Homebuilders’ Revenue Growth Expected in 2016, 2017

U.S. homebuilders are in a good place right now. They’re reaping the benefits of wage and employment growth, tight inventories and attractive mortgage rates, according to Joseph A. Snider, Moody’s Investors Service vice president– senior credit officer.

As housing starts rise and new home sales grow, publicly rate homebuilders should see their revenues rise by more than 10% this year and next, Moody’s said. That’s despite the fact that while housing affordability is on the decline, it remains stable in most of the country. "Household formation is increasing and adding to the deficit in available housing supply," Snider said.

Also, Moody’s expects to see publicly rate homebuilders continue to outperform the private sector—an ongoing trend seen last year also when total housing starts and new home sales saw gains of 10.9% and 14.6%, respectively. But publicly rate homebuilders did even better, tallying 17% and 14% growth in revenues and pretax income, respectively, last year.

The industry forecast is not all cloudless skies, however. Strict mortgage lending underwriting standards, for example, are at the top of risks for the sector. “The risk of increasing interest rates also creates a potential headwind for the housing industry, as a near-term rate rise seems likely after the Federal Reserve has kept interest rates low for more than seven years,” Moody’s economists said.

- Nicholas Stern, editorial associate

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