Big New Home Gains Predicted for 2011
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- Peter King | December 22, 2010
New home sales and construction will bounce back next year, with nearly 20 percent gains projected as part of a broader recovery of the housing market and the economy in general, according to the newest Fannie Mae economic forecast.
“We close 2010 with a sense of building momentum,” the report says. It notes that while housing remains in the doldrums, recent leading indicators suggest the market is poised for a rebound, possibly as soon as the current quarter or perhaps in early 2011.
It predicts that new home construction, which has been lagging near historic lows, will pick up strongly in 2011, with an 18.5 percent increase by the fourth quarter of the year, with a similar increase in sales. Even stronger growth is forecast for 2012, with a nearly 50 percent additional gain predicted.
In specific numbers, the report predicts increases from an annualized rate of 438,000 single-family housing starts in the current quarter, to 630,000 in the fourth quarter of 2011 and 930,000 by the end of 2012.
More modest but still substantial gains are predicted for home sales overall. The report predicts existing home sales, following a 6.5 percent decline in 2010, will rise by 3.9 percent in 2011 and 8.9 percent in 2012.
It cites stronger-than-expected economic growth as the driving factor, raising its own predictions for 2011 by half a percentage point of GDP. It notes a number of recent developments, including increased consumer and investor spending, a rising GDP and the stimulus effects of recently enacted tax breaks, as reasons for optimism.
“Given these recent positive developments, we believe that economic growth is poised to kick into higher gear, with an above-par performance lurking just around the corner—by the second quarter of 2011,” it reads. “For all of 2011, we expect growth of 3.4 percent, compared with a projected 2.9 percent in the previous forecast.”
It says that while foreclosures and rising mortgage interest rates will present challenges for the housing market, stronger economic growth and an improved labor market should be enough to offset them.
Meanwhile, it does not look for any significant increase in home prices until 2012, forecasting a 0.6 percent rise in median prices for all of 2011, before increasing to a 4.6 percent boost in 2012.
The Fannie Mae December Economics and Mortgage Market Analysis was released on Monday.
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