Housing construction may improve next year, says Chicago Fed

Analysts with the Federal Reserve Bank of Chicago say that new home construction may climb to greater rates this year and next year given sustained employment improvement and steady moving activity.

The bank's annual economic forecast predicted that nationally, housing starts will reach a pace of 600,000 by the end of this year, up from 550,000 a year earlier. Housing growth will persist into 2011, with the bank predicting housing starts to reach 690,000 by the end of next year.

New home demand may increase as the nation's employment situation improves slightly, giving more Americans the financial confidence to consider moving into new homes. The Chicago Fed also forecast the national unemployment rate to fall to 9.2 percent in 2011, from 9.8 percent today.

The bank surveyed 30 economists at its outlook symposium a week ago to determine its predictions. The report also included extensive forecasts for the economy as a whole, with the nation's financial picture expected to improve somewhat in 2011.

At the same time, recent bank actions to lower mortgage rates have done little to spur moving activity nationwide. On Sunday, Federal Reserve chairman Ben Bernanke told 60 Minutes that he would consider actions to lower rates yet again if the economy doesn't improve in the near future, a scenario that would make moving into a new home even more affordable.
 

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