Fannie Mae: Housing recovery requires lower supply

WASHINGTON

Fannie Mae's economic and mortgage market analysis group said Monday that the housing market is stabilizing but excess inventory continues to hinder a recovery.

The housing lender released an economic outlook report that projects economic growth of 3.1 percent for 2010, despite the recent dip in growth for the first quarter.

Fannie Mae Chief Economist Doug Duncan said the unwinding of various programs -- such as the mortgage-backed securities program -- are evidence of an improving financial picture and belief by the federal reserve that the financial sector can stand on its own.

New home sales are at record lows and will be slow until the inventory of existing homes and foreclosures are worked off, according to Fannie Mae. However, Fannie Mae saw key indicators for existing home sales showing signs of recovery.

"We estimate that June 2009 was the end of the recession, a good sign that we're moving forward," Duncan said in a statement. "Nevertheless, significant improvements in the labor market and consumer spending will be the big hurdles as we move toward recovery in the housing market and broader economy."