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Home | Daily Dose | Fitch: Housing Recovery Will Reflect Economic Performance
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Fitch: Housing Recovery Will Reflect Economic Performance

Fitch Ratings is the latest market commentator to blame the housing sector’s recent slowness on weather challenges.

In an analysis gauging the recovery’s progress, the ratings agency listed harsh winter weather across the country as one of the biggest factors moderating the housing recovery, though higher interest rates and home prices have also provided some drag.

“During the winter and early spring unusually cold temperatures and frequent, powerful snow and rain storms in various markets and even regions ... deterred potential homebuyers and delayed construction activities,” Fitch said. “Throughout last year builders aggressively raised home prices in most markets (especially coastal markets) and where possible elevated prices more modestly in the first quarter.”

Affordability will likely only deteriorate. Looking at 2014, Fitch expects new home prices to rise between 2.5–3.5 percent, with existing-home prices also moving up.

However, despite affordability and debt hurdles—particularly for young first-time homebuyers—the firm says overall mortgage affordability remains favorable relative to historic norms, and “[h]ome prices are undervalued when compared to incomes.”

Given the bigger picture, Fitch says, housing looks attractive in a historical context.

“[M]onthly housing statistics can be volatile and we still believe the market will show a moderate gain for the year,” analysts for the firm say in the report, adding that “the spring selling season will likely not set the tone for the rest of 2014.”

“The continued shape of the recovery will reflect the pace of economic activity and the availability of private capital to support mortgage growth above the floor in volume provided by the GSEs and FHA [the Federal Housing Administration],” Fitch said. “Stringent credit standards as well as escalating home prices and interest rates could also further moderate the pace of recovery.”

About Author: Tory Barringer

Avatar of Tory Barringer
Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

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