10/22/2021 | Press release | Distributed by Public on 10/22/2021 10:08
The robust existing home sales number was somewhat above our upwardly revised expectation for Q3. Demand for housing has remained strong despite the lack of homes available for sale and high prices, though we continue to expect sales to moderate in Q4 and into 2022. We believe the low inventory of available existing homes will continue to be the primary constraint on sales next year, though we still expect the level of sales to remain roughly 6 percent higher than 2019 levels. Demand for new homes also remains strong, reflected both in the single-family starts number, which appears to be leveling out at a pace roughly 10 percent higher than what occurred before the COVID-19 pandemic, and the increase in homebuilder sentiment. However, homebuilders still face supply chain bottlenecks and labor scarcity. The total number of homes under construction continued to move up, rising 1.1 percent over the month to a level 30.6 percent higher than a year ago, reflecting a comparatively slower pace of completions in recent months relative to starts. While the recent drift upward in mortgage rates may begin to cool new and existing home sales somewhat, we continue to see demand as being sufficiently strong to drive a faster pace of home construction if homebuilders are able to sufficiently alleviate supply constraints.
The disappointing decline in industrial production is tempered somewhat by a handful of temporary factors that we expect to alleviate next month. We believe mining output should recover in October as nearly all production capacity has returned to the Gulf Coast following Hurricane Ida, and utilities output should stabilize as the weather returns to seasonal norms. Even with these caveats, however, production continues to be hampered by supply chain bottlenecks and a tight labor market, which we believe will continue to drive inflationary pressures and weigh on growth well into 2022. Considering both the unusual declines in utilities and mining output and other indicators and reports that suggest auto manufacturing is likely already at or near its trough, our growth outlook is unlikely to change based on the industrial production report.
Economic and Strategic Research Group
October 22, 2021
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) 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 ESR 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 ESR 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.