Dive Brief:

• The 2017 outlook for the North American homebuilding and building materials sectors is positive as the housing market continues to see low interest rates, housing starts and new home sales sitting roughly 30% below historical trends and tight inventory, indicating pent-up demand, according to data from Moody’s provided to Construction Dive.

• The credit rating agency forecasts revenues in the homebuilding industry to rise at an annual rate of more than 10% for the next 12 to 18 months, while weighted industry gross margins will be more than 20% for the same period. Operating income in the building materials sector is also expected to grow by more than 7% during that time.

• Moody’s warns of risks ahead in the new year, including higher mortgage rates, restrictive underwriting standards for loans, a shortage of finishes lots and a lingering lack of skilled labor.

Dive Insight:

There is still a lot of optimism surround the housing market heading into 2017 despite some concerns being triggered by expectations that the Federal Reserve will raise its benchmark interest rate at the close of its December meeting today, which could drive up mortgage rates and increase borrowing costs for homebuilders.

Home prices are expected to continue rising, albeit at a slower pace in the new year. A forecast earlier this month from Realtor.com suggested a 3.9% rise in the average price and sale gains of 1.9% nationally in 2017. Home-price growth this year is expected to be around 4.9%.

With demand for homes outpacing supply in many parts of the country, builders remain optimistic for future building activity. The National Association of Home Builders/Wells Fargo Housing Market Index held steady from October with a mark of 63 in November.

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