The combination of higher building material costs and rising mortgage rates will test the pricing power of US homebuilders, says Fitch Ratings. We expect demand to remain strong through 1H21, providing support for modest price increases on newly constructed homes, but trends could soften in 2H21, given increasing affordability issues and tougher yoy comps. Homeownership for entry-level and first-time homebuyers will increasingly become a challenge if higher costs are passed on to customers and the upward trend in mortgage rates continues.
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