Though most forecasters are bearish on the outlook for property values next year, due largely to the overhang of foreclosures that is worsening with the self-imposed moratoria by several big lenders, a consensus is building for improved demand by next summer as the overall economic picture brightens.
The latest to weigh in is Fannie Mae’s Economics & Mortgage Market Analysis Group, which predicted last week in their November housing forecast that they still believe improving financial conditions and recent encouraging signs from the labor market should set the stage for an above-par growth trend by the middle of 2011.
However, the Fannie forecasters see a modest sales increase of only 3.2 percent on the year, much less than previously. In fact, they have cut their predictions every month since May, when they forecast a 12.4 percent total sales increase in 2011. Their November forecast actually reduced the growth in sales Fannie predicted previously. In October, they forecast a total 2011 sales increase of 3.9 percent. In September was 4.0 percent.
Last month, most economists were less optimistic. Exactly half of the 109 economists surveyed by MacroMarkets during the first two weeks of October expected to see the onset of recovery in 2011; the balance don’t expect don’t expect a rebound to take hold until sometime in 2012 or later. Fewer Economists See Housing Recovery in 2011. See Fewer Economists See Housing Recovery in 2011.
Fannie’s forecasters said that even with stronger than expected economic growth in the third quarter, the group forecasted continued sluggish growth at least through the first quarter of 2011. By the end of the year, however, total annual sales will reach 5.3 million new and existing homes, compared to 5.1 million this year.
Foreclosure issues are expected to keep home sales subdued in the final quarter of 2010 but the group expects to see a gradual improvement in 2011. “For all of 2010, total home sales are projected to decline by about 8 percent from 2009, marking the bottom of annual total home sales in this cycle,” said Fannie Mae Chief Economist Doug Duncan. “We expect home sales to increase by about 3 percent in 2011. However, the pace of recovery will largely be determined by labor conditions. If hiring improves at a faster pace than expected, home sales will likely see a stronger gain in 2011 and vice versa.”
Last month Fitch’s economists issued a more aggressive forecast for existing sales. New home sales are forecasted to fall 13.9 percent in 2010 and grow 14 percent in 2011. Fitch expects existing home sales to decline 7.5 percent in 2010 and increase 6 percent in 2011.
Friday, PMI’s economists joined the fray with a positive spin in their monthly forecast. “Improved economic data over the past month may be pointing to a pickup in the economy for the fourth quarter. The key question, however, is whether any pickup in the economy can be sustained - or increased - in 2011. At this point the answer looks like yes, but there are still risks that could keep growth from accelerating next year, or could even slow the economy further…The stronger economy (especially as shown by better labor market indicators), near-record low mortgage rates, and distance from the end of the second homebuyer tax credit suggest that the trend in home sales should continue to be upward,” said Chief Economist David Seiders and PMI’s team of economists. PMI now foresees a rise in existing sales of 8.9 percent and of new homes of 32.4 percent.