The A. Gary Anderson Center for Economic Research at Chapman University released the results of its 33rd annual economic forecast for the U.S. and California this week.
According to the forecast, the economic recovery will continue at a relatively slow pace in 2011, but will be enough to generate 1.7 million net new jobs nationwide, which will cause the national unemployment rate to drop about one percent, to 8.6 percent, by year-end 2011.
Although housing affordability is at historically high levels, the forecast finds there will be no sharp rebound in housing next year. The forecast calls for housing starts to increase 7.2 percent, from 600,000 to 640,000 units. Home buyers’ concerns about unemployment and the ongoing problems in the mortgage industry, coupled with a large excess supply of vacant units on the market, will constrain production of new homes.
The forecast also calls for continuing improvement in resale housing prices in 2011, with housing prices nationwide increasing 3.3 percent. Like new housing starts, home prices will be constrained by consumer anxiety as well as the significant overhang of vacant housing units on the market.
In California, employment is forecasted to increase by 1.2 percent—167,000 net new payroll jobs, with the job recovery positively affecting housing demand. And the expected rebound in income, low mortgage rates, and lower home prices are helping to keep housing affordability at historical highs, leading to increased housing demand, particularly for first-time home buyers.
A pickup in new residential construction, high inventory of resale homes, and existing shadow inventory will mostly offset the positive factors influencing demand.