Tighter mortgage standards and significant inventories of new and existing homes for sale portend "another dismal year" for homebuilders in 2008, according to Fitch Ratings.The rating outlook for the homebuilding sector is negative, Fitch said. "If mortgage rates should rise or credit terms further tighten, then Fitch's housing forecast could turn even more pessimistic," the rating agency said. "And, of course, if the economy slides into recession then the downturn would not only deepen, but possibly extend further into 2009." Bob Curran, a managing director and the lead homebuilding analyst at Fitch, said homebuilders will need to manage their balance sheets and liquidity. "Companies have to continue to downsize to the point where they can remain profitable, excluding nonrecurring real estate charges, which means further cuts in staffing and other overhead as well as other cost reductions," Mr. Curran said. Fitch can be found online at http://www.fitchratings.com.

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