Dec. 18 (UPI) -- New single-family housing starts will surge 10 percent next year and result in more than 1 million new deliveries in 2021, federal mortgage agency Fannie Mae said in a study Wednesday.
The mortgage giant's Economic and Strategic Research Group said the expected increase is due mainly to a resilient U.S. economy, which it forecasts to grow by 2.1 percent in 2020 and strengthen domestic labor markets and consumer spending.
The housing construction industry is expected benefit from those trends in 2020 and is now "poised to become an engine of overall economic growth again," Fannie Mae chief economist Doug Duncan said in the report.
"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," he said.
Other factors leading to the positive forecast included the likelihood of the Federal Reserve holding interest rates steady through next year, negotiators agreeing to "phase one" of a U.S.-China trade deal and signals that global growth will accelerate in the coming year.
While the 10 percent hike would represent the strongest activity since the 2008 financial crisis, it would still register well below the peak of 1.7 million starts in 2005 and the strong pace recorded in the late 1990s.
Housing demand from millennials is also fueling the surge, Fannie Mae said. Even at the faster pace, it noted, it will take several years for new construction to catch up with current demand that's coming mainly from 25 to 34 year olds still living with their parents, Wednesday's analysis said.
A shortage of U.S. homes for sale, especially at the lower end of the price scale, is also pushing builders to create smaller homes for younger and first-time buyers.