Fannie Mae Chief Economist Doug Duncan joins Yahoo Finance Live to discuss what to expect from the housing market in 2022 and what first-time buyers are facing.
Video Transcript
– The housing market has had a red-hot run amid low inventory and sky-high prices. Here to discuss the outlook for this year and how it’s impacted by economic conditions, let’s bring in our next guest Doug Duncan, Fannie Mae chief economist. Doug, thanks so much for being here today. Just want to start by looking at that economic environment in which the housing industry exists right now. So GDP grew at 5.7% last year. 6.9% in December. I’m wondering, how much growth do you envision seeing this year as inflation continues to run red hot, and where are we in the business cycle?
DOUG DUNCAN: Yeah, sure. I think the message you got today in the bond market from the employment report saw the 10 year rise something like around 10 basis points, which suggests that the market thinks the Fed will be more aggressive. And that employment report suggests they have a rationale for doing that. So our view is that the economy is already slowing, even though that fourth quarter number was strong. A lot of that was inventory building that was taken out of the first two quarters of next year.
So we think somewhere between 2 and 3/4% and 3% growth next year, which is still a good year. But it will be a year in which the Fed is tightening. For housing, we characterize this as a pivot. Several things are changing. First of all, all of the income transfers from the stimulus are over. So that’s going to be withdrawn as a growth driver. The Fed is obviously changing posture. So monetary tightening is going to be the story, not monetary easing. That suggests that rates are going to rise.
And for the mortgage space, the fact that the Fed has said eventually they would like to have a portfolio with no mortgage-backed securities in it and that they intend probably around mid-year this year to start running off the…