Problems in the US housing sector abound. Credit quality for both US- and UK-based firms continues to deteriorate, but the moves are significantly more dramatic in the US, with average probability of default increasing 3% over the last month and 13% over the past year.
Data is likely to be weak for some time, with April housing starts seeing a sharp fall and unemployment likely to remain elevated for months as consumers manage considerable debt burden. One estimate has US housing prices dropping until April 2021. The situation is scarcely different in the UK, with one estimate predicting a drop in prices of 13% in 2020.
Credit quality for US housing sector firms took another big tumble this month. The month-over-month deterioration is 3%, and the year-over-year change is 13%. Average probability of default for these firms is currently 55 basis points, compared to 53.4 basis points in the previous month and 48.8 basis points at the same point last year. The current Credit Benchmark Consensus (CBC) rating for this aggregate has remained at bb+ over the last year.
Credit quality for UK housing sector firms is in something of a holding pattern: getting worse in the short-term and flat over the longer-term. The month-over-month deterioration is 0.4%, but year-over-year, this aggregate saw improvement of 0.4%. With the most recent update, average probability of default for these firms is 52.8 basis points, compared to 52.6 basis points in the prior month and 53 basis points at the same point last year. Like with the US aggregate, the current Credit Benchmark Consensus (CBC) rating for this aggregate has remained at bb+ over the last year.
To learn more about the data behind this article and what Credit Benchmark has to offer, visit https://www.creditbenchmark.com/.
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