07/30/2021 | Press release | Distributed by Public on 07/30/2021 09:36
New home sales fell 24.1 percent from a year prior as the annual comparison now reflects last summer's surge in sales, though they were at a pace similar to the 2019 rate. Combined with the decline in the pending home sales index, we believe demand for homes is likely normalizing somewhat following the pandemic-related surge. High prices may be driving some would-be homebuyers out of the market, and we believe many first-time buyers likely pulled forward their demand during the pandemic, leaving fewer potential first-time homebuyers currently than there would have been otherwise. However, we think ongoing supply constraints are also likely dragging on sales as builders have delayed breaking ground on projects, which is reflected in the share of homes for sale but not yet started hitting a record high at nearly 30 percent. The decline in sales was larger than we had anticipated, meaning our near-term forecast will likely be revised downward; however, we still expect a modest uptick in sales as supply constraints ease. We also expect that the continually low interest rate environment will likely prevent homebuying demand from slipping below pre-pandemic levels, though we continue to expect the dearth of affordable supply to weigh on the pace of sales going forward.
Second quarter GDP came in 1.6 percentage points lower than we had forecast, driven by an unexpected decline in government consumption and investment, in part due to the expiration of the Paycheck Protection Program (PPP) in May, as well as considerably weaker business inventory investment. Due to these factors likely being temporary, the weakness has only minimal impact on our GDP outlook for the remainder of the year. Still, we expect supply chain disruptions to weigh on growth in the third quarter, particularly if the recent increase in COVID-19 cases across Asia leads to further lockdowns, which could exacerbate the current struggle of supply growth to match the strength in global demand. Further, the decline in the saving rate and in real disposable income, combined with the continual increase in prices, suggests that, going forward, consumption may not contribute quite as much to GDP growth, even as consumer confidence and PCE remained high in June and throughout the economic recovery.
Economic and Strategic Research Group
July 30, 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.