Moderate Growth Projected for 2012

Overall, growth is expected to continue for the year, but at a modest rate, according to the Fannie Mae February 2012 Economic Outlook report.

Economic growth is projected to be at 2.3 percent for 2012, an increase compared to 1.6 percent last year, according to the report.
For the first time in seven years, the housing market is projected to contribute to gross domestic product (GDP), the report also stated, but by a very modest amount.
“Risks to the forecast are more balanced between the upside and downside since our January forecast,” said Fannie Mae chief economist Doug Duncan. “The economy appears to be more resilient than in previous months, and should be less vulnerable to shocks, including any spillover from the European sovereign debt crisis.”
Duncan added that economic growth will remain constrained by various headwinds, including a potential spike in oil prices; an expected decline in net exports; and an expected increase in fiscal drag, including the fading of federal spending from the stimulus and a decline in defense spending for operations in Iraq and Afghanistan.
For 2011, the unemployment rate ended at 8.9 percent, and is projected to average at 8.4 percent in 2012, according to an economic forecast report released by the Mortgage Bankers Association (MBA).
The unemployment rate dropped to 8.3 percent in January, down 0.2 points from the previous month.
Mike Fratantoni, VP of research and economics for the MBA, said the organization has increased its estimate of economic growth, and nudged down expectations for the unemployment rate in 2012 considering the stronger job reports from the last two months.
The MBA report projects the 30-year fixed rate mortgage to average at about 4.3 percent for 2012. According to the February 16 Primary Mortgage Market Survey from Freddic Mac, the 30-year rate stayed at an all-time low of 3.87 percent since the first week of February.
Fratantoni also said purchase applications have come in weaker than anticipated, while refinance applications have come in considerably stronger.
According to an MBA report released February 15, the Market Composite Index, a measure of mortgage loan application volume, decreased 1 percent compared to the previous week. The Refinance Index increased 0.8 percent from the previous week, reaching its highest level since August 8, 2011. The refinance share of mortgage activity inched up to 81.1 percent of total applications, a slight increase from 80.5 percent for the previous week.
Foreclosures activity in 2012 is predicted to increase due to artificially low numbers in 2011 from foreclosure processing delays, according to the 2012 foreclosure market outlook report released by RealtyTrac. Foreclosure activity is not expected to return to the 2009 peak and is projected to decrease in 2013, according to the report.