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43 » VISIT US ONLINE @ DSNEWS.COM FANNIE MAE: ECONOMIC GROWTH SLOWS IN Q1; ECONOMY STILL EXPECTED TO DRAG HOUSING UPWARD e first quarter of 2015 experienced slow economic growth due to "temporary factors," but the economy is expected to make a come- back starting in the second quarter, according to Fannie Mae's Economic & Strategic Research (ESR) Group's March 2015 Economic Outlook. Notably, the slower economic growth did not deter Fannie Mae's prediction that the economy will "drag housing upward" in 2015. "e economy is getting a boost from the strong employment numbers we've seen last year and at the start of 2015," Fannie Mae Chief Economist Doug Duncan said. "When this employment growth partners with income growth and consumers experience a rise in their personal household income, we should see a similar boost in the housing sector. Overall, we expect an improving 2015 with continued economic growth bringing housing above 2014 levels." e temporary factors that slowed economic growth include a drawdown in inventory, un- usually high snowfall in some parts of the coun- try, and the West Coast port slowdown. Fannie Mae expects the reducing of those factors in the second quarter, combined with upbeat labor market conditions and positive consumer and business fundamentals, willpush GDP growth to 2.8 percent in 2015, ahead of the 2014 pace of 2.4 percent. e downside risks to growth include slow- ing global growth abroad, geopolitical events, and increased financial volatility due to specula- tion around the target Fed funds rate, according to Fannie Mae. Fannie Mae's report indicated housing start- ed off 2015 as "flattened at best or weakened" in the first quarter compared to the fourth quarter of 2014, which supported an earlier predic- tion made by Fannie Mae. Single-family starts declined sharply from December to January, as did existing home sales, while new home sales remained flat. Pending home sales picked up, and loan performance improved. In fact, Fannie Mae pointed out the correlation between the la- bor market improvements and the sharply lower rate of early-stage delinquency loans. Meanwhile, the U.S. labor market experienced net job gains of 295,000 in Febru- ary and a three-month average of 288,000; the 3.3 million jobs created in the last year are the most since 2000, according to the Bureau of Labor Statistics. Wage gains were muted, however, with an increase in the average hourly wage of just 3 cents from January to February (up to $24.78). While the unemployment rate is at its lowest rate (5.5 percent) since 2008, the labor force participation (62.8 percent) is just one-tenth higher than a three-decade low point, according to Fannie Mae's report. Duncan indicated in Fannie Mae's report that the agency's forecast for housing is little changed from the previous forecast, in which he stated stronger housing recovery will follow stronger wage growth, which he expects to occur. "Housing also should receive an additional tailwind in the mortgage market," Duncan wrote. "e Fannie Mae Mortgage Lender Sen- timent Survey showed that lenders believed that lending standards have eased, and the February Fannie Mae National Housing Survey showed that a record high percentage of consumers believed that it is easy to get a mort- gage."

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