Standard & Poor’s went on a rate-slashing spree on homebuilders Friday

On Friday S&P cut its credit ratings on five homebuilders after
recent quarterly earnings and economic data showed the housing market
deteriorating.

The ratings agency lowered D.R. Horton
(nyse:DHI -news -people). Lennar(nyse:LEN -news -people), and Pulte Homes(nyse:PHM -news - people) to non-investment grade or “junk” status.

It also lowered Centex(nyse:CTX -news -people) to the brink of junk and lowered Standard Pacific(nyse:SPF -news -people)’s ratings as well.

It changed the outlook on Ryland Group(nyse:RYL -news -people) to “negative” from “stable,” which raises the company’s chances of having its ratings lowered in the next two years.

S&P said the homebuilding sector’s problems have been “exacerbated by rising inventory levels, the sharp decline in nonconforming mortgage products, and the determinedly negative sentiment of even well-qualified consumers.”

Ratings, which indicate a company’s ability to repay its debt obligations, determine the cost to a company of borrowing money.