Six quarters into the U.S. economic recovery, the nation remains on life support but is expected to start breathing on its own in 2011. Considering that the National Bureau of Economic Research declared the “Great Recession” officially ended in the second quarter of 2009, the subsequent upswing has not been as hardy or as pronounced as is typical for recoveries following deep recessions, from a historical perspective.

“We need more than the slow, weak, slogging recovery we’ve had so far,” said economist James L. Doti, president of Chapman University in Orange, Calif., during the 33rd annual economic forecast conference presented by the school’s A. Gary Anderson Center for Economic Research.

To the point, Doti focused on jobs — particularly in the construction industry — and the housing market as the key factors to getting the economy back on its feet again. With an estimated 7 million jobs lost during the recession, he worries that the number of jobs created so far in the recovery pales in comparison to past recoveries and at this rate it could take 10 years to recoup all the jobs lost.

“The scary thing is, what if they decide not to go back to work? It’s a dead weight loss to the economy,” Doti noted. 

As the Chapman report explains, while some industries have begun to recover, residential construction employment is still mired in the recession, having dropped another 10 percent during the six quarters of the recovery.

In a Wall Street Journal article appearing Sept. 10, 2010, co-authors Steven Gjerstad, a Presidential Fellow at Chapman, and Vernon Smith, co-winner of the Nobel Prize in Economics in 2002, and a Professor of Economics at Chapman, explain the key factors involved.

“In the Great Depression and in every recession since, residential construction has recovered before every other sector and its recovery has been far larger in percentage terms than in any other major sector,” the authors explained. “This is the slowest rebound in residential construction in any sustained recovery from a post-war recession. No policy will change this situation: the housing market is saturated with foreclosed homes. This is a fact that needs to be confronted: we are almost surely in for a long slog.”

Although the Chapman forecasters are calling for 1.7 million new jobs to be created in 2011 — enough to drop the nation’s unemployment rate by about 1 percent to 8.6 percent — the recovery is projected to remain mild next year.

High housing affordability and low mortgage rates won’t be enough, as housing starts are forecast to increase only 7.2 percent for the year, with unemployment and foreclosures stifling the drive to build more new homes.

“With the rate of unemployment near 10 percent, consumers have good reason to fear for their future economic prospects,” the Chapman report explains. “The current mortgage and foreclosure mess is also causing homebuyers to delay their purchasing decisions. On top of all that, there is a surfeit of empty dwellings both for sale and for rent.”

While housing prices turned barely positive in 2010, the Chapman forecast for next year calls for a larger upswing — although only 3.3 percent — in home prices due to continued consumer anxiety over the mortgage/foreclosure crisis and the oversupply of 1.6 million vacant units in the nation’s housing inventory.

Historically, Chapman forecasts have proven to be quite accurate in their yearly prognostications, given that certain unforeseen economic events can occur during the year that can cause sudden unexpected changes in direction.

If the oversupply of vacant homes does take years to work its way through the system as the Chapman forecasters expect, home affordability remains high and mortgage rates stay near their historic lows, 2011 may be the year for real estate investors and potential homebuyers to dive in and make those purchases before the economic recovery takes off full steam.RealtyTrac, the nation’s online foreclosure marketplace, helps you stay on top of current market trends.

Read more about the Chapman forecast for the U.S. and California. Let us know what you think about the prospects of purchasing distressed properties next year.

Brace yourself for another rough year in housing: The number of foreclosures is expected by many to increase in 2011 as more troubled mortgages work their way through the pipeline.

Next year could very well be a peak year for foreclosures, says Rick Sharga, a senior vice president at RealtyTrac, an online marketplace for foreclosure properties. The market is expected to tally about 1.2 million bank repossessions in 2010, up from 900,000 in 2009, he says. “We expect we will top both of those numbers in 2011.”

That’s partially due to issues the industry has faced with foreclosure processing that began in the fall and delayed a portion of foreclosures from being completed this year, he says. In the so-called robosigning controversy, some lenders halted foreclosures after learning procedures for signing off on foreclosure documents might not be in accordance with the law.

Continued high unemployment also is expected to exacerbate the foreclosure problem in the year ahead, as will upcoming interest-rate resets on adjustable-rate mortgages that will increase monthly payments for some homeowners, Mr. Sharga says.

In the meantime, data on the volume of loan modifications from the Treasury Department indicate that fewer borrowers were being approved for permanent modifications in recent months, says Greg Hebner, chief executive of MOS Group, a loss-mitigation service provider to mortgage lenders and servicers.

What’s more, there’s a growing feeling that modifying mortgages doesn’t get to the heart of the housing crisis: “There is the perception that the answer to this involves trying to get job growth,” which will help homeowners pay their loans and enable others to buy homes, said Jay Brinkmann, chief economist for the Mortgage Bankers Association, during a recent conference call with reporters.

For the longer term, however, the outlook for the foreclosure market is better since fewer homeowners are becoming delinquent on their mortgage payments. Thirty-day delinquencies are down 11% since the height of the recession in the first part of 2009, according to Mr. Brinkmann.

And loans 60 or more days past due are expected to fall nearly 20% by the end of 2011, to about 5% of all mortgages from an expected 6.2% at the end of 2010, according to a forecast released Tuesday from credit-reporting company TransUnion. Delinquency numbers are expected to continue to improve as unemployment slowly declines. (For its numbers, TransUnion uses a random sample of 27 million records from its database.)

“It’s good progress, but we are by no means out of the woods yet,” says Steve Chaouki, group vice president in TransUnion’s financial-services business unit. In a more normal market, 60-day delinquencies would be in the 1.5% to 2% range, he says.

So how does all this bode for housing prices?

High housing inventory, along with high unemployment, will likely add up to continued depressed home prices in the year ahead in many markets, says Nichole Jordan, banking and securities industry practice leader for Grant Thornton, an accounting and business advisory firm.

“It’s going to take several years to work through the excess inventory,” she says.

Ms. Jordan and others are looking to 2012 for anything resembling a recovery in housing. Even then, it’s going to be a long journey to stabilization; it historically takes five to seven years for prices to stabilize after a deep correction, Ms. Jordan says.

“Realistically, you’re not going to see home prices appreciate next year,” says Jason Kopcak, head of whole loans at financial-services firm Cantor Fitzgerald. In fact, many in the industry are expecting prices to fall another 10% next year on a national basis, he says. RealtyTrac’s Mr. Sharga says the national decline could be around 5%. Other economists are expecting prices to remain flat.

Next year “is going to be a wash, in terms of any meaningful recovery, and we’re looking toward 2012,” said Guy Cecala, publisher of Inside Mortgage Finance, during a conference call with reporters. And that’s assuming there are no other major problems or delays to contend with, he says.