"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.
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.
