Fitch downgrades homebuilders

Fitch Ratings Inc. downgraded eight publicly traded homebuilders yesterday and affirmed ratings on five others following a sector review. The cuts reflect the weak housing environment and Fitch’s expectations that the sector will face even tougher challenges than previously thought for the balance of 2008, and that prices will continue to decline well into 2009. “The anemic economy and impaired mortgage markets are of course contributing to the housing shortfall,” the New York-based firm said in a statement. “The possibility of the housing downturn continuing longer and becoming deeper than current anticipated could have bread ratings implications for homebuilders.” The agency cut Centex Corp. of Dallas, D.R. Horton Inc. of Fort Worth, Texas, and Ryland Group Inc. of Calabasas, Calif., to high yield, from investment-grade. The other downgrades included Beazer Homes USA Inc. of Atlanta, Lennar Corp. of Miami, Meritage Homes Corp. of Scottsdale, Ariz., M/I Homes Inc. of Columbus, Ohio, and Pulte Homes Inc. of Bloomfield Hills, Mich. Fitch affirmed its ratings on Hovnanian Enterprises Inc. of Red Bank, N.J., KB Home of Los Angeles, MDC Holdings Inc. of Denver, NVR Inc. of Reston, Va., and Toll Brothers Inc. of Horsham, Pa. However, the outlooks on 12 of the 13 remain negative. Future ratings and outlooks will be affected by land and development spending, inventory levels, speculative inventory activity, high cancellation rates, new-home-order activity, debt levels and free-cash-flow trends, among other factors.