CHICAGO, May 17 /PRNewswire/ -- The changing shape of national
homebuilders and the impact of these changes in a downturn scenario are
highlighted in a report titled Evolution of National Homebuilders: Recent
Trends and Rating Considerations.
As national homebuilders have evolved over the past decade, an important
trend has been established: namely a continuing transition of homebuilders
from real estate companies to manufacturers. Builders have increasingly
sought to minimize the risks associated with land price fluctuations by
reducing the holding period for owned land positions and by implementing
return models that typically do not incorporate land price appreciation.
Builders instead seek to establish a competitive advantage based on their
ability to efficiently develop, manufacture, and sell homes on a timely basis.
This evolution has generally had a positive affect on homebuilder credit
quality.
In addition, over the past decade national builders have maintained growth
by acquiring smaller builders in attractive growth markets. The benefits that
accrue to the larger players due to this consolidation, specifically in terms
of market share, geographic diversity, access to capital, and competitive
advantage (versus smaller builders) are described in the report, as well.
DCR recognizes that any outlook for the homebuilding industry is clearly
of limited duration. While the key drivers of housing demand remain
relatively intact, DCR (now a part of Fitch IBCA) acknowledges that near-term
results could flatten due to comparisons with strong prior year periods.
Negative comparisons, however, should not necessarily translate into weaker
credit profiles as companies should be well positioned to react to any
weakness in the market.
The report also includes considerations when evaluating a homebuilder`s
balance sheet liquidity and a description of several key financial ratios used
to gauge a homebuilder`s credit quality.
For access to this report visit DCR's Web site at http://www.dcrco.com
(Quick Search: Homebuilders).
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Mark Oline, 312-368-2073, oline@dcrco.com, or
Jeffrey Miller, 312-368-3192, miller@dcrco.com, both of Duff &
Phelps
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