S&P Revises Outlook on Six Home Builders

New York, NY, May 25, 2007--Standard & Poor's changed its rating outlook on six U.S. home builders to negative from stable, citing broad housing industry challenges and other factors.

S&P also downgraded its rating for one home builder, Comstock Homebuilding Cos. (CHCI.O: Quote, Profile , Research)

The U.S. home builders now carrying a negative rating outlook are: Centex Corp., D.R. Horton Inc., Pulte Homes Inc., Hovnanian Enterprises Inc., Kimball Hill Inc., and William Lyon Homes.

A negative outlook means S&P is likely to cut the rating in the next two years.

The common thread affecting the home builders' ratings, according to S&P, is persistent weakness in the U.S. housing market.

"Turmoil in the subprime mortgage market contributed to a disappointing spring selling season during the quarter, and further compounded our concern that consumer skepticism and tighter lending standards will prolong the absorption of the excess supply of homes currently listed for sale," S&P said in a statement.

For about a year, home construction has fallen off sharply on weakening demand and rising interest rates following a long run-up in property values in many parts of the United States.

With respect to Centex, S&P said it "anticipates sharply lower cash flow protection measures over the next several quarters as a consequence of broad housing industry challenges."  

Centex's "debt levels remain high relative to those of its investment-grade peers," S&P said. The company carries a "BBB" rating, two levels above junk territory, as does Pulte Homes.

S&P also warned that D.R. Horton's "higher-than-average level of speculative inventory" may make it vulnerable to further U.S. housing weakness.

D.R. Horton carries a "BBB-minus" rating, the lowest investment grade rating.

Hovnanian Enterprises holds a "BB" rating, or two steps below investment grade.

S&P also lowered its corporate credit rating for Comstock Homebuilding Cos. Inc. one notch to "B," the fifth-lowest junk rating, from "B-plus," citing the company's weak first quarter earnings