The US housing sector can breathe a (perhaps temporary) sigh of relief. The UK housing sector, however, may be taking a turn for the worse, with credit quality diminishing. There have been some positive signs in recent weeks, like rising sales, increased construction, and regulatory changes that allow for more construction. But with the UK experiencing the worst recession on record, this sector’s credit prospects may be restrained for some time.
Default Risk for US Housing Sector Unchanged
US Household Goods and Home Construction Firms
Credit quality for the US housing sector has begun to plateau. There was no change in credit quality from the prior month, and only a 2% decline from two months prior. Year over year, credit quality is still down 16.7%. Average probability of default for this sector is now 49 basis points, unchanged from the prior month and compared to 48 basis points two months prior. At the same point last year, it was 42 basis points. While credit quality may not be getting worse, about 77% firms with a CBC rating are at bbb or lower. The aggregate’s average CBC rating is bb+.
UK Household Goods and Home Construction Firms
The holding pattern for the UK housing sector appears to have ended. After seeing little to no change since the end of 2018, credit quality has taken a turn for the worse, starting in March this year. The deterioration in credit quality for this sector is 4% compared to one month prior and 6% compared to two months prior, and it’s down by 8% year-over-year. Average probability of default is now 56 basis points, compared to 54 basis points one month prior and 53 basis points two months prior. At the same point last year, it was 52 basis points. About 83% of the firms in the sector with CBC rating are at bbb or lower. The aggregate’s average CBC rating is bb+.
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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