Moody's expects the industry to grow revenue by more than 10%
Moody’s has announced that it has maintained its positive outlook on the US homebuilding industry as positive employment, wage, and consumer confidence trends persist.
The outlook reflects the rating agency’s expectations for the industry’s fundamental business conditions over the next 12 to 18 months.
“We remain positive on the US homebuilding market, as momentum in key underlying drivers of housing demand offsets signs of nascent headwinds,” Moody’s Vice President Joseph Snider said. “The homebuilding expansion, now in year seven, and the overall economic expansion, now in year nine, show few signs of slowing, despite rising interest rates and trade war anxieties that are beginning to raise recession fears.”
Moody’s expects the industry to grow revenue by more than 10%, while average gross margins are projected to hover around 20%.
The rating agency also attributed its outlook to the entry of millennials into the housing market. The biggest population cohort in the US, millennials are purchasing and renting homes in powerful and increasing numbers.
“We view the homebuilding industry as still having significant further room for consolidation,” Moody’s Assistant Vice President Natalia Gluschuk said. “We believe acquisitions will be selective and well-spaced-out, and expect public-to-public large transformational purchases to continue as builders compete for market share, while public-to-private purchases will extend reach into new and existing markets.”
If revenue growth falls below 10% or gross margins slip sustainably below 20%, Moody’s said it may change its outlook on the industry to stable. However, the rating agency said that any such change would likely be caused by an event-driven shock instead of industry fundamentals.
