Lisa Sarajian, managing director of Real Estate Companies at Standard & Poor's, noted that recent declines in mortgage rates have buoyed traffic and new order activity, which had been showing some signs of softening over the past few quarters.

Because reported deliveries and associated revenues for conventional homebuilders reflect sales activity from two to three previous quarters, it will generally take a few quarters before a pullback is reflected in earnings.

With current backlogs continuing to look very healthy, most rated homebuilders appear poised to deliver another solid year of financial performance. Beyond 2001, the picture gets cloudier, although not yet alarmingly so, the S&P report said. The industry, its demand drivers, and major participants have evolved fairly dramatically over the past decade. As a result, future conventional housing may well prove less volatile than in past cycles.