U.S. Housing Economy Growth to Slow, Fitch Forecasts

(Thumbnail Illustration: Mike Sorohan)

The U.S. housing economy growth is poised to decelerate due to cost pressures from higher tariffs and immigration restrictions plus weakening consumer and homebuilder sentiment, according to Fitch Ratings, New York.  

“Trade protectionism will increase prices on key material construction inputs,” the ratings agency said in its latest U.S. Cross-Sector Housing Monitor. “Foreign born, non-citizen workers represent an overwhelming share of key specialty construction occupations, and immigration restrictions are likely to raise labor costs.”

“Tariffs and labor concerns contribute to our forecasts for flat to declining housing starts and completions in 2025 relative to 2024,” the report said. Housing starts declined by 2.9% year-over-year in February, and though home inventory has improved, it remains below pre-pandemic levels.

Limited supply will likely support home price growth of between 3% and 4% this year, although growth will vary by region, Fitch forecast. Northeastern states have seen much faster growth than southern states, which have higher new home inventory.

“We are forecasting a 4% increase in new home sales, exceeding pre-pandemic levels, supported by homebuilder incentives. Existing home sales are predicted to rise by 5%, comparable to Great Recession lows,” the report said.

Fitch noted mortgage delinquencies have been rising since 2022 due to pressures on weaker borrowers with elevated mortgage rates and rising all-in homeownership costs. “Nevertheless, delinquency rates remain low due to the prevalence of low fixed-rate, 30-year mortgages,” the report said. “Rising debt-to-income ratios will contribute to slightly weaker Fitch-rated RMBS loan performance in 2025, with serious delinquencies increasing to 1.7% from 1.4% in 2024.”

The report noted Fitch anticipates a single 25 basis point interest rate cut in 2025, leaving the Fed funds rate at 4.25% by year-end.