Today’s rising interest rates have some market participants concerned, according to Moody’s Investors Service. The survey reports that crimped housing supply, coupled with the higher cost to borrow, is chipping away at optimism. Some participants, however, feel that conditions in their housing-related domains are going seriously downhill, Moody’s notes.
For the second year in a row, in tandem with its annual U.S. Housing and Housing Finance Conference, Moody’s surveyed debt issuers spanning a variety of industries exposed to the housing space. The company’s survey includes 86 answers from issuers in corporate finance (homebuilders), financial institutions (mortgage lenders and insurers), public finance (housing finance agencies), and structured finance (RMBS issuers and single-family/multifamily REITs).
“Tightening housing supply and increasing interest rates will have the biggest effect on issuers as they drive up the cost of homeownership—issuers expect more substantial price increases than last year—and potentially shut out many first-time homebuyers,” Moody’s reported.
Besides housing supply (a new category for 2018), the other most pressing concern on industry members’ minds is demographics, Moody’s says.
“Market participants expect demographics to become a more significant driver of industry conditions over the short- and long-term as millennials entering the housing market and downsizing baby boomers compete for the same smaller homes and rentals,” Moody’s reported.
Amid moderating concerns over tax rates and regulatory issues, the company notes, issuers feel that visibility in their industries is “medium to good.” This is a positive marketplace barometer, indicating issuers feel upbeat about the ability to move their companies in the right direction in the foreseeable future.
As for GSE reform, most respondents don’t expect it to happen until the next presidential election. “Ninety-one percent of respondents feel that at least one of the two GSEs—Fannie Mae or Freddie Mac—will survive any reform measures, while 34 percent feel that there will be no government guaranty on conforming mortgages,” the survey reported.