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Analysts Predict Comeback for New Homes in 2015

Fitch Housing Forecast [1]After trudging along a sluggish track in 2014, the market for new homes is projected to make a comeback next year, Fitch Ratings [2] says in a new forecast.

Looking at the year ahead, the ratings firm predicts a bounce in both supply and demand for homes as the economy continues to steadily expand and both employment measures and consumer confidence see improvement. With housing starts and new home sales expected to advance, Fitch sees a possibility of higher revenues for homebuilders and positive rating actions for some companies in the sector.

"The likelihood of higher home deliveries could position housing revenue to jump by 20–25 percent next year," said Bob Curran, managing director at Fitch.

The agency's forecast echoes predictions in a recent survey of economists conducted by the Wall Street Journal [3]. The panel of experts called for housing starts to jump to 1.22 million in 2015, a leap from the expected 1.05 million new units started this year.

Other recent predictions are also hopeful. It its own forecast for 2015 [4], Freddie Mac projected total housing starts would pick up 20 percent in the next year, with single-family homes driving that increase.

Meanwhile, homebuilder sentiment [5] continues to trend on the positive side, fueled by higher hopes for future new home sales.

While analysts seem optimistic, whether or not that confidence bears out in the next year is the real question. Last year at this time, economists polled by the Wall Street Journal forecast an increase in housing starts to 1.11 million. Looking back at the last 12 months, they're now saying the housing sector proved to be the most disappointing performer in 2014.

In other predictions, Fitch also predicts home prices will rise 2.7 percent in the next year, an increase spurred by supply conditions.

"New home pricing will benefit from still-restrained levels of new home inventory, though home price increases should level off to the low single digits," Curran said.

Also improving in Fitch's outlook is the level of foreclosures in the next year, which are expected to drop further as more borrowers break free of "underwater" status.