US housing metrics expected to improve later in 2014 on faster economic growth even though most metrics thus far have fallen short of expectations; single-family starts expected to rise 15% to 710,000 units, multifamily to grow 9% to 335,000: Fitch
April 22, 2014
– Link to Fitch Ratings' Report: U.S. Homebuilding/Construction: The Chalk Line (Spring 2014)
Despite an absence of underlying consumer momentum this spring, U.S. housing metrics should improve later in 2014 due to faster economic growth, according to Fitch Ratings in the latest edition of the 'Chalk Line'.
'Comparisons have been a challenge so far this year, with most housing metrics falling short of expectations from a year ago,' said Robert Curran, Managing Director and lead homebuilding analyst for Fitch Ratings. 'Though the severe winter throughout much of North America has restrained some housing activity, buyer sensitivity to home prices and finance rates and the slowing of job growth at year-end is resulting in diminished consumer momentum.'
That said, Fitch expects stable ratings for most issuers within the homebuilding sector in 2014, reflecting a continued, moderate cyclical improvement in overall construction activity as the year progresses. There is even potential for a few upgrades among some homebuilders.
Housing metrics should improve in 2014 due to faster economic growth, and some acceleration in job growth, despite somewhat higher interest rates, as well as more measured home price inflation. However, Fitch is tapering its forecast to reflect the subpar spring selling season. Single-family starts are now projected to improve 15% to 710,000 as multifamily volume grows about 9% to 335,000.
Thus, total starts this year should top one million. Fitch projects new home sales to advance about 16% to 500,000 and existing home volume to remain flat at 5.10 million. This is largely due to fewer distressed homes for sale. New home price inflation should moderate in 2014, at least partially because of higher interest rates. Average and median new home prices should rise about 3.5% in 2014.
Fitch will provide a brief recap of the fourth-quarter 2013 and comment on the expectations for first quarter-2014 and the remainder of the year during a teleconference to be held tomorrow at 1:00 p.m. ET (separate press release to follow).
Fitch's latest 'U.S. Homebuilding: The Chalk Line - Quarterly Update: Spring 2014' includes the following key updates and new features:
--Homebuilders' quarterly growth trends and margin statistics for 4Q'13, excluding the impact of non-recurring, non-cash real estate charges, are provided;
--Liquidity analyses are updated and historical liquidity profiles are presented for perspective;
--Recovery ratings are detailed for six single B or lower rated homebuilding credits;
--The variability of new home sales during recoveries is referenced;
--The disparity between new and existing home prices is discussed;
--Upcoming higher rates for HAMP-modified loans and HELOC resets are discussed;
--The growth and attraction of the VA loan program is reviewed;
--Trends in homebuilder gross margins, excluding impairment and write-offs and before interest expense, are chronicled;
--Various foreclosure statistics and related data are updated and a summary of historical foreclosure filings are presented;
--There are also updated comments on the Fed and interest rates, government housing legislation, HAMP, HARP, ARMs, AD&C financing, national home pricing trends, metropolitan home prices, jumbo loans, investors, lumber prices, demographics, sales of vacation and investor homes, starts built for rent, Fannie Mae/Freddie Mac, the FHFA, FHFA lawsuits, FHA, the MBS market, underwriting standards, and surveys about home ownership;
--Fitch's economic and construction forecasts for 2014 have been updated.
The report is available at 'www.fitchratings.com' under 'Latest Research' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'
Robert P. Curran, +1-212-908-0515
Fitch Ratings, Inc., One State Street Plaza, New York, NY 10004
Robert Rulla, +1-312-606-2311
Monica Delarosa, +1-212-908-0525
Sandro Scenga, New York, +1 212-908-0278
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