Prospects for accelerating growth have grown dimmer recently due to downward revisions of first-quarter economic activity and slowdowns across a broad set of indicators during May, according to theJune 2011Economic Outlook released today by Fannie Mae's (OTC Bulletin Board: FNMA) Economics & Mortgage Market Analysis Group. Weakness in economic activities spanning manufacturing, consumer spending, jobs, and housing has resulted in the group downgrading projected growth for the current quarter, as well as for the second half of they year. For 2011, economic growth is expected to come in at 2.5 percent, down from 2.9 percent in the previous forecast and more than a full percentage point lower than the forecast at the beginning of the year.

Elevated inventories continue to put downward pressure on home prices, continuing the trend that started at the end of the homebuyer tax credit last summer. The group forecasts that we still have not seen the bottom for home prices, expecting additional home price declines through the third quarter before flattening out at the end of 2011.

"Ultimately, the labor market holds the key to a housing recovery, but job growth is needed in order to activate housing demand," said Fannie Mae Chief EconomistDoug Duncan. "Hiring delays will continue to push out timing for the housing rebound."