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Fitch: Harsh Winter, Higher Rates Dampen US Housing Recovery
April 7, 2014 / 2:36 PM / in 4 years

Fitch: Harsh Winter, Higher Rates Dampen US Housing Recovery

(The following statement was released by the rating agency) NEW YORK, April 07 (Fitch) Harsh winter weather across the US is among several factors moderating the housing market recovery, according to Fitch Ratings. Higher rates and home prices have cut into affordability, though housing still looks attractive from a historical perspective. Various housing metrics reached a bottom for this cycle in 2011 or 2012. The pattern of recovery so far is a moderate expansion rather than a traditional v-shaped recovery. The continued shape of the recovery will reflect the pace of economic activity and the availability of private capital to support mortgage growth above the floor in volume provided by the GSEs and FHA. Stringent credit standards as well as escalating home prices and interest rates could also further moderate the pace of recovery. Fitch expects new home prices to increase between 2.5% and 3.5% this year. Existing home prices should also rise, which might precipitate more home sales activity. However, affordability is still out of range for many first time buyers dealing with excess student loans and tough lending standards. Overall mortgage affordability remains favorable relative to historic norms. Home prices are undervalued when compared to incomes and also relative to commercial property prices. The total U.S. housing market didn't show much improvement during recent months, as reflected in some weak or worse-than-expected data reports. But monthly housing statistics can be volatile and we still believe the market will show a moderate gain for the year. Some customer segments (trade-up and luxury) are outperforming others (entry level) and while the weather overlay has been dreadful, the spring selling season will likely not set the tone for the rest of 2014. First quarter net order comparisons for public homebuilders that have already reported, such as Lennar and KB Home, were positive but clearly affected by weather and other issues. During the winter and early spring unusually cold temperatures and frequent, powerful snow and rain storms in various markets and even regions (particularly the Midwest) deterred potential homebuyers and delayed construction activities. Throughout last year builders aggressively raised home prices in most markets (especially coastal markets) and where possible elevated prices more modestly in the first quarter. We expect stable ratings for the majority of issuers within the homebuilding sector in 2014, reflecting a continued, moderate, cyclical improvement in overall construction activity during the period. However, financial performance will vary among issuers, partially due to customer, geographic and product emphasis. We also believe housing should benefit from a slowly expanding economy. As by-products of a mildly growing economy, employment should show moderate gains and consumer confidence is expected to further improve. For additional information on the U.S. housing market, please see our special reports which are both available on our Website www.fitchratings.com : 2014 Outlook: U.S. Housing and Homebuilders, A Continued Mild Recovery, and U.S. Homebuilding/Construction: The Chalk Line. Contact: Robert P. Curran Managing Director Corporates, Homebuilding +1-212-908-1515 Robert Rulla Director Corporates, Homebuilding +1-312-606-2311 Kellie Geressy-Nilsen Senior Director Fitch Wire +1-212-908-9123 Fitch Ratings, Inc. One State Street Plaza Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available on www.fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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