Fitch: More Consolidation Among Major U.S. Homebuilders Likely

Business Wire, Jan 3, 2005

NEW YORK -- The top 15 U.S. homebuilders will continue to strengthen their foundations by expanding outward, and taking some smaller players with them, as Fitch Ratings expects more consolidation within the sector.

'In a slightly more challenging market, the large builders will continue to buy private, midsize companies, while some regional and multiregional homebuilders figure to expand into more markets and become more national builders,' said Robert Curran, Senior Director, Fitch Ratings. 'The financial ability to dominate major metropolitan markets through land acquisition should be an even greater competitive advantage in 2005 and beyond.'

Fitch expects annual home appreciation to hover in the 4%-6% range over the next few years, while as many as 10 million homeowners are added by 2013. An increasingly significant percentage of those additional homeowners will be immigrants and echo boomers. Also reflected in the household/home growth statistics will be the changing needs of baby boomers, who are in their peak home-owning years.

Barring any major interest rate increases or cyclical economic corrections, housing should not deteriorate meaningfully during the next year or so, and Fitch believes it is highly unlikely that housing demand should rise rapidly. However, Curran says that, 'If the stock market performs well during 2005, that could further spur higher income households to improve their housing accommodations, enriching the mix of sales to the advantage of builder margins.'

Fitch will be discussing the sector in more detail during a teleconference to be held on Wednesday Jan. 5 at 11:00 a.m. EDT (separate press release to follow). The Fitch report, 'U.S. Homebuilding/Construction: The Chalk Line - Quarterly Update: Winter 2004/2005' is available on the Fitch Ratings web site at 'www.fitchratings.com in the 'Corporates' sector page under 'Special Reports'. New features in this report include an analysis of the penetration of the fifty largest metropolitan markets by public homebuilders. In addition, Fitch has provided data on median sales prices for all the major metropolitan markets during the past few years up to the current quarter, as well as statistics for these metropolitan markets using the OFHEO price index.