Fitch: 'Jaw Toothed' Recovery Likely For U.S. Homebuilders

Recent statistical and anecdotal information points to a bottom for U.S. housing, though early-stage recovery will be more muted than average, according to Fitch Ratings in the latest edition of the 'Chalk Line'.

Single family housing starts and new home sales have regularly, if not consistently, been showing improvement in recent months, as have new home inventories, home pricing and consumer and builder sentiment. That being said, 'During the first 12-15 months off the bottom, the housing recovery may appear jaw-toothed as substantial foreclosures now in the pipeline surface as distressed sales, while meaningful new foreclosures arise from Alt-A and option adjustable-rate mortgage resets,' said Managing Director and lead U.S. homebuilding analyst Bob Curran.

Nonetheless, Fitch has raised its forecasts for housing metrics for 2009 and 2010, which according to Curran represents 'the first positive adjustments in housing metrics in approximately three and a half years.'

Fitch will provide a recap of second quarter 2009 (2Q'09) as well as discuss the outlook for calendar 2009 and 2010 during a teleconference to be held this Friday, Oct. 16, 2009 at 11:00 a.m. ET (separate press release to follow). Fitch's 'U.S. Homebuilding: The Chalk Line - Quarterly Update: Fall 2009' is available at www.fitchratings.com under the following headers:

Sectors >> Corporate Finance >> Corporates >> Research

Key updated and new features in this report include homebuilders' quarterly growth trends and margin statistics for second quarter-2009, excluding the impact of non-recurring, non-cash real estate charges, and information about the calendar second quarter and fiscal year-to-date option write-offs and land value write-downs. Fitch assesses actual reductions in inventories (excluding real estate write-downs) since peak levels and discusses the effect of the FAS 109 deferred tax valuation adjustment. Homebuilder covenant and liquidity analyses are updated and historical liquidity profiles are presented for perspective. Rankings are provided for the top 10 builders in 2008 as well as information on the leading 100 builders. Major public builders' positions in the top 50 metropolitan housing markets are presented for 2008. Current challenges for the FHA are also analyzed. There is additional input on the mortgage market and government housing support programs. And our economic and construction forecasts have been updated for 2009 and 2010. These are the first increases in projections in about 3 1/2 years.

Additional information is available at www.fitchratings.com

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