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2009 likely to see more financial problems for US developers

The property market, although already weak, could dive further and that leaves little prospect of a respite for the struggling construction industry, according to the latest quarterly report from Fitch Ratings.

'As weak as housing has been it can soften further,' said Robert Curran, lead analysts with the ratings company. 'Credit markets are still impaired, home prices continue to fall and now the general economy and, especially, employment numbers have taken a turn for the worse,' he added.

Fitch analysts said no improvement in demand occurred in December 2008, as low mortgage rates were countered by job loss and continued loss of home equity as prices dropped yet again.

Coupled with low demand, an excess supply of homes continues to be troubling, the report says. 'However, it is not just an inventory problem. There is also a negative psychology that has become pervasive. The expectation or fear is that home prices are vulnerable to further declines and buying now would be a mistake,' it continues.

As a result of this consumer fear, stocks declined as much as 33% in the first nine months of 2008 for some home builders, according to data analyzed by Fitch.

Major home builders that suffered the most included Beazer Homes, Centex Corporation, Lennar Corporation and KB Home.

There may be a bit of light at the end of the tunnel, provided mortgage rates remain largely below 5%, the report says. 'Lower mortgage rates, depressed home prices and new economic stimulus programs will probably lead to a bottoming of certain housing metrics late in 2009, but not before there is more carnage among homebuilders,' the report concludes.