Homebuilder CDS Widen On Poor Sales Forecast

The five-year credit default swaps of several homebuilders widened on data published by a U.S. homebuilders' association showing builders' confidence in the sector is at its lowest level in 15 years.

  • 18 Aug 2006
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The five-year credit default swaps of several homebuilders widened on data published by a U.S. homebuilders' association showing builders' confidence in the sector is at its lowest level in 15 years.

Last week the National Association of Home Builders published the data contained in an index ­ the Wells Fargo/National Association of Home Builders Housing Market Index ­ which gauges builders' sales expectations for single-family homes for the next six months. August was the seventh consecutive month in which builder confidence, as measured by the index, has fallen.

Among homebuilders that saw CDS spreads widen were Beazer Homes; its CDS spreads widened five basis points to 263, according to Markit. Beazer Homes CDS spreads have widened from 180 three months ago. Standard Pacific Homes' CDS spreads widened 11 basis points to 350 and 110 basis points over the past three months. K.Hovnanian Homes also saw its spreads widen two basis points to 260 and have widened 70 basis points over the past three months. Toll Brothers' CDS spreads moved out a point to 120, after having widened 25 points over the past three months.

The association cited rising sales cancellations and a big increase in inventories as reasons for the negative forecast.

  • 18 Aug 2006

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3 Lloyds Bank 5,761 18 8.38
4 Citi 5,606 15 8.15
5 JP Morgan 5,007 7 7.28

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5 Credit Suisse 55,529.51 142 6.64%