Home builders with local projects downgraded

Standard & Poor's Ratings Service has reduced its corporate credit ratings on five national home builders that have a major presence in the Charlotte region.

Production builders Centex Corp., D.R. Horton Inc., Lennar Corp., Pulte Homes Inc. and Standard Pacific Corp. were downgraded by S&P on Friday.

The outlook for all five companies is negative, an indicator that a future rate cut is expected.

The negative review further underscores weaknesses in the U.S. housing market. In October, a report from Deutsche Bank analysts said the Charlotte residential market has recently begun experiencing an "unraveling."

Net orders for new homes here fell by as much as 25 percent in August and early September, according to the report, which cited July as the turning point for the local market.

S&P said its rating actions "affect roughly $15 billion in public debt securities and acknowledge the ongoing deterioration in key credit metrics and worsening housing market conditions, which are exacerbated by rising inventory levels, the sharp decline in nonconforming mortgage products, and the determinedly negative sentiment of even well-qualified consumers."

The credit ratings of four of the five home builders are now at "junk" status, or below investment grade. S&P considers ratings in the BB and B categories as having "significant speculative characteristics."

Standard Pacific Corp. dropped a notch to BB- from BB. Standard Pacific Homes, a division of the California-based company (NYSE:SPF - News), was named last month as the residential partner for City Park, a 170-acre mixed-use redevelopment at the site of the former Charlotte Coliseum.

Texas-based D.R. Horton (NYSE:DHI - News) -- which recently defaulted on a contract for 70 lots at The Palisades, a master-planned, 1,600-acre community in southwest Charlotte -- was cut to BB+ from BBB-.

Michigan-based Pulte Homes (NYSE:PHM - News) fell to BB+ from BBB- while Miami-based Lennar (NYSE:LEN - News) was downgraded to BB+ from BBB.

Dallas-based Centex (NYSE:CTX - News) was lowered to BBB- from BBB.

A sixth company, California-based Ryland Group Inc. (NYSE:RYL - News), remained unchanged at BBB- but S&P changed its outlook to negative from stable.