S&P: Rising Defaults May Worsen Housing Glut

Rising subprime mortgage defaults threaten to exacerbate an oversupply of housing inventory, according to a new report published by Standard & Poor's Ratings Services.The recently published article, "Credit FAQ: How Subprime Woes Might Affect Rated Homebuilders," addresses the potential effect of the subprime situation on homebuilders' captive finance subsidiaries, the glut of unsold homes, and other "hot-button" issues. "We haven't taken any rating actions on homebuilders solely because of the subprime issue," said credit analyst James Fielding. "However, rising foreclosure rates and tightening consumer credit raise additional red flags regarding a cyclical housing downturn that is already deeper and broader than previously anticipated. What's more, the duration of this downturn will be a function of how well the economy, and job growth, holds up over the next year, since it is the steady absorption of excess housing supply that will lead to eventual stabilization." S&P can be found online at http://www.standardandpoors.com.