Fannie Mae: Inventory hindering housing recovery

Fannie Mae’s economists see signs of a strengthening economy but say the housing market still faces headwinds.

In its April Economic Outlook, Fannie Mae says excess inventory and foreclosure sales are hindering the housing market. New home sales are at record lows and will be slow to recover until inventory of existing homes and foreclosure overhang are worked off, Fannie Mae says.

It notes some positive signs for housing, particularly rising existing home sales, including pending sales and purchase applications.

On the broader economy, Fannie Mae forecasts 2010 economic growth of 3.1 percent.

“Financial conditions are improving as seen by the unwinding of various programs, most notably the Mortgage Backed Securities purchase program which ended in March,” said Fannie Mae chief economist Doug Duncan. “This is strong evidence that the Fed believes the financial sector can stand on its own.”