Strong Housing Rebound Underway but Experts Say There Are Risks

Fannie Mae’s Economic and Strategic Research (ESR) Group is pointing to the reopening of the economy in several states from the COVID-19 pandemic shutdowns, as a reason for their raising their estimates for the 2020 full year GDP from the current -5.4% decline it predicted in June to a -4.2% downturn in July. ESR economist say the improvement is almost entirely due to a stronger pace of recovery of the U.S. economy than originally anticipated. The ESR group calls the housing rebound unexpectedly strong and early date indicates the improvement will continue in June and July. However, they have a caveat the current surge of new COVID-19 cases in many areas will drag on growth in the future. However, they expect any future shutdowns and behavioral changes will be less severe than in the first round. Furthermore, given that consumer spending is still down, future behavioral responses will likely translate into only a drag on growth rather than a sharp decline, as occurred in the early spring.