The economy and housing market are showing encouraging signs as the end of the year nears. In fact, according to Fannie Mae’s Economic & Strategic Research Group, the economy should see a strong fourth quarter finish, despite the recent loss of economic momentum. A combination of higher hourly earnings and lower unemployment numbers is making Americans feel more financially stable, which should lead to increased consumer spending. That’s a positive sign for the economy and the residential real estate market as well. “Despite mixed housing and mortgage market data, our forecast for housing activity is little changed over the past two months,” said Fannie Mae chief economist Doug Duncan. “The supply of existing homes remains lean amid slowing new single-family construction, putting significant upward pressure on home prices. While this helps boost home equity, it hurts affordability, especially for potential first-time home buyers.” Fortunately, Fannie Mae is forecasting only a gradual increase in mortgage rates through next year and expects rising household incomes to lessen the impact of higher home prices. More here.