Housing likely to contribute to 2013 GDP
Housing will contribute to gross domestic product in 2013, barring some unforeseen double-digit recession or economic downturn, Fitch managing director Robert Curren said Tuesday.
Fitch projects single-family housing starts will grow 18% in 2013, with new home sales rising 22% and existing home sales edging up 7%.
The average single-family new home price edged up 3.5% in 2012 and is expected to rise 3.8% in 2013, Fitch said.
"Attractive home prices, persistently low mortgage rates and a rise in nominal incomes results in superior affordability and valuations," Curren said. "Mortgage rates remain near their all-time recorded lows and housing appears more undervalued versus incomes than at any time in the past 35 years."
Yet, Curren stopped short of making home sales and price growth a sure thing, with the economy still battling headwinds and mortgage lending still tight as lenders battle new rules, changing demographics and debt overhang that's delaying new borrowers.
"Although home prices have stabilized and started to improve, home price appreciation will tend to be relatively narrowly focused and very sensitive to local economic, employment, and supply issues," Curren wrote. "Demand will continue to be affected by widespread negative equity, challenging mortgage qualification standards and excess supply due to foreclosures."
Curren described housing as a "net plus for the economy" in 2012 and said it could become a more robust jobs generator this year.
Builders also are braced to continue positive growth trends first established last year. Eight of the nation's public builders expanded the number of lots they control from the second to third quarter of 2012.
D.R. Horton, K. Hovnanian, KB Home, Lennar, Meritage, M/I Homes, NVR, Ryland, Standard Pacific and Toll Brothers ended up with a higher lot count when comparing late 2012 to 2011.
One trend Fitch is following is builders' desire to entire into partnerships and joint ventures with other firms. An example is KB Home's recent decision to launch a home lending firm with its existing preferred lender, Nationstar Mortgage.
"In any case, some builders have been required to commit more capital to certain joint ventures," Curren said. "In addition, there was and is concern that financially impaired partners may result in certain joint-venture debt being forced on the remaining partners."
Either way, Fitch expects builders to lean more heavily on strategic mergers or consolidations in the years ahead.
Curren says it's possible larger builders will acquire private and midsized companies, mirroring the Pulte Homes and Centex merger a few years back.
The merging firms will focus on expanding market share or regional reach.
Overall, housing and homebuilding activities are likely to offer ongoing support to the country's economic recovery in 2013, Curren said.
But he added, severe economic issues – or legislative changes like the potential elimination of the mortgage interest deduction – could diminish potential economic gains from housing.