Fitch: U.S. Home Builders Primed for Solid Spring

Fitch Ratings, New York, said steady order growth and strong backlogs should support healthy financials for the U.S. home building sector entering the spring selling season.

The Fitch Chalk Line report cited strong 2015 housing data: single-family starts expanded by nearly 11 percent while multifamily volume increased by 11.5 percent. New home sales improved by nearly 15 percent while existing home sales rose by 6.5 percent.

Fitch Director Robert Curran said the upcycle for housing should continue in 2016. Fitch projects single-family starts to improve by 11.5 percent and multifamily volume to grow by 6 percent. Fitch also expects new and existing home sales to increase by 14.5 percent and 4 percent, respectively.

“Low oil prices, robust employment growth, pent-up demand and steep rent increases should help support the housing upturn for at least the next six to 12 months,’ Curran said. “Additionally, the continued moderate easing in credit standards is enticing more first-time homebuyers to enter the market.”

Potential impediments to the market include contagion from the weak Chinese economy influencing the U.S. economy, volatile financial markets, and an adequate, reasonable cost labor supply are potential impediments.

Curran said Fitch expects stable ratings for most issuers within the homebuilding sector during 2016, reflecting a continued, moderate cyclical improvement in overall construction activity. “However, there is potential for a few positive outlooks and/or rating upgrades,” he said.