Fitch predicts single-family housing starts to rise by 10%

By Stevie Duffin Updated on 9/25/2013

In 2012, single-family housing starts will see a climb of 10%, according to Fitch Ratings. The firm’s latest U.S. homebuilding update also reports an 8% rise in new home sales.

After disappointing results for 2011, the ratings giant expects an erratic homebuilding market.

In its update, Fitch stated that single-family housing finished well below expectations at the beginning of the year with an 8.5% fall in starts. New home sales joined the decline by dropping 5.9%. However, existing home sales improved by 1.7%.

Regardless of housing market difficulties and the prediction of home prices remaining soft, Fitch explains 2012 will be favorable for builders. Less competitive rent options and new home inventories at historic lows will sprinkle the market.

While builders are rated as stable, Fitch’s outlook for homebuilders veers from stable to negative.

The starving job market continues to affect the sector with negative buying psychology. Fitch believes people fear buying a home during a decline where home prices are still vulnerable. Government has introduced new programs such as the HARP 2 Refinance program to help homeowners refinance their loans.

Fitch expects public homebuilding firms to commit resources to partially or undeveloped land, and add selectively to their developed lot holdings in future.

This strategy is supported by the still irregular flow of appropriately priced land from banks and other sources, states Fitch. Yet if the difficulties increase in the operating environment, builders are expected to act cautiously with land purchase to preserve cash.