Fannie Mae's forecast for economic growth in the second half of the year is a little lower than in an earlier prediction, mainly because of a slowdown in consumer spending.
In a nutshell, growth in the second half of 2016 will be decent, but not great. Fannie Mae is expecting the economy to expand an average of 2.4 percent, an upgrade from the 1.1 percent in the first half.
According to Fannie Mae's Economic and Strategic Research Group's October 2016 Economic and Housing Outlook, consumer spending declined in August for the first time since January. In addition, the personal saving rate is slightly higher, suggesting consumers are saving more and spending less.
"Consumer spending growth is expected to continue to soften in the fourth quarter, contributing to moderating economic growth from the third quarter," Fannie Mae.
However, the ESR Group's full-year 2016 forecast remains unchanged at 1.8 percent.
"Recent economic data have been a mixed bag -- the good, the bad, and the steady," said Doug Duncan, chief economist for Fannie Mae. "On the upside, the third print of second quarter GDP showed that the economy grew three-tenths higher than in the second estimate, with an encouraging upward revision in nonresidential fixed investment. The steady news comes from the labor market, with relatively decent conditions overall. The biggest doses of bad news come from consumer spending, the linchpin of economic growth, and residential investment, which appears to have posted a second consecutive sizable drop in the third quarter."
There have been encouraging signs that homeownership demand by young adults is on the upswing.
"However, housing activity has lost momentum in recent months," said Duncan. "Existing home sales, new home sales, single-family housing starts, and single-family construction spending declined in August. In addition, pending home sales and purchase mortgage applications weakened during the month, suggesting continued weakness in existing home sales in the near term amid very lean supply."
Number of People Refinancing Loans Shrinking
Mortgage rates might be at their lowest in 40 years, but the number of people refinancing their loans clearly isn't moving in lockstep with that trend.
Rates have apparently not been driven low enough to entice people to refinance, as refis account for less than half of all mortgage closings, Ellie Mae was quoted as saying in a Market Watch article.
"Refis made up about three out of every four home loans originated as the housing market recovered from the 2008-09 financial crisis, and as owners regained equity in their homes, employment picked up, and the purchase of new and existing homes sputtered, "Ellie Mae said.
Rates are nearly as low now, but the pool of people who could benefit from mortgage refinancing appears to be shrinking.