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Things are looking up for the housing market, even as the rest of the economy appears to be bogging down.

Construction of single-family homes is up 20 percent compared to this same time last year, while home sales are up by 9 percent for the same period. Meanwhile, residential investment is expected to contribute to economic growth for the first time since 2005, according to a new Fannie Mae economic forecast.

Overall, the economy appears to be slowing down slightly, although modest growth is still expected. Fannie Mae now expects that 2012 will show an increase of 2.0 percent in the nation's gross domestic product, down from 2.2 percent previously predicted.

Weakening consumer spending, a drop in consumer confidence, reduced hiring and ongoing concerns over the European debt crisis were cited as factors in the revised outlook.

Economy slows, housing picks up

"The data from the past month collectively point to decelerating economic growth, but growth nonetheless," said Fannie Mae Chief Economist Doug Duncan. "…However, despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat, presenting a rare upside boost to the economy."

Homeowners are showing greater confidence that housing prices will rise in the next 12 months, according to Fannie Mae's June National Housing Survey, while the share of consumers polled who said they would buy a home if they were to move increased by 6 percentage points compared to last year.

Looking ahead, Fannie Mae does not expect mortgage rates to sink much further than the current record lows of about 3.6 percent on 30-year fixed-rate loans. A small increase is likely over the coming months, according to the Fannie Mae forecast, with an average rate of 3.8 percent predicted by year's end.

First published at: http://www.mortgageloan.com/housing-perks-economy-cools-9175

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