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