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Fannie Mae: Housing construction will rise in 2011

December 23, 2010 - The government-sponsored mortgage giant Fannie Mae predicts new home construction to improve next year, giving consumers more options when moving into new homes.

In its monthly report, Fannie Mae improved its overall economic outlook from a 2.9 percent rate of growth to 3.4 percent, basing its determination off increased consumer spending and confidence as well as falling unemployment claims. A firmer economy in 2011 will form the foundation of housing growth, said the report, which predicted new home construction to surge to a seasonally adjusted annual rate of 710,000 units in 2011 - well above this year's projected rate of 592,000.

New home sales will soar 19.8 percent next year, mostly making up for the 14.2 percent drop they experienced this year, said the report. By 2012, total home sales - both for new units and those already exiting - should increase 11.6 percent.

"We expect modest increases in home sales, despite recent interest rate rises, due in part to modest additional declines in home prices, and we expect people to take advantage of affordability as their employment and income outlook brightens," said Fannie Mae chief economist Doug Duncan.

That bodes well for the nation's homebuilders, many of whom report that slow moving activity has hampered the demand for new homes. The National Association of Home Builders' most recent confidence index reported that builder sentiment index held firm at the low level of 16 in December.
 

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