New York Federal Reserve Bank President William Dudley spoke in New York today saying that he feels that economic growth will rebound, which would warrant raising short term interest rates in 2015. The first quarter of 2015 saw growth slow in the first three months of the year, with the harsh weather early in the quarter the main culprit in the slowdown. A similar pattern occurred last year in the first quarter, only to see a big rebound for the rest of the year. "I believe that the growth prospects for the U.S. economy over the remainder of 2015 will improve, when, hopefully, the data supports a decision to lift off later this year, it does not mean that U.S. monetary policy will be tight.”
Fannie Me released its April 2015 Economic and Housing Outlook on Monday revealing that economic activity was suppressed in the first quarter, largely due to the West Coast port disruptions along with the difficult weather patterns that gripped a large portion of the Northeast. The full year Gross Domestic Product remains unchanged at 2.8%. But beware, there is a risk tilted to the downside, consumers remain cautious, and the pick up in consumer spending, which is key to the rebound in growth, may be weaker than Fannie Mae anticipates.
In housing, Fannie Mae expects housing starts and home sales to rise about 13% and 5% respectively, little changed from the prior forecast. Fannie went on to say that it projects that total single-family mortgage originations will rise nearly 15 percent in 2015 to $1.35 trillion before declining modestly in 2016. As far as refinancing in 2015, the refinance share of total mortgage applications should decline to 35% in 2016, from 45% in 2015. Lastly, inventories remain very tight at the lower end of the market, making it difficult for potential first time homebuyers.