The Fannie Mae Economic and Strategic Research (ESR) Group on Monday (12-19-22) released its December 2022 commentary. According to the ESR Group, following an upward revision in 2022Q3 real gross domestic products (GDP) and stronger-than-expected incoming personal consumption data to begin 2022Q4, the economy is now expected to ‘eke out’ positive growth of 0.4% in 2022 before entering a modest recession in the new year.
The ESR Group views the current rate of personal consumption growth as unstainable given the combination of low personal saving rate and an elevated ratio of consumer debt to personal disposable income. With many cyclical indicators continuing to point toward economic contraction, the ESR Group forecasts 2023 GDP growth to be negative 0.5%, an improvement from last month’s forecast of negative 0.6%. The ESR Group expects the economy to begin expanding again in 2024 at a 2.2% annual growth rate.
In regard to housing, the ESR Group has modestly revised upward its total single-family home sale projections for 2022 and 2023 to 5.72 million and 4.57 million units, respectively, due to the recent significant pullback in mortgage rates. The projection of a home sales decline in 2023 is due largely to the expected economic slowdown and the fact that most mortgage holders continue to have rates substantially below current market rates, creating a disincentive to move. The ESR Group expect homes sales in 2024 to rebound 14.7% to 5.24 million due the expectation that economic growth will resume, and mortgage rates will stabilize.
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