According to Fannie Mae’s Economic and Strategic Research (ESR) Group’s October 2021 commentary, global supply chain constraints continue to cap economic output amid growing inflationary and consumer-spending concerns. For the third consecutive month, the ESR Group revised downward its full-year 2021 real gross domestic product (GDP) growth projections from 5.4% to 4.9% due to its more pessimistic view of the speed at which current supply chain disruptions will resolve, as well as its upwardly revised inflation projections and expectation that services-related consumer spending will take longer to return to a more historically normal level.
The ESR Group also highlighted the ongoing impact of supply chain disruptions on housing, including on home price growth and mortgage rate expectations vis-à-vis higher inflation. The ESR Group forecasts mortgage rates to average 3.3% in 2022, up from last month’s projection of 3.1%, as benchmark interest rates are expected to rise due to increased inflation expectations and a projected tightening of monetary policy.
While the ESR Group expects home price growth to decelerate moving into 2022 as the housing market cools from its recent highs, it did revise upward its home price growth forecast by 1.8 points to 16.6% for 2021 and 2.3 points to 7.4% for 2022, as measured by the FHFA Purchase-Only Index, in large part due to persistently tight inventory levels.
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Economic Growth Again Revised Downward Due to Supply Chain and Inflation Concerns