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S&P Global Ratings Downgrades Century Communities to 'BB-' on Macroeconomic Headwinds
Summary
S&P Global Ratings has lowered the credit rating for homebuilder Century Communities from 'BB' to 'BB-', citing concerns over elevated mortgage rates and consumer hesitancy impacting profitability.
S&P Global Ratings announced Monday it has downgraded Denver-based homebuilder Century Communities Inc. (NYSE:CCS) to a 'BB-' rating from 'BB', assigning a negative outlook. The ratings agency attributed the change to expectations that the company's adjusted debt-to-EBITDA ratio will remain above 3x for the next 12 to 18 months due to weakened profit margins.
The downgrade also affects the company's senior unsecured notes, which were lowered to 'BB-' from 'BB'. S&P maintained a '3' recovery rating, indicating a potential 50%-70% recovery for noteholders in the event of a payment default. The agency projects Century Communities' adjusted leverage could stay at or slightly above 4x in the near term, providing little cushion against the revised downside threshold for the rating.
This ratings action reflects broader challenges in the residential homebuilding sector. S&P forecasts that the 30-year conventional mortgage rate will average 6.2% in 2026 and 5.6% in 2027. The agency also anticipates a slowdown in housing activity, projecting residential starts to decrease by 400,000 in 2026 and an additional 500,000 in 2027, alongside a gradual rise in unemployment.
AdS&P outlined potential scenarios for future ratings changes. A further downgrade to 'B+' could occur within the next 12 months if the company's debt-to-EBITDA ratio does not fall below 4x, or if its EBITDA deteriorates significantly. Conversely, the outlook could be revised to stable if leverage declines below the 4x threshold and operational profitability shows signs of steadying.