FNC Morning View

FNC Morning View: 1/9/12

Posted on Jan 9, 2012

Predictions for 2012

New Year’s is the season for resolutions but also predictions, so in this broadcast, FNC’s Bill Rayburn and Bob Dorsey share with us some of what they see in their crystal balls for the year ahead in terms of the overall economy, the housing market specifically, Fannie and Freddie’s future (or the lack thereof), HARP, and even what they expect to happen politically in this election year.

On the overall future of the economy, Bob is forecasting a relatively stagnant year for the unemployment rate with a range between 8.5% to perhaps a low of 7.9%. He sees the economy adding some 200,000 plus jobs each month, but the overall rate staying fixed as the participation rate increases. People who have spent time on the sidelines will reenter the job market to counterbalance the number of new jobs being created. He also predicts that inflation will stay low with the Fed acting in the third quarter to give a boost to the markets.

Bill concurred with most of these points, adding that he expects mortgage originations to be about 1.2 trillion, an improvement over MBA’s forecast of around 900 billion for the year. He sees interest rates likewise remaining at about current levels through 2012 with the stock market falling to around 11,000 before experiencing a 4,000-point jump in the third quarter.

Bob commented that he felt foreclosures would increase this year in response to new government policies, that the Fed would buy up large numbers of mortgage backed securities in the third quarter, and that HARP would be expanded with less strings attached to its outreach. In a somewhat surprising forecast, he posited that Freddie and Fannie, rather than totally disappearing, might actually increase in their role in the markets as politicians fall back on them to help the still struggling housing market.

In the realm of politics, Bill, with Bob’s agreement, predicted that President Obama would be reelected in the fall, thanks to a total implosion by the Republican Party during their heated primary season. He sees, however, both the House and Senate being under Republican control, thus creating the division of powers that is arguably more comfortable for many voters who have doubts about both parties. The end result may in fact be an extended period of political stagnation.

In closing, Bob offered his view that housing prices would indeed begin a slow recovery during 2012 along with increasing real estate investments and about 350,000 new homes being built during the year. And along with the rest of us at FNC, our dynamic duo wishes everyone a happy and prosperous new year.