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2012 a Possible Ray of Light for Construction

by Chicago Agent

After a some tough years, 2012 may very well be the glimmer of hope builders have been eagerly awaiting.

Leave it to a credit ratings agency to be the bearer of pleasant news. Fitch Ratings, one of the major ratings agencies in finance, stated in a report released earlier today that economic conditions in 2012 may be more accommodating to construction, a sector of the economy that has faced increasingly difficult circumstances after the downturn in housing.

Along with improvements in construction activity, Fitch’s report stated that an expected expansion in the national economy would also help construction, as would the relatively strong liquidity that most builders will have at the start of the new year.

In a piece on HousingWire, Kerri Panchuk noted that Fitch’s was not the only independent analysis to predict good things for building in 2012.

“FBR on Monday said a declining unemployment rate and a move to less rigid lending standards will help homebuilders in 2012,” Panchuk wrote. “The company even gave outperform ratings to builders Lennar Corp. and Standard Pacific Corp.”

As Panchuk notes, though, the ultimate factors on how well construction performs in 2012 will be geography, the builder’s products, and most importantly, who the firm’s customers are.

And those three areas may be impacted by some increasingly tricky developments in housing. Home values are expected to decline over the next couple of months, and foreclosure inventories, after remaining stagnant through much of 2011, will most likely increase in early 2012, as banks begin working through the backlogs of foreclosed properties that developed after the robo signing scandals of 2010.

Robert Curran, the managing director and lead homebuilding analyst for Fitch, was quoted in Panchuk’s article saying that housing, for the first time in recent memory, “is not fulfilling its role as a key impetus to the early stages of an economic recovery.”

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