Second-Half Growth Strengthens, but Outlook Remains Worrisome According to Fannie Mae’s Economics & Mortgage Market Analysis Group

WASHINGTON, November 18, 2011 -

- Housing Improvement Expected to be Woefully Slow Through Next Year

After nearly stalling out in the first half of the year, the economy saw some improvement during recent months. According to Fannie Mae’s (OTC Bulletin Board:  FNMA) Economics & Mortgage Market Analysis Group, the economy expanded at a 2.5 percent annualized rate in the third quarter while gains in recent employment data helped confirm that the economy will skirt recession this year. Nevertheless, the U.S. continues to remain vulnerable to shocks, including the ongoing financial crisis in Europe, particularly in Greece and Italy, and the debate over fiscal policy in the U.S. - both of which indicate a slower economic growth path in 2012. Moreover, it appears likely that Europe will slip into a recession, the degree of which will have an impact on the pace of growth for the U.S. in the coming year. The Group expects 2011 existing home sales will be little changed from 2010, with 2012 existing home sales only slightly higher.

“Despite a small numerical pickup in housing activity, the housing market continues to be essentially flat and we do not expect the recent uptick to be a sustained trend,” said Fannie Mae Chief Economist Doug Duncan. “Consumer sentiment is in a holding pattern at depressed levels. In turn, the likelihood of positive developments in the housing market remains a concern.”

“We’re pleased that third-quarter and early fourth-quarter economic, employment, and housing indicators have been in positive territory, and, most importantly, that there’s been no slide back into U.S. recession. Our hope has been that these last few months of positive growth would buy the economy time to shore up a sustainable growth path,” Duncan stated. “Any sustained growth will depend on a pickup in employment and consumer confidence and spending. Unfortunately, a recent increase in consumer spending occurred despite the biggest drop in real personal disposable income since the third quarter of 2009, which resulted in a full percentage point decline in the saving rate in the third quarter. This large decline bodes poorly for consumer spending growth early next year, especially if the payroll tax cut and emergency unemployment benefits expire at the end of the year as scheduled.”

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

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 purchasing or guaranteeing mortgage loans originated by mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

Follow us on Twitter: twitter.com/FannieMae

Pete Bakel, Fannie Mae, +1-202-752-2034