The deepest and longest recession since the Great Depression appears to be over, Fannie Mae economists say, projecting sales of new and existing homes will jump 11 percent next year and that national home prices will stabilize, remaining essentially flat.
The mortgage guarantor’s monthly housing forecast projects 5.96 million home sales in 2010, with sales of existing homes growing by 10 percent, to 5.46 million. New-home sales are expected to rebound even more sharply in 2010, growing by 24 percent to 498,000.
"It appears that the economic recovery is here," Fannie Mae economists Doug Duncan and Orawin Velz said in a report summarizing their economic and mortgage forecasts, although they expect it will be weak compared to previous recoveries from deep recessions.
Real gross domestic product (GDP) grew at a 3.5 percent annualized pace in the third quarter, following five declines in the prior six quarters, they noted, but growth is likely to moderate in the final three months of the year before strengthening in late 2010.
The first-time homebuyer tax credit helped boost third-quarter home sales, which also led to a jump in real estate brokerage commissions, Duncan and Velz said in their report.
A 23.3 increase in the annualized rate of residential investment (home sales) in the third quarter was the largest in more than two decades, although it came from "extremely depressed" levels, the report said. Real residential investment was contributing to economic growth again, adding 0.5 percentage points to third-quarter GDP growth.
But a survey of consumers in October showed the percentage of respondents indicating that "jobs are hard to get" hitting a new high for the downturn. In their economic forecast, Duncan and Velz said they expect the unemployment rate to average 10 percent next year, up from 9.3 percent this year and 4.6 percent in 2007.
Their housing forecast projects that housing starts will surge by 35 percent next year, from a recent historic low of 462,000 projected starts in 2009 to 624,000 next year.
Fannie Mae expects national home prices will stabilize next year, with the median resale home price remaining essentially unchanged at $170,800. That’s a 0.2 percent decline from 2009 and a 22 percent decline from 2007. …CONTINUED