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Gross domestic product (GDP), adjusted for inflation, grew at a 3.0 percent annualized rate in Q2 2024, unchanged from the prior estimate, according to the third and final estimate from the Bureau of Economic Analysis (BEA). Gross domestic income (GDI), a theoretically equivalent measure to GDP, was revised upward significantly from a 1.3 percent annualized growth rate to 3.4 percent. The large upward revision to GDI was part of the annual revisions to the national accounts. The updated data now show significantly stronger growth in real disposable personal income over the past several quarters. This has pushed the personal saving rate up to 5.2 percent through the second quarter, up from a previously reported 3.3 percent.
Personal income, adjusted for inflation, increased 0.1 percent in August, according to the BEA. Real disposable personal income and real personal consumption were also up a muted 0.1 percent. The personal saving rate, which was also affected by revisions to the national accounts, declined one-tenth to 4.8 percent after revisions. The PCE price index rose just 0.1 percent over the month and slowed to a 2.2 percent growth rate compared to a year earlier, a new cycle low. Core PCE inflation also increased just 0.1 percent over the month, though the annual rate ticked up to 2.7 percent due to less favorable base effects.
The Conference Board Consumer Confidence Index declined 6.9 points to 98.7 in September, a three-month low. Confidence in the present situation declined 10.3 points to 124.3, the lowest level since 2021, while consumer expectations were down 4.6 points to 81.7.
New single-family home sales declined 4.7 percent to a seasonally adjusted annualized rate (SAAR) of 716,000 in August, though this only gives back part of the 10.3 percent jump up the month prior, according to the Census Bureau. The number of new homes for sale rose 1.7 percent to 467,000, pushing the months' supply up five-tenths to 7.8. Still, this remains below the recent peak of 10.6 in July of 2022.
The National Association of REALTORS® Pending Home Sales Index, which records contract signings of existing homes and typically leads closings by one to two months, rose just 0.6 percent to 70.6 in August after hitting a record low in July.
The FHFA Purchase-Only House Price Index increased 0.1 percent on a seasonally adjusted basis in July after two months of flat home prices. Compared to a year ago, home prices rose 4.6 percent, a deceleration from the 5.4 percent year-over-year growth rate recorded in June.

Forecast Impact:

The large upward revision to GDI now shows significantly stronger growth in real disposable personal income over the past several quarters, which helps to explain why consumption growth has remained robust. A fundamental assumption in our forecast had been that the personal savings rate had been unsustainably low as income growth meaningfully lagged consumer spending in recent quarters. With income growth now being revised upward significantly, the second quarter saving rate is now a relatively healthy 5.2 percent (4.8 percent in the latest monthly data). These revisions thus present some upside risk to our growth forecast through the end of 2024 and into 2025. While we had previously called for slowing growth in part due to believing consumers would need to retrench to allow incomes to catch up with spending, we will be reassessing this view in our next update. Elsewhere, inflation pressures have continued to ease, largely in line with our expectations. Core PCE inflation remains on track to reach the Fed's target by the second quarter of next year.

New home sales are currently tracking a bit above our Q3 forecast. Our forecast continues to be one of relative strength in new home sales as builders use a number of incentives, including rate buydowns, to move inventories. Despite potential headwinds from poor builder confidence and a growing inventory of existing homes for sale in the Sunbelt, new sales have remained a bright spot in an otherwise slow housing market. On the existing home side, pending sales remained anemic. While more timely purchase application data suggest some pick-up in activity in recent weeks, the pending sales report is in line with our forecast for continued weakness in existing home sales through the end of the year.

Nathaniel Drake
Economic and Strategic Research Group
September 27, 2024

Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & 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, beliefs, 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, beliefs, 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.

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