Home Sales ‘Setback’ Could Hurt Overall Economic Recovery – Fannie Mae

June 8, 2010
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Fannie Mae cuts mortgage investment forecast

The largest provider of U.S. residential funding, Fannie Mae, cut its forecast for residential investment this quarter following a “setback” in home sales and cautioned on its impact on the economic recovery.

With reference to its monthly outlook, Fannie Mae also cut its forecast for 2010 mortgage originations for a second month. Residential investment is likely to drop 17.2 percent in the first quarter and rebound for the rest of 2010, Fannie Mae economists, led by Doug Duncan, said in their outlook.

For all of 2010, residential investment will grow 10 percent, slightly below the previous forecast, they said. Severe weather interrupted activity in the first two months of 2010, while the extension of the U.S. home-buyer tax credits drew fewer buyers than expected, the economists said.

Home loan origination volume will probably slide to 1.31 trillion in 2010 from about 1.97 trillion in 2009. That is down from 1.34 trillion in February, and would mark the fewest since 2000, according to Mortgage Bankers Association data.