Washington - Continued improvements in economic activity driven by strong growth in consumer spending are moving the economy beyond the recovery phase and into a period of expansion, according to the February 2011 Economic Outlook released today by Fannie Mae's Economics & Mortgage Market Analysis Group. For 2011, economic growth is projected to accelerate to 3.7 percent, up from 2.8 percent economic growth in 2010.

Housing has yet to see robust movement and continues to lag the rest of the economy, according to the group. On the upside, the excess supply of housing appears to have peaked. In addition, the rental vacancy rate fell, indicating the excess supply of housing is being worked off slowly – a trend necessary for housing to return to stability. The downward trend in the rental vacancy rate is consistent with the downward trend in the homeownership rate, which implies a rising share of households have chosen renting over owning. The homeownership rate fell to 66.5 percent in the fourth quarter of 2010, down from a peak of 69.2 percent in late 2004.

"We have confidence that the economy is on stronger legs with a sustainable growth path. Our projected annual growth rate for 2011 is nearly a full percent higher than the annual growth rate for 2010, which is a significant event," said Fannie Mae Chief Economist Doug Duncan. "Economic cross currents such as the lack of sustained strong job growth, state and local fiscal issues, and geo-political uncertainty in the Middle East present downside risks. Nevertheless, the positives outweigh the negatives."