Jan 30 (The following statement was released by the rating agency)
U.S. home prices are continuing their upward push nationwide, though the trend faces strong
headwinds from persistent labor market struggles and depressed median wages, according to the
latest sustainable home price update from Fitch Ratings.
Home price growth is maintaining near-record pace in much of the western US as
supply remains tight. New home sales are limited by low construction rates.
Additionally, existing inventory is restricted by both underwater borrowers
unable to sell their homes and a large number of properties still mired in
extended foreclosure proceedings. a€˜In markets with short supply, increased
demand from institutional investors and individual borrowers returning to
recovering markets has created the conditions for the sharp climb in prices,a€™
said Director Stefan Hilts.
Unemployment is now down to its lowest level in five years (6.7%). However, a
closer look at this aggregate number shows that much of the improvement is
driven by workers dropping out of the labor force. a€˜Without a strong employment
base, it is difficult to find sustainable support for the rapid growth in home
prices across much of the country,a€™ said Hilts.
GDP growth is another area where strong numbers may be disguising economic
weakness. Last quartera€™s annualized growth rate of 4.2% marked the strongest
numbers in nearly a decade. However, median wages remain depressed as the
economic base has declined in many traditional employment sectors, with 4Qa€™13
median household income 8% lower than in 1999 in real terms. a€˜With median wage
levels stagnant, many potential buyers do not have the resources necessary to
participate in the home ownership market,a€™ said Hilts.
Fitch's 'U.S. RMBS Sustainable Home Price and Economic Risk Factor Report a€“
January 2014' is available at 'www.fitchratings.com' or by clicking on the below
Link to Fitch Ratings' Report: U.S. RMBS Sustainable Home Price and Economic
Risk Factor Report a€“ January 2014