Fitch: Spec Housing & High Single Family Starts A Non-Issue for U.S. Homebuilders ... For Now.

NEW YORK -- Current speculative housing levels and the consistently high rate of single-family housing starts have prompted some concern of late among investors, and while neither issue appears to be a short-term threat for U.S public homebuilders, that may change in the event of a consumer-led economic correction, according to Fitch Ratings in the latest edition of 'The Chalk Line'.

'A rising share of homes bought for investment purposes implies that the amplitude of a housing correction, when it occurs, could be intensified by investment housing dumped on the market, though most of the public builders have taken steps to discourage home purchase investors,' said Robert Curran, Senior Director, Fitch Ratings. 'Single family home construction, which has been at quite high levels for a number of years, cannot be sustained indefinitely, but demographics and other factors would likely support above cycle trend-line volume during a typical economic contraction.'

Mortgage rates are currently benign and even if they begin to rise during the second half of the year, housing metrics are likely to at least match the lofty 2004 levels. Talk of a national housing price bubble, along with concerns over the increase in adjustable-rate mortgage usage, remain overstatements in Fitch's opinion, though the use of more exotic mortgage vehicles such as zero down payment loans, option adjustable mortgages and no-documentation loans, bear witness to the liberalization of standards.

While demand for entry level and first-step trade-up housing remains strong, demand for more expensive housing has also improved of late, which according to Curran, 'is a plus if the stock market performs well during the remainder of 2005 as it may spur higher income households to improve their housing accommodations.'

Fitch will be providing its second-quarter update on the sector in detail during a teleconference to be held on Wednesday July 6 at 11:30 a.m. EST (separate press release to follow).

The Fitch report, 'U.S. Homebuilding/Construction: The Chalk Line -- Quarterly Update: Summer 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 2004 National Homebuilder Rankings, detailed statistics about existing single-family homes and condominiums/co-ops within existing home sales and historical sales prices of single family homes adjusted for 2004 prices, as well as average and median price per square foot of floor area in new one-family houses sold by location since 1992, and trends in homeowner and renter income vis-a-vis housing costs since the mid 1970s.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.