Homebuilders will weather slowdown
Most firms' diversity, 'conservative' debt help in expected harder times, Standard & Poor's says.
Aparajita Saha-Bubna / Bloomberg News
The U.S. homebuilding industry will likely weather a slowdown in housing as their diversified businesses and "conservative" debt levels help counter lower sales, according to Standard & Poor's.
For the 26 builders the credit-rating company ranks, 21 have a "stable" outlook and three have a "positive" outlook, meaning that a rating upgrade is more likely than a downgrade. New York- based S&P said in a report today that it rates about $30 billion of homebuilder debt.
"Most homebuilder ratings should remain stable even though the anticipated soft landing may turn out to be much bumpier than expected," said James Fielding, an S&P analyst, in the report. Many builders "were able to materially diversify their operating platforms and structure conservatively leveraged balance sheets."
The housing market is cooling after setting records in recent years. Sales of new houses probably will fall 9.5 percent this year to 1.16 million from an all-time high of 1.28 million in 2005, David Berson, chief economist of mortgage-finance company Fannie Mae, said in his semi-annual forecast on July 19.
Purchases fell 3 percent during June to an annual pace of 1.131 million from a revised 1.166 million rate in May that was slower than first reported, the Commerce Department said Thursday.
Concern about the slowdown has hurt investors. High-yield debt sold by Hovnanian Enterprises Inc., KB Home and other construction companies have generated losses of about 1.23 percent this year, including reinvested interest, based on indexes compiled by Merrill Lynch & Co. The performance is the worst of 37 industries tracked by the firm.
An S&P index of 16 homebuilder stocks is down 34 percent this year.
An index compiled by the National Association of Home Builders/Wells Fargo to gauge homebuilder sentiment fell to 39, the lowest since December 1991, from 42 in June, the Washington-based association said July 18. It was the eighth decline in nine months.
"The industry may experience a correction over the next year to year-and-a-half that is sharper than expected, but will potentially be shorter in duration by historical standards," Fielding wrote.
Most firms' diversity, 'conservative' debt help in expected harder times, Standard & Poor's says.
Aparajita Saha-Bubna / Bloomberg News
The U.S. homebuilding industry will likely weather a slowdown in housing as their diversified businesses and "conservative" debt levels help counter lower sales, according to Standard & Poor's.
For the 26 builders the credit-rating company ranks, 21 have a "stable" outlook and three have a "positive" outlook, meaning that a rating upgrade is more likely than a downgrade. New York- based S&P said in a report today that it rates about $30 billion of homebuilder debt.
"Most homebuilder ratings should remain stable even though the anticipated soft landing may turn out to be much bumpier than expected," said James Fielding, an S&P analyst, in the report. Many builders "were able to materially diversify their operating platforms and structure conservatively leveraged balance sheets."
The housing market is cooling after setting records in recent years. Sales of new houses probably will fall 9.5 percent this year to 1.16 million from an all-time high of 1.28 million in 2005, David Berson, chief economist of mortgage-finance company Fannie Mae, said in his semi-annual forecast on July 19.
Purchases fell 3 percent during June to an annual pace of 1.131 million from a revised 1.166 million rate in May that was slower than first reported, the Commerce Department said Thursday.
Concern about the slowdown has hurt investors. High-yield debt sold by Hovnanian Enterprises Inc., KB Home and other construction companies have generated losses of about 1.23 percent this year, including reinvested interest, based on indexes compiled by Merrill Lynch & Co. The performance is the worst of 37 industries tracked by the firm.
An S&P index of 16 homebuilder stocks is down 34 percent this year.
An index compiled by the National Association of Home Builders/Wells Fargo to gauge homebuilder sentiment fell to 39, the lowest since December 1991, from 42 in June, the Washington-based association said July 18. It was the eighth decline in nine months.
"The industry may experience a correction over the next year to year-and-a-half that is sharper than expected, but will potentially be shorter in duration by historical standards," Fielding wrote.
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