Fitch: Healthy Improvements in Housing Metrics Still Expected

Though recent reports seem to indicate a hitch in the ongoing housing recovery, ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp maintains its expectations of ""a healthy increase in housing metrics"" through this year and the next.

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Noting that slowing price growth and climbing interest rates may have a diminishing effect on the market, Fitch is nevertheless keeping to its forecast of a ""continued, below trend line, cyclical rise off a very low bottom.""

""As we have noted previously, recovery in the housing market will likely occur in fits and starts and housing absolute numbers are still low relative to past cycles,"" the company said in its latest analysis. ""Expansion should not be expected as a total slope upward, as there are a number of variables that intervene.""

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With the current obstacles presented by the current slow-growth economy and limited lot availability, Fitch predicts single-family starts should improve by 17.0 percent in 2013, with multifamily starts gaining 20 percent. On the sales side, the agency expects existing-home sales to grow 8.5 percent, with new home sales expanding 20.0 percent.

Furthermore, even with 30-year mortgage rates hiking up nearly a full percentage point over the past few months, Fitch insists ""affordability in total is still attractive.""

""While borrowing rates may somewhat decrease the customer base, we believe stronger demand will be evident in trade-up housing where that buyer is better positioned financially to absorb higher home prices and increased interest rates,"" the company said.

At the point, Fitch says housing growth is being stymied most by declining affordability, widespread negative equity, and tight mortgage qualification standards, all of which are putting a drag on demand.

Also an issue is the shortage of developed lots for construction, which--coupled with rising material and labor costs--has put pressure on builders. However, the company believes those problems are subject to specific markets and are not prominent nationally.