2008-10-10 20:49:01 -
- With the credit markets seizing up once again and the U.S. government assuming an interventionist stance, continued weakness for U.S. homebuilders' operating and financial performances is likely to be replicated in third-quarter 2008 (3Q'08) results and through the remainder of 2008, according to Fitch Ratings in the latest edition of 'Chalk Line'.
Excessive default rates on mortgages have
undermined the value of securities and related financial instruments held by many financial institutions, leading to a crisis in confidence in the financial sector, according to Managing Director and lead U.S. homebuilding analyst Bob Curran.
"Credit has become very difficult to access, which hurts all companies, especially homebuilders," said Curran. "Of course, a lack of confidence has been an on-going problem for the housing sector as potential homebuyers often have not been confident that current home prices will be sustained and thus have deferred purchase."
Deterioration in credit metrics continued in the second quarter of 2008, particularly for profit related and leverage metrics. Tangible net worth covenants have been and will be a covenant issue for some companies. Builders continue to seek amendments from their bank groups.
Fitch will provide a 2Q'08 recap of as well as discuss the outlook for calendar 2008 and 2009 during a teleconference to be held on Tuesday, Oct. 14, 2008 at 11:00 a.m. ET (separate press release to follow). The Fitch report, 'U.S. Homebuilding: The Chalk Line - Quarterly Update: Fall 2008' is available at www.fitchratings.com under the following headers:
Corporate Finance then Corporates then Special Reports
New features in this report include homebuilders' quarterly growth trends and margin statistics for the second quarter of 2008, excluding the impact of non-recurring, non-cash real estate charges, and information about the calendar second quarter and fiscal year-to-date option write-offs and land value write-downs. Fitch assesses actual reductions in inventories (excluding real estate write-downs) since peak levels and discusses the effect of the FAS 109 deferred tax valuation adjustment. 2007 data on metropolitan market share by company and market concentration are presented. The discontinuation of downpayment assistance programs (DPAs) is highlighted, as are covered bonds (a possible alternative financing vehicle for mortgages) and the recent disconnect between the federal funds rate and mortgage rates. The federal government's latest efforts to support the financial system, housing and the mortgage sector are discussed. And our economic and construction forecasts have been updated for 2008 and 2009.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Robert P. Curran, +1-212-908-0515
Media Relations:
Sandro Scenga, +1-212-908-0278
