The ratings agency said it expects more consolidation within the sector as many of the larger homebuilders will take some of the smaller players with them. It added that more consolidation within the sector is expected.
"In a slightly more challenging market, the large builders will continue to buy private, mid-size 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," Curran said.
Fitch expects annual home appreciation to hover in the 4 percent to 6 percent range over the next few years, while as many as 10 million homeowners are added by 2013.
However, Curran said 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."