US homebuilding industry outlook is positive - Moody's latest is "Homebuilding Industry -- US: Strong Employment, Low Interest Rates Keep Outlook Positive"
Moody's citing underlying drivers supporting the sector to continue
- currently low unemployment rates,
- low interest rates
Moody's expects homebuilders' revenues will increase by more than 10% in the next 12 months & industry's gross margins will exceed 20%
- For 2018, industry revenue is anticipated to grow in excess of 10%, albeit gross margins will be challenged to achieve the same benchmark.
- "Ironically, two of the chief positive underlying factors could ultimately lead to a pullback," says Joseph Snider, Moody's Vice President -- Senior Credit Officer. "If history is any guide, currently low unemployment rates, especially when combined with low interest rates, can lead to unsustainable asset bubbles."
Housing demand is expected to be driven in growing amounts by millennials, the largest population cohort in the US, while active adult housing and first-time homes are becoming a new "sweet spot."
Downside risks to its outlook
- homebuilding sector is in year six of its current expansion
- mortgage-underwriting standards remain restrictive
- any housing-finance reform may adversely affect mortgage rates and availability
- A number of factors could alter the industry outlook, including but not limited to a burst asset bubble, a global recession, a foreign conflict that dramatically affects US consumer confidence, a spike in oil prices or interest rates, and flight by foreign buyers.
