A number of publicly-traded home builders have been downgraded by Fitch Ratings this week, in response to one of the worst years for new home sales ever recorded.
KB Home were one of the companies to receive a downgraded issuer default rating, dropping from B+ to BB-, said HousingWire. The company was over-exposed to struggling entry markets, said Fitch, and it’s likely that the company’s liquidity position will erode during the next one to one-and-a-half years should its operating losses continue.
Fitch pointed out that while KB Home has the necessary liquidity to service its debts and fund working capital, this safety net will probably erode over the next 12 to 18 months. Fitch said that although the company had cash assets of $621 million, it had to pay out $226 million to meet its obligations to South Edge.
Also downgraded were Beazer Homes USA, who saw their rating drop from B- to CCC. IDR at Ryland Group were also downgraded, seeing their rating drop from a stable BB to a negative BB-.
However, Toll Bros., who focus on building luxury homes, managed to hold onto its stable rating, reported HousingWire.
Fitch commented in a statement released on Monday that:
“With the recent softening in the economy and lowered economic growth expectations for 2011 and 2012, the environment may at best support a relatively modest recovery in housing metrics over the next year and a half.”
Fitch had previously said it expected to see housing markets pick themselves up in 2011 and 2012.