Fitch Forecasts Continued Improvements for Housing

""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp is predicting a continued recovery into 2012, according to a recent report titled _U.S. Homebuilding and Construction: The Chalk Line_.

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A slowly growing economy combined with ""somewhat diminished distressed home sales competition, less competitive rental cost alternatives, and new home inventories at historically low levels"" led the ratings agency to predict growth for housing starts and home sales into 2012, with further moderate improvements into 2013.

In the report, Fitch said it expects single-family housing starts to improve 19 percent and new home sales should spike 19.5 percent.

""The public homebuilders generally reported a financially strong first half and excellent spring selling season. This seems to set the stage for a solid recovery year in 2012,"" the report stated.

In addition, the ratings agency also forecasts strong sales, with new home sales expected to increase about 19.5 percent and existing home sales 8.5 percent.

The future of home prices also looks positive, with Fitch expecting the average and median single-family new home prices, as measured by the Census Bureau, to improve 3.2 percent in 2012 and further increase 2.5 percent into 2013.

While the report expects the housing market to be poised for gains in terms of construction, home sales, and prices, the report also pointed to challenges that could change the current direction of housing.

Fitch said a sharp rise in mortgage rates (which was said to be unlikely), a tightening in credit terms, or a double-dip recession could cause Fitch to revise its forecast into a more negative one.

The report also discussed the issue of inventory. While it seems supply is shrinking in many areas, there is still an excess supply of existing homes in certain markets. According to the report, as of August, supplies for new and existing homes equated to about 4.5 months and 6.1 months, respectively. In addition, the report noted estimates from Capital Economics on shadow inventory, which calculated about 4 million homes could be in the shadows as of September. Fitch said its most recent estimate shows there are about 6.20 million homes in the shadows, including 1.10 million non-agency properties.