Recent economic data are pointing to a gradually improving economy. GDP revisions for the fourth quarter of 2011 indicated a stronger underlying pace of demand with higher consumer spending and business investment, according to Fannie Mae's Economic & Strategic Research Group. However, inventory accumulation accounted for about two-thirds of the increase in headline economic growth, while growth from other sources grew at a tepid 1.1 percent annualized pace. The most positive aspect of the GDP revisions was the upward revision to income growth, which revealed a less sharp decline in the saving rate in the second half of 2011. Increased income growth and less saving reduction imply consumer spending has stronger support in the near-term. Overall, the Group expects growth to accelerate from the subdued pace of the first quarter of 2012, strengthening to about 2.5 percent in the second half of the year.

Employment growth has been an important development from a housing sector perspective. Four solid months of private sector payroll growth have given rise to the possibility of overall increased economic activity, with employment playing a pivotal role for a housing recovery.

"Our February National Housing Survey has shown the impact of recent strong private sector employment growth on Americans, as consumer confidence in the direction of the economy has improved by 19 percent since November 2011," said Fannie Mae Chief Economist Doug Duncan. "We continue to see a better balance of upside and downside risk, as the improving labor market is expected to help turn one of the headwinds in the housing market into a tailwind. On the downside, a rise in gas prices may affect the consumption of other goods and services if prices stay high for a significant period of time."