As if the stock market's wild vacillations in the past few weeks weren't evidence enough that few have a firm hold on the U.S. economy's near- and long-term outlook, Fannie Mae this week issued an analysis that says the likelihood of a dreaded double-dip recession is now a 50/50 proposition.
Fannie Mae's economics and mortgage market analysis group today pegs total U.S. economic growth for the year to downshift to around 1.4% for all of 2011, down from 3.1% in 2010.
Perhaps even more troubling, Fannie Mae's brain trust is now forecasting U.S. economic growth of only 2% in 2012, well off the 3.1% uptick it originally predicted back in July.
"Key factors, including revisions to gross domestic product (GDP) data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth," Fannie Mae Chief Economist Doug Duncan said in the report. "Moreover, European financial market and fiscal policy turmoil, coupled with the U.S. debt ceiling debate, have hit on consumer confidence, which is at recessionary levels."
Duncan added that critical macro economic factors — the debt ceiling crisis, compromise and subsequent downgrade of the country's sovereign debt rating as well as high unemployment — is adversely impacting an already faltering U.S. housing market.
"Our July data shows that 70% of Americans think the economy is on the wrong track, up from 60% a year ago," he added. "In turn, despite historically low interest rates, consumers are still saying they don't see this as a good time to go out and borrow money to buy a house."
Fannie Mae's researchers said overall U.S. housing activity is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence and a softening hiring trend.
One exception, however, is the rental housing market. The rental vacancy rate (the share of rental housing that is vacant and for rent) plunged from 9.7% to 9.2% in the second quarter of 2011, the lowest rate in nine years. This is consistent with the declining trend in the homeownership rate, indicating that a rising share of households have shifted to renting over owning.