“Our current thinking is that the downturn, currently two years in the making, will last until 2009, with any sector recovery likely to be sluggish for some time after that,” says Moody’s Vice President/Senior Credit Officer Joseph Snider. “We are looking ahead 12-18 months to evaluate issuers’ potential credit profiles, well before any recovery might reasonably be expected, and transition ratings to reflect each company’s projected financial condition.”
… Recent negative developments for the industry include the dramatic shift in the credit and lending environment, and the residential mortgage market exhibiting some elements of a credit crunch. Snider says home sales are likely to take a “substantial hit” in the next few months as subprime and most alt-A lending has ground to a halt and even prime-qualified borrowers have found it harder to get a mortgage.
The rating agencies still appear to be fighting a rearguard action. 2008 is a big year for adjustable-rate mortgage resets, which will put more borrowers under stress. And comparisons to the last housing recession (the one that started in 1988) shows that inventory levels are far worse than then, as are rental vacancies. And that time, it took 15 quarters (meaning nearly four years) for inventory to clear.