Economy Embarking on Period of Expansion According to Fannie Mae's Economic & Mortgage Market Analysis Group

By Fannie Mae, PRNE
Thursday, February 24, 2011

Housing Market Struggling to Gain Traction

WASHINGTON, February 25, 2011 - Continued improvements in economic activity driven by strong growth in
consumer spending are moving the economy beyond the recovery phase and into a
period of expansion, according to the February 2011 Economic Outlook released
today by Fannie Mae's (OTC Bulletin Board: FNMA) Economics & Mortgage Market
Analysis Group. For 2011, economic growth is projected to accelerate to 3.7
percent, up from 2.8 percent economic growth in 2010.

Housing has yet to see robust movement and continues to lag the rest of
the economy, according to the group. On the upside, the excess supply of
housing appears to have peaked. In addition, the rental vacancy rate fell,
indicating the excess supply of housing is being worked off slowly - a trend
necessary for housing to return to stability. The downward trend in the
rental vacancy rate is consistent with the downward trend in the
homeownership rate, which implies a rising share of households have chosen
renting over owning. The homeownership rate fell to 66.5 percent in the
fourth quarter of 2010, down from a peak of 69.2 percent in late 2004.

"We have confidence that the economy is on stronger legs with a
sustainable growth path. Our projected annual growth rate for 2011 is nearly
a full percent higher than the annual growth rate for 2010, which is a
significant event," said Fannie Mae Chief Economist Doug Duncan. "Economic
cross currents such as the lack of sustained strong job growth, state and
local fiscal issues, and geo-political uncertainty in the Middle East present
downside risks. Nevertheless, the positives outweigh the negatives."

For an audio synopsis of the February 2011 Economic Outlook, listen to
the podcast on the Economics & Mortgage Market Analysis site at Visit the site to read the full February 2011
Economic Outlook, including the Economic Developments Commentary, Economic
Forecast, and Housing Forecast.

Also available via link from the Economic Developments Commentary is the
Multifamily Market Commentary by Kim Betancourt, Director, Multifamily
Economics and Market Research. The Commentary provides information on current
multifamily market conditions. The February 2011 Commentary projects
continued, but modest, improvement for the multifamily market in 2011 with
normalized rent growth of one to two percent for the first half of the year.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's
Economics & Mortgage Market Analysis (EMMA) group included in these materials
should not be construed as indicating Fannie Mae's business prospects or
expected results, are based on a number of assumptions, and are subject to
change without notice. How this information affects Fannie Mae will depend on
many factors. Although the EMMA group bases its opinions, analyses,
estimates, forecasts, and other views on information it considers reliable,
it does not guarantee that the information provided in these materials is
accurate, current, or suitable for any particular purpose. Changes in the
assumptions or the information underlying these views could produce
materially different results. The analyses, opinions, estimates, forecasts,
and other views published by the EMMA group represent the views of that group
as of the date indicated and do not necessarily represent the views of Fannie
Mae or its management.

Fannie Mae exists to expand affordable housing and bring global capital
to local communities in order to serve the U.S. housing market. Fannie Mae
has a federal charter and operates in America's secondary mortgage market to
enhance the liquidity of the mortgage market by providing funds to mortgage
bankers and other lenders so that they may lend to home buyers. Our job is to
help those who house America.

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