By Ian McKendry

WASHINGTON (MNI) – U.S. home builder confidence surged in July and
now Fitch Ratings is forecasting double-digit growth in some sectors of
the housing market.

“Housing appears more undervalued versus incomes than at anytime in
the past 35 years,” Fitch Ratings Managing Director Robert Curran said
on a call Tuesday to discuss the summer edition of a report titled: U.S.
Homebuilding/Construction: The Chalk Line.

“In a slowly growing economy with relatively similar distressed
home sales competition, less competitive rental cost alternatives, and
new home inventories at historically low levels, single-family housing
starts should improve about 12%, while new home sales increase
approximately 10.5% and existing home sales grow 5.6%,” Fitch said in
the report.

Curran said Fitch upgraded its housing market outlook from the
spring but noted that the ratings agency is forecasting a “moderate rise
off a historically low bottom.”

Tuesday, The National Association of Home Builders reported that an
index measuring home builder confidence rose to its highest level since
March of 2007.

“Builder confidence increased by solid margins in every region of
the country in July as views of current sales conditions, prospects for
future sales and traffic of prospective buyers all improved,” NAHB
Chairman Barry Rutenberg said in a statement.

The NAHB report was just the latest of what has been stronger
housing data since the spring.

In a Tuesday morning New York Fed blog post, Fed researchers
examined housing data at a county level and compared it to national
housing statistics.

“The stabilization of the housing market suggested by various
national indicators is corroborated by looking at a number of indicators
disaggregated to the county level,” the researchers wrote.

However, they added that most local housing markets have a long way
to go before being deemed healthy.

High Frequency Economics’ Chief Economist Jim O’Sullivan also
pointed out in a research note that housing doesn’t pull the same weight
that it used to in terms of impacting economic growth.

“While housing is in recovery mode, the sector is much less
important than it used to be. Residential investment directly accounts
for 2.3% of GDP now, down from a 6.3% peak in 2005,” O’Sullivan wrote.

Fitch Ratings’ Curran said that while Fitch was more optimistic
about the housing market they had actually downgraded their economic
growth forecast for 2012 and 2013.

More housing data will be released for the month of June this week.
The census bureau will release housing starts data at 8:30 a.m ET
Wednesday and the National Association of Realtors will publish the
existing-home sales report at 10:00 a.m Thursday.

The median estimate of economists surveyed by MNI calls for 745,000
new homes started in June on a SAAR basis which would be more than a 5%
increase from the 708,000 rate that was reported in May.

Analysts credit the 7.9% increase in building permits in May in
combination with a rebound from a 4.8% decrease in housing starts for
their more optimistic forecast.

In the same MNI survey, the median estimate for June existing-home
sales was 4.65 million on a SAAR basis which would be up from the 4.55
million pace that was reported in May.

Pending home sales, a forward looking indicator of existing-home
sales increased 5.9% in May after falling 5.5% in April.

** MNI Washington Bureau: 202-371-2121 **

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