(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: What Investors Want to Know: Under One Roof â
U.S. Housing Forum 2016
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882747
NEW YORK, June 20 (Fitch) The health of U.S. housing is relatively robust
heading into the halfway mark of the year, though a Fitch Ratings special report
discusses some proverbial minor cracks in the foundation that have surfaced.
2017 is shaping up to be a mirror image of 2016 for homebuilders. With interest
rates set to rise further, demographics and employment growth should be at least
as positive next year. This bodes well for first time buyers as they are
representing a higher portion of housing purchases with qualification standards
loosening further. One potential challenge for the housing recovery is labor
shortages, which are more acute than usual for this stage in a recovery and
could persist and become more widespread.
Home prices nationally appear to be on solid footing as far as RMBS is
concerned, though some overvalued regional pockets are growing. Home prices in
San Francisco, Phoenix and Las Vegas are all roughly 15% overvalued while most
major markets in Texas are overpriced by roughly 10-15%. Another headwind for
some undervalued housing markets is shadow inventory. New York's distressed
inventory in particular remains roughly three times higher than the level was in
2007. Additionally, the distressed supply will remain a drag in New York until
the end of 2018.
The somewhat uneven forward movement for single-family housing is in contrast to
multifamily REITs. Apartments are still in favor over homeownership
(particularly among millennials), a trend Fitch expects will be a continued plus
for multifamily REITs. That the sector is still able to deliver record rents and
occupancies in spite of a fairly tepid recovery for the broader economy is due
in large part to the lower home ownership rate.
A common question among CMBS investors is whether multifamily properties are
past their peak, to which Fitch says not yet. Even though they are decelerating,
multifamily operating fundamentals remain amongst the best in commercial real
estate. Millennials are now the largest segment of the US population, which
should be a plus for multifamily CMBS with many millennials likely to opt for
renting apartments before buying homes. That said, markets like Seattle,
Washington D.C. and Austin may be susceptible to declines due to additional
supply coming online in the near term while supply is causing growth in New York
and San Francisco to slow. Oil-rich markets like parts of North Dakota and
Texas are also areas of concern. Overall, rent growth is slowing and vacancies
are slowly increasing.
Fitch will be holding a webcast tomorrow at 10AM ET to discuss its outlook for
major U.S. housing segments for the remainder of this year. Click on the link
below if you wish to register for this event. There will be a brief Q&A session
after the prepared presentation, which is expected to last approximately 45
minutes.
https://ushousingforum2016.splashthat.com/
'What Investors Want to Know: Under One Roof - U.S. Housing Forum 2016' is
available at 'www.fitchratings.com' or by clicking on the above link. Additional
materials and research are available in Fitch's U.S. Housing Forum page, the
link of which is shown below.
https://www.fitchratings.com/site/structuredfinance/rmbs/ushousing
Contact:
Robert Curran
Managing Director, Homebuilding
+1-212-908-0515
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
Grant Bailey
Managing Director, RMBS
+1-212-908-0544
Britton Costa
Director, REITs
+1-212-908-0524
Tara Sweeney
Senior Director, CMBS
+1-212 908-0347
Christopher Wolfe
Managing Director, GSEs
+1-212 908-0771
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email:
sandro.scenga@fitchratings.com.
Additional information is available on 'www.fitchratings.com'
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