Home sales and construction will improve this year, contributing “modestly” to economic expansion after acting as a drag on growth since 2006, according to a Fannie Mae (FNMA) forecast released today.
Sales of new and existing homes are likely to increase 3.5 percent and housing starts are projected to rise 16 percent, fueled by improvement in apartment development and a rebound in single-family house construction, according to the report by Douglas Duncan, Fannie Mae’s chief economist, and Orawin Velz, a director in its Economics and Mortgage Market Analysis group.
“With an expected improvement in housing activity in 2012, residential investment should start contributing to growth, albeit only modestly initially,” Duncan and Velz wrote.
The housing market has been held back by weak demand as high unemployment and concerns about job security prevent buyers from taking advantage of falling home prices and borrowing costs, Duncan said in an interview yesterday at Bloomberg’s New York offices.
“We see an incremental increase only in the number of residential units that get moved through sale,” Duncan said. “It’s another sort of holding pattern.”
Mortgage rates will continue to provide support for the market, rising only slightly in 2012, according to the report. The average rate for a 30-year fixed loan fell to 3.89 percent in the week ended yesterday, the lowest in records dating to 1971.
