Fannie Mae Predicts New Construction Up in 2020

Courtesy of Fannie Mae; Image source Free photo 82976152 © creativecommonsstockphotos – Dreamstime.com

Lending giant Fannie Mae has dramatically increased its forecast for new construction in 2020 and beyond.  The adjustment is due to an increase in new home sales and single-family home construction starts during 2019. High consumer spending, low mortgage rates, and a healthy labor market are also all contributing to the higher predictions.

Courtesy of Fannie Mae

Housing and the Economy

The projected numbers for residential fixed investment (RFI), specifically, have increased ten times—from the 0.3 percent increase previously forecast for 2020 up to 3.4 percent. (According to the NAHB, “RFI is effectively the measure of the home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees.”)

Recent data from the Mortgage Bankers Association supports the positive outlook, with an increase of 27 percent in applications for new home purchases in November 2019 over November 2018.

In a CNBC report, Fannie Mae chief economist Doug Duncan stated that “housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years, further bolstering our modest-but-solid growth forecasts through 2021.”

A Step in the Right Direction, But…

The one million new homes represented by the increased numbers mark the highest forecast since the recent recession.  In 2005, though, there were 1.7 million single family starts, while the late ‘90s saw numbers consistently around 1.2 million. 

Also, due to short supply, high prices and low wages, not everyone believes that Fannie Mae’s extreme optimism is warranted. Even the original Fannie Mae report notes that “It will likely take several years, even at a more robust pace, for new construction to address the existing pent-up demand for additional housing, as suggested by a still-increasing share of 25- to 34 year-olds living at home with their parents.”

Happy 2020!

Happy New Year from Attainable Home. If you’re in the market for a new house in 2020, we hope you find one you love with a price you love as well!

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