Home Sales and Economic Growth Continue to be Slowed by Labor and Supply Chain Limitations

According to the September 2021 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group, for the second month in a row, expectations for near-term real GDP growth were revised downward-and-outward due to persistent supply chain disruptions and labor market tightness.

The ESR Group now projects full-year 2021 real GDP growth to clock in at 5.4%, down from its previous forecast of 6.3%, anticipating instead that much of the previously projected second-half 2021 growth will take place in 2022, for which it upgraded its economic growth forecast from 3.2% to 3.8%.

Inflation continues to be a key concern as well, with the ESR Group forecasting the Consumer Price Index to end the year at an annualized pace of 5.4% and remain above 5% until the second quarter of 2022.

Home construction is also being held back by supply problems, and as such the ESR Group downgraded its expectations for fourth quarter new home sales from 846,000 units to 789,000 units.

In a statement prepared for the ESR Group September release, Doug Dungan, Fannie Mae Senior Vice President and Chief Economist said, “Economic growth continues to be held back by supply chain and labor market constraints, both of which we expect to continue well into 2022. We also expect inflation to remain elevated through much of next year, even if the crest of the recent surge is behind us. Given the strength of recent house price appreciation and rent growth, we continue to believe that the contribution from housing to underlying inflation has yet to be fully realized within the official measures of inflation. Further, affordability remains a challenge, even with mortgage rates near historic lows; if the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect housing activity to slow from our current projections.”