Market Survey
CHANNEL CHECK
Further Stabilization in Hard-Hit Markets, Low
Price Points
¦
Traffic steady; strongest in beaten-down markets. Our Monthly Survey of
Real Estate Agents pointed to steady and healthy traffic in July with buyers
continuing to aggressively seek out foreclosures. Our buyer traffic index was
steady at 43.4 in July from 43.1 in June. The foreclosure heavy markets saw
the greatest amount of traffic, as investors seek out foreclosure bargains.
¦
Strength in Arizona, California, Florida, and Washington, D.C. The
“foreclosure four” of Ft Myers, Las Vegas, Phoenix, and Riverside-San
Bernardino (Inland Empire) all saw strong traffic with as significant investor
demand supports foreclosure sales activity (agents indicate that as much as
50% of sales are to investors in these areas). In these markets our traffic
index ranged from a low of 58 in Phoenix to a high of 70 in Ft Myers, and all
of these markets have seen high levels of traffic through Spring and Summer
as investors seek foreclosure bargains. In Washington, D.C. (NVR and TOL),
our traffic slipped to 60 from 63, but has been above agents expectations
(readings above 50) for each month since March.
¦
Weakness in Atlanta, Chicago, and Texas markets. Agents noted
weakness in Atlanta with traffic dropping down to a low level of 22 after
showing improvement over the past two months. Chicago remained constant
at 29, continuing the weak trends seen in that market. Traffic in the Texas
markets was again below expectations – Austin offered the best trends with
traffic up slightly to 34 in July from 28 in June, but we saw weakness in
Dallas (traffic dropped to 38 from 41 in June), Houston (traffic remained
weak at 23, consistent with 22 in June), and San Antonio saw a tough month
(traffic fell to 10 from 33).
¦
Pricing nearing a bottom in many markets on low-end homes. Our price
index increased another 2.7 points in July to 33.6, the highest level we have
seen in several years. Agents indicated rising prices over the past 30 days in
Ft. Myers, Phoenix, and Riverside-San Bernardino with several other
markets showing near-stable prices. Agents saw the weakest pricing trends
in Atlanta, Charlotte, Chicago, Jacksonville, and New York.
Research Analysts
Daniel Oppenheim, CFA
212 325 5726
dan.oppenheim@credit-suisse.com
Michael Dahl
212 325 5882
michael.dahl@credit-suisse.com
05 August 2009
Monthly Survey of Real Estate Agents 2
Further Stabilization in Hard-Hit Markets, Low Price
Points
For those who may be unfamiliar with our survey, we center our indices around 50
so that readings above 50 indicate positive or improving trends and readings below
50 indicate negative or worsening trends. Please see page 5 for a full description of
our survey methodology.
Traffic steady, strongest in beaten-down markets. Our Monthly Survey of Real Estate
Agents pointed to steady and healthy traffic in July with buyers continuing to aggressively
seek out foreclosures. Our buyer traffic index was steady at 43.4 from 43.1 in June. The
foreclosure heavy markets saw the greatest amount of traffic, as investors seek out
foreclosure bargains.
Exhibit 1: Traffic Unchanged in June; Buyers Continue to Seek Distressed Properties
Month
Buyer
Traffic
Index
Home
Price
Index
Incentive
Index
Home
Listings
Index
Time
to Sell
Index
Apr-2008 33.1 20.6 28.3 27.2 24.2
May-2008 31.5 21.4 30.8 32.1 24.9
Jun-2008 29.0 22.1 28.8 33.6 26.6
Jul-2008 27.4 21.0 30.5 34.7 24.9
Aug-2008 25.9 20.1 29.7 37.5 25.7
Sep-2008 24.0 17.5 30.6 39.5 22.5
Oct-2008 19.6 15.3 29.6 41.0 19.9
Nov-2008 19.8 15.3 30.3 45.3 22.0
Dec-2008 25.3 13.3 30.3 48.0 23.2
Jan-2009 36.5 15.9 32.1 43.5 26.6
Feb-2009 36.0 17.1 31.1 40.5 28.2
Mar-2009 39.5 20.5 32.5 41.7 33.4
Apr-2009 48.4 24.8 35.3 45.3 42.6
May-2009 45.4 27.0 37.5 47.0 44.6
Jun-2009 43.1 30.9 41.2 52.4 43.7
Jul-2009 43.4 33.6 40.3 56.0 46.2
Point change 0.3 2.7 (0.9) 3.7 2.5
Source: Credit Suisse estimates
Strength in Arizona, California, Florida, and Washington, D.C. The “foreclosure four”
of Ft Myers, Las Vegas, Phoenix, and Riverside-San Bernardino (Inland Empire) all saw
strong traffic with as significant investor demand supports foreclosure sales activity
(agents indicate that as much as 50% of sales are to investors in these areas). In these
markets our traffic index ranged from a low of 58 in Phoenix to a high of 70 in Ft Myers,
and all of these markets have seen high levels of traffic through Spring and Summer as
investors seek foreclosure bargains. In Washington, D.C. (NVR and TOL), our traffic
slipped to 60 from 63, but has been above agents expectations (readings above 50) for
each month since March.
05 August 2009
Monthly Survey of Real Estate Agents 4
Weakness in Atlanta, Chicago, and Texas markets. Agents noted weakness in Atlanta
with traffic dropping down to a low level of 22 after showing improvement over the past two
months. Chicago remained constant at 29, continuing the weak trends seen in that market.
Traffic in the Texas markets was again below expectations – Austin offered the best trends
with traffic up slightly to 34 from 28 in June, but we saw weakness in Dallas (traffic
dropped to 38 from 41 in June), Houston (traffic remained weak at 23, consistent with 22
in June), and San Antonio saw a tough month (traffic fell to 10 from 33).
Pricing nearing a bottom in many markets on low-end homes. Our price index
increased another 2.7 points in July to 33.6, the highest level we have seen in several
years. Agents indicated rising prices over the past 30 days in Ft. Myers, Phoenix, and
Riverside-San Bernardino with several other markets showing near-stable prices. Agents
saw the weakest pricing trends in Atlanta, Charlotte, Chicago, Jacksonville, and New York.
Exhibit 2: Most buyers continue to focus on foreclosures
Traffic Levels Versus Expectations
34%
40%
26%
More than expected Meets expectations Less than expected
How Do the Recent 30 Days Compare to the Prior
30 Days...
12%
27%
34%
45%
66%
43% 40%
7%
26%
0%
10%
20%
30%
40%
50%
60%
70%
Home Prices Incentives Time to Sell
Increased Remained the same Decreased
Source: Credit Suisse estimates
05 August 2009
Monthly Survey of Real Estate Agents 5
Survey Methodology
We survey real estate agents, as we believe that agents will provide an accurate
assessment of housing market trends in both the new and existing home markets. Even
though homebuilders sell new homes, we believe that it is crucial to have an
understanding of the existing home market as the existing home market is substantially
larger than the new home market (approximately 85%/15%) and trends in the existing
home market dictate trends in the new home market.
Each month we ask five main questions, which are all listed below. In July, we received
responses from 1,600 real estate agents across the country. We then review these
responses and calculate an index for each of the questions with high numbers indicating
positive or improving trends and low numbers indicating negative or worsening trends. An
index of 50 would indicate a neutral trend. Note that for items such as incentives, a low
index level would indicate a higher level of incentives, as higher incentives represent a
negative trend. Similarly, for the number of listings and the length of time needed to sell a
house, an increase in listings (a negative trend) and an increase in the time needed to sell
a house (a negative trend) both correspond to low index values.
1) Are traffic levels in-line with, above, or below your expectations for this time of
year? (Because of seasonality to traffic trends – generally more traffic in Spring and less
in Fall/Winter – we ask about traffic relative to the expectations for this time of year rather
than how traffic compared to the prior month.) A traffic index above 50 means that traffic
was above the expectations of agents, a traffic index of 50 means that traffic was in-line
with expectations, and a traffic index below 50 means that traffic was below expectations.
2) Have prices remained the same, increased, or decreased over the past 30 days?
A price index above 50 indicates that prices increased over the past 30 days, a price index
of 50 indicates that prices were flat, and a price index below 50 indicates that prices
decreased.
3) Have incentives remained the same, increased, or decreased over the past 30
days? An incentive index above 50 indicates that incentives decreased over the past 30
days, an incentive index of 50 indicates that incentives were unchanged, and an incentive
index below 50 indicates that incentives increased.
4) Do you see the same, more, or fewer, listings as compared with 30 days ago? An
inventory (listings) index above 50 indicates that the inventory of homes for sale
decreased over the past 30 days, an inventory index of 50 indicates that inventories were
unchanged, and an inventory index below 50 indicates that inventories increased.
5) Does it take the same, more, or less time to sell a house? A time to sell index above
50 indicates that the time needed to sell a home decreased over the past 30 days, a time
to sell index of 50 indicates that the time needed to sell a home was unchanged, and a
time to sell index below 50 indicates that the time needed to sell a home increased.
05 August 2009
Monthly Survey of Real Estate Agents 6
Exposure to Key New Home Markets
The market exposure of homebuilders to the key housing markets is outlined in the table
below.
Exhibit 3: Summary of Homebuilders’ Exposure to Key New Home Markets
CTX DHI HOV KBH LEN MDC MTH NVR PHM RYL SPF TOL WCI
Atlanta, GA 31,121 2% 3% * 3% * * * * 4% 7% * * *
Austin, TX 12,137 2% 4% * 3% 5% * 5% * 2% 3% * * *
Charlotte, NC 15,185 2% 1% * 1% * * * 9% 1% 3% * * *
Chicago, IL 18,153 2% 3% 4% * 4% * * * 5% 7% * 2% *
Dallas, TX 27,653 7% 6% 5% 4% 5% * 10% * 2% 5% 7% 0% *
Denver, CO 7,912 1% 6% * 4% 3% 10% * * 1% 4% 4% * *
Fort Myers, FL 4,357 1% * 12% * 4% * * * 3% * * * 19%
Houston, TX 42,070 * 5% 11% 7% 12% * 6% * 3% 8% * * *
Jacksonville 7,352 1% 4% * 2% 1% 7% * * 3% * * * 6%
Las Vegas, NV 13,473 3% 5% * 10% 4% 20% 5% * 8% 4% * 4% *
Los Angeles, CA 9,382 0% 2% 4% 2% 1% 1% * * 0% * 2% * *
Miami, FL 7,086 * * * * 3% * * * * * * * 8%
Minneapolis 7,613 3% 2% 2% * 2% * * * 2% 5% * * *
NY-NJ 12,318 0% 0% 2% * 0% * * 0% 1% * * 8% 4%
Orlando, FL 11,801 * 2% * 5% 3% * * * 4% 5% * * *
Phoenix, AZ 26,494 5% 11% * 5% 4% 17% 23% * 12% 5% 16% 7% *
Inland Empire, CA 16,104 4% 6% 13% 7% 8% 5% 2% * 5% 6% 8% 0% *
Seattle, WA 12,406 1% 1% * * * * * * * * * * *
Tampa, FL 8,056 * * 5% 2% 6% * * * 3% 5% 12% * 6%
“First time buyers are out
there looking.”
05 August 2009
Monthly Survey of Real Estate Agents 10
Chicago, IL – Another Tough Month; Traffic Limited
to Entry Level
(7,778 single-family permits in 2008, 8th largest market in the country)
Fear and job uncertainty limits buyer traffic. Buyer traffic remained constant in July as
compared with June, as our traffic index came in at 29, the same as in June, indicating
traffic levels below agents’ expectations for this time of year (readings below 50 point to
traffic below agents’ expectations). However, despite the overall weak traffic, several
agents noted the bright signs that “homes have taken longer to sell, but are finally moving
at reduced prices” and that “a lot of buyers are realize what a good time it is to be in the
market buying”. Fear contributed to the limited traffic, with buyers concerned about their
employment prospects and further declines in home prices. The comments were very
mixed, though, with some noting a slowdown in July, “buyers have retreated after a busier
June”. Those agents noting better traffic stressed that it is at the entry level, with the “first
time homebuyer tax credit and good values bringing buyers to the market”.
Continued pressure on prices, but a few bright signs. Home prices continued to fall in July,
as our price index measured 21 from 11 in June, with any reading below 50 indicating
lower home prices over the past 30 days. The key issue is the high and rising inventory, as
our home listings index came in at 28, slightly worse than 31 in June with any level below
50 pointing to rising inventory. Selling times continued to lengthen with our time to sell
index falling to 22 in July from 30 in June (below a neutral reading of 50).
Comments from real estate agents:
¦ “First time homebuyer credit and good value - prices reaching bottom”
¦ “Buyers stopped looking for upgrade homes; they’re now concerned about losing
their job.”
¦ New fears that the bottom hasn't been reached. Pricing not matching buyers
expectations.
Ryland, Lennar, and Hovnanian have the most exposure. Ryland has the greatest
exposure to Chicago with approximately 7% of sales in the market, followed by Lennar
Corp. and Hovnanian with 4% of sales.
Exhibit 8: Buyers Stay Cautious Due to Economic Concerns
Traffic Levels Versus Expectations
59% 26%
16%
More than expected Meets expectations Less than expected
How Do the Recent 30 Days Compare to the Prior
30 Days...
3%
36%
65%
36%
58%
26%
61%
7% 9%
0%
10%
20%
30%
40%
50%
60%
70%
Home Prices Incentives Time to Sell
Increased Remained the same Decreased
Source: Credit Suisse estimates
Traffic
Home Prices
Incentives
Agent Recommendations
Agents recommend Pulte, Toll Brothers, and Horton. Pulte Homes and Toll Brothers
received the highest percentage of recommendations by agents nationwide. 25% of
agents (net of positive responses less negative responses) surveyed said they would
recommend Pulte and Toll Brothers, and 18% said they would recommend Meritage. We
believe this is important since 35-40% of new home sales involve an agent. In addition,
homebuilders will likely increasingly rely on agents as market conditions weaken. This is a
positive for those companies, in addition to others below that received strong
recommendations, but also represents an opportunity for companies such as KB Home.
Exhibit 50: Pulte Homes, Toll Brothers, and Meritage Most Highly Recommended by Agents
Rank Ticker Company Name Net Recommendation
1 PHM Pulte Homes 25.2%
2 TOL Toll Brothers 24.7%
3 DHI D.R. Horton 17.6%
4 MTH Meritage Homes 16.2%
5 LEN Lennar Corp. 14.3%
6 CTX Centex Corp. 11.7%
7 RYL Ryland Group 11.4%
8 SPF Standard Pacific Corp. 11.3%
9 HOV Hovnanian Enterprises 6.1%
10 MDC MDC Holdings 5.7%
11 NVR NVR, Inc. 4.5%
12 WCI WCI Communities 0.1%
13 KBH KB Home (12.9)%
Source: Credit Suisse estimates
05 August 2009
Monthly Survey of Real Estate Agents 54
Exhibit 51: Which of the following homebuilders would you most highly recommend to clients?
Market CTX DHI HOV KBH LEN MDC MTH NVR PHM RYL SPF TOL WCI
Atlanta, GA 26% 13% -- -- -- -- -- -- 35% 35% -- -- --
Austin, TX 31% 65% -- 4% 38% -- 38% -- 31% -- 38% 50% --
Baltimore, MD -- 0% 14% 0% 14% 14% -- 14% -- 0% -- -- --
Charleston, SC 38% 23% -- 31% 8% -- -- 0% -- 31% -- -- --
Charlotte, NC 33% 33% 13% 10% 17% -- -- 43% -- 20% 20% 30% --
Chicago, IL 14% 8% 8% -- 13% 1% -- -- 38% 14% -- 29% --
Cincinnati, OH 0% -- 0% -- -- -- -- 11% 5% 11% -- -- --
Columbus, OH 11% -- 11% -- -- -- -- 0% 11% -- -- -- --
Dallas, TX 22% 31% 13% 0% 13% 3% 16% -- 16% -- 13% 25% --
Denver, CO 5% 22% -- 14% 16% 27% 8% -- 14% 22% 11% 22% --
Detroit, MI 19% -- 4% -- -- -- -- -- 58% -- -- 62% --
Fort Myers, FL 25% 32% 4% 11% 25% -- 7% -- 36% 18% -- -- 25%
Houston, TX 7% 13% 17% 10% 47% 0% 20% -- 17% -- -- -- --
Jacksonville, FL 0% 42% -- 33% 50% 25% -- -- 42% 33% 25% 42% 0%
Las Vegas, NV 16% 38% -- 25% 31% 9% 16% -- 50% 25% -- 53% --
Los Angeles, CA 5% 8% 16% 27% 16% 3% 3% -- 5% -- 16% 14% --
Miami, FL -- 12% -- -- 37% -- -- -- -- -- 2% -- 15%
Minneapolis, MN 18% 39% 10% -- 27% -- -- -- 27% 20% -- 10% --
Nashville, TN 18% -- -- -- -- -- -- -- -- -- -- -- --
New York-Northern New Jersey, NY5% 3% 25% -- 11% -- -- 1% 25% -- -- 32% 4%
Orlando, FL 21% 17% 10% 28% 24% -- 14% -- 59% 14% 7% 45% --
Philadelphia-Southern NJ -- 4% 14% -- 7% 4% -- 18% 32% -- -- 36% --
Phoenix, AZ 18% 30% 9% 4% 18% 10% 40% -- 48% 13% 16% 43% --
Port St. Lucie, FL 0% 20% -- 0% -- -- -- -- -- -- -- -- --
Portland, OR -- 29% -- -- -- -- -- -- -- -- -- -- --
Raleigh, NC 29% 21% 7% 7% 7% -- -- 0% 14% -- 14% 21% --
Richmond, VA 75% -- -- -- -- -- -- 0% -- -- -- -- --
Riverside-San Bernardino, CA 28% 33% 25% 33% 28% 3% -- -- 42% 17% 22% -- --
Sacramento, CA 48% 24% 19% 5% 29% 0% 24% -- 48% 5% 10% 29% --
San Antonio, TX 40% 70% -- 10% 30% -- 10% -- 50% -- -- 30% --
San Diego, CA 3% 23% 23% 26% 13% 0% -- -- 10% 13% 19% 16% --
San Francisco, CA 17% 4% -- -- 15% -- 6% -- 21% -- 8% 10% --
Sarasota, FL 14% -- -- 14% 29% -- -- -- 43% -- 0% -- 0%
Seattle, WA 31% 31% -- -- -- -- -- -- -- -- -- -- --
Tampa, FL 20% 29% 14% 14% 20% 3% -- -- 23% 17% 17% -- 9%
Tucson, AZ -- 44% 12% 12% 48% 16% 56% -- 56% -- 0% 4% --
Virginia Beach, VA 10% 0% 0% -- -- -- -- 0% -- -- -- -- --
Washington, DC 20% 15% 17% -- 5% 5% -- 20% 32% 10% -- 24% --
Wilmington, NC 0% -- -- -- -- -- -- 11% -- -- -- -- --
TOTAL 20% 24% 12% 14% 23% 8% 20% 10% 32% 18% 14% 30% 9%
Source: Credit Suisse estimates
05 August 2009
Monthly Survey of Real Estate Agents 55
Agents discourage customers from buying a home from KB Home. KB Home
received the highest percentage of negative recommendations by agents nationwide. 27%
agents surveyed said they would discourage clients from buying a home from KB Home.
We note that KB Home pre-sells a majority of its homes, which may negatively influence
agents’ responses.
Exhibit 52: From which of the following homebuilders would you most strongly discourage clients from buying?
Market CTX DHI HOV KBH LEN MDC MTH NVR PHM RYL SPF TOL WCI
Atlanta, GA 4% 13% -- -- -- -- -- -- 11% 2% -- -- --
Austin, TX 19% 12% -- 69% 15% -- 12% -- 8% -- 4% 8% --
Baltimore, MD -- 0% 29% 0% 14% 0% -- 14% -- 14% -- -- --
Charleston, SC 0% 0% -- 8% 15% -- -- 0% -- 8% -- -- --
Charlotte, NC 13% 10% 0% 23% 13% -- -- 0% -- 3% 3% 3% --
Chicago, IL 7% 0% 1% -- 7% 4% -- -- 3% 7% -- 3% --
Cincinnati, OH 0% -- 0% -- -- -- -- 11% 0% 11% -- -- --
Columbus, OH 0% -- 0% -- -- -- -- 0% 0% -- -- -- --
Dallas, TX 19% 13% 0% 25% 13% 0% 0% -- 6% -- 3% 0% --
Denver, CO 5% 11% -- 35% 3% 5% 0% -- 8% 5% 0% 0% --
Detroit, MI 19% -- 4% -- -- -- -- -- 15% -- -- 4% --
Fort Myers, FL 4% 4% 14% 11% 7% -- 4% -- 0% 4% -- -- 25%
Houston, TX 10% 17% 7% 43% 3% 0% 0% -- 13% -- -- -- --
Jacksonville, FL 17% 0% -- 17% 0% 0% -- -- 17% 0% 0% 0% 0%
Las Vegas, NV 6% 13% -- 28% 0% 13% 3% -- 0% 3% -- 6% --
Los Angeles, CA 0% 0% 3% 8% 5% 0% 0% -- 3% -- 0% 3% --
Miami, FL -- 5% -- -- 12% -- -- -- -- -- 2% -- 9%
Minneapolis, MN 6% 6% 6% -- 8% -- -- -- 12% 14% -- 2% --
Nashville, TN 18% -- -- -- -- -- -- -- -- -- -- -- --
New York-Northern New Jersey, NY3% 1% 13% -- 1% -- -- 0% 4% -- -- 4% 4%
Orlando, FL 7% 10% 3% 17% 17% -- 7% -- 7% 10% 0% 0% --
Philadelphia-Southern NJ -- 11% 14% -- 0% 0% -- 0% 11% -- -- 32% --
Phoenix, AZ 4% 9% 12% 45% 6% 1% 3% -- 6% 1% 3% 6% --
Port St. Lucie, FL 0% 0% -- 40% -- -- -- -- -- -- -- -- --
Portland, OR -- 4% -- -- -- -- -- -- -- -- -- -- --
Raleigh, NC 21% 14% 14% 36% 14% -- -- 7% 7% -- 7% 14% --
Richmond, VA 25% -- -- -- -- -- -- 25% -- -- -- -- --
Riverside-San Bernardino, CA 14% 0% 3% 19% 6% 0% -- -- 6% 11% 3% -- --
Sacramento, CA 0% 10% 5% 43% 5% 0% 5% -- 5% 0% 10% 0% --
San Antonio, TX 20% 0% -- 70% 0% -- 10% -- 10% -- -- 0% --
San Diego, CA 13% 10% 3% 16% 3% 0% -- -- 0% 0% 0% 3% --
San Francisco, CA 2% 6% -- -- 2% -- 0% -- 6% -- 2% 2% --
Sarasota, FL 0% -- -- 0% 29% -- -- -- 0% -- 0% -- 0%
Seattle, WA 0% 19% -- -- -- -- -- -- -- -- -- -- --
Tampa, FL 3% 6% 0% 17% 11% 0% -- -- 9% 3% 6% -- 14%
Tucson, AZ -- 4% 4% 32% 8% 8% 4% -- 8% -- 4% 4% --
Virginia Beach, VA 0% 0% 0% -- -- -- -- 0% -- -- -- -- --
Washington, DC 7% 5% 10% -- 12% 0% -- 7% 5% 15% -- 12% --
Wilmington, NC 0% -- -- -- -- -- -- 0% -- -- -- -- --
TOTAL 8% 7% 6% 27% 8% 2% 4% 5% 6% 6% 3% 5% 9%
Source: Credit Suisse estimates
05 August 2009
Monthly Survey of Real Estate Agents 56
Exhibit 53: Homebuilding Industry Comparative Valuations
Price
8/5/09 2008 2009E 2010E
CTX Centex Corp. Neutral $11.61 $1,445 ($15.66) ($4.44) ($1.00) $1,769 64% $7.38 $7.30 1.59x $9.50 1.22x 1.0x $9.75 0.0% (16.0%)
DHI D.R. Horton Underperform $12.60 $3,993 ($8.13) ($1.83) ($0.25) $1,486 34% $8.36 $8.31 1.52x $7.60 1.66x 1.0x $7.50 1.2% (39.3%)
HOV Hovnanian Neutral $4.22 $326 ($16.04) ($4.00) ($1.75) $798 95% ($0.93) ($0.93) N/M ($0.20) N/M N/M $2.00 0.0% (52.6%)
KBH KB Home Outperform $17.94 $1,369 ($12.59) ($3.10) ($0.55) $1,132 44% $8.96 $8.96 2.00x $12.75 1.41x 1.3x $17.00 1.4% (3.8%)
LEN Lennar Corp. Neutral $12.70 $2,226 ($7.00) ($4.08) ($1.95) $1,108 37% $15.08 $15.08 0.84x $11.50 1.10x 0.7x $8.50 1.3% (31.8%)
MDC MDC Holdings Underperform $36.16 $1,698 ($8.25) ($2.50) ($0.60) $1,611 (147%) $21.36 $21.36 1.69x $24.15 1.50x 1.1x $26.00 2.8% (25.3%)
MTH Meritage Homes Underperform $22.34 $692 ($9.79) ($4.20) ($0.10) $344 35% $14.63 $14.48 1.54x $15.50 1.44x 1.1x $17.00 0.0% (23.9%)
NVR NVR Inc Neutral $607.53 $3,525 $16.65 $25.40 $37.25 $1,250 (280%) $247.56 $240.58 2.53x $239.00 2.54x 2.3x $550.00 0.0% (9.5%)
PHM Pulte Homes Neutral $11.93 $3,085 ($5.81) ($4.13) $0.05 $1,746 39% $9.14 $9.14 1.30x $9.10 1.31x 1.1x $10.00 0.0% (16.2%)
RYL Ryland Neutral $22.91 $1,004 ($9.33) ($5.55) $0.15 $713 20% $13.73 $13.73 1.67x $14.60 1.57x 1.1x $16.00 0.5% (29.6%)
TOL Toll Brothers Neutral $20.79 $3,349 ($1.82) ($2.82) $0.23 $1,963 13% $19.12 $19.12 1.09x $15.95 1.30x 1.2x $19.00 0.0% (8.6%)
Average $2,065 36% 1.39x 1.39x 1.0x 0.8% (20.9%)
Total
Return
Potential
Price
Target
Dividend
Yield
P/Adj.
BV
Target
Multiple
Cash
($ Mln) P/TBV
Adjusted
BV/share
Net
Debt/
Cap
Book
Value/
Ticker Company Name Rating share
Tangible
BV/share
Market
Cap.
(Millions)
CS Calendar Year Ests
Source: Company data, Credit Suisse estimates
05 August 2009
Monthly Survey of Real Estate Agents 57
Companies Mentioned (Price as of 05 Aug 09)
Centex (CTX, $11.61, NEUTRAL [V], TP $9.75)
DR Horton (DHI, $12.60, UNDERPERFORM [V], TP $7.50)
Hovnanian Enterprises (HOV, $4.22, NEUTRAL [V], TP $2.00)
KB Home (KBH, $17.94, OUTPERFORM [V], TP $17.00)
Lennar (LEN, $12.70, NEUTRAL [V], TP $8.50)
M.D.C. Holdings, Inc. (MDC, $36.16, UNDERPERFORM [V], TP $26.00)
Meritage Corp (MTH, $22.34, UNDERPERFORM [V], TP $17.00)
NVR Inc. (NVR, $607.53, NEUTRAL [V], TP $550.00)
Pulte (PHM, $11.93, NEUTRAL [V], TP $10.00)
Ryland Group (RYL, $22.91, NEUTRAL [V], TP $16.00)
Standard Pacific (SPF, $3.65)
Toll Brothers (TOL, $20.79, NEUTRAL [V], TP $19.00)
WCI Communities, Inc. (WCI, $.02)
Disclosure Appendix
Important Global Disclosures
I, Daniel Oppenheim, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies
and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed
in this report.
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total
revenues, a portion of which are generated by Credit Suisse's investment banking activities.
Analysts’ stock ratings are defined as follows:
Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived
risk) over the next 12 months.
Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months.
Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months.
*Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total
return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**,
with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities.
Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry
factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of
the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage
universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock
rating definitions, respectively, subject to analysts’ perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the
Neutral stock rating definition, respectively, subject to analysts’ perceived risk.
**An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.
Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected
performance of an analyst’s coverage universe* versus the relevant broad market benchmark**:
Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
*An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector.
**The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.
Credit Suisse’s distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Outperform/Buy* 37% (57% banking clients)
Neutral/Hold* 43% (58% banking clients)
Underperform/Sell* 19% (49% banking clients)
05 August 2009
Monthly Survey of Real Estate Agents 58
Restricted 2%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy,
Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's
decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit
Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research:
http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Important Regional Disclosures
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit
http://www.csfb.com/legal_terms/canada_research_policy.shtml.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that.
CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of
market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-month
period relative to the relevant coverage universe. Because Trade Alerts and stock ratings reflect different assumptions and analytical methods, Trade
Alerts may differ directionally from the analyst's stock rating.
The author(s) of this report maintains a CS Model Portfolio that he/she regularly adjusts. The security or securities discussed in this report may be a
component of the CS Model Portfolio and subject to such adjustments (which, given the composition of the CS Model Portfolio as a whole, may differ
from the recommendation in this report, as well as opportunities or strategies identified in Trading Alerts concerning the same security). The CS
Model Portfolio and important disclosures about it are available at www.credit-suisse.com/ti.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
disclosures regarding any non-U.S. analyst contributors:
The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts
listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.creditsuisse.
com/researchdisclosures or call +1 (877) 291-2683.
Disclaimers continue on next page.
05 August 2009
Americas/United States
Equity Research
Industry_RealtorSurvey_8-5-2009.doc
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction
where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse, the Swiss bank, or its subsidiaries or its affiliates
(“CS”) to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of
the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All
trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.
The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an
offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for
any particular investor. CS will not treat recipients as its customers by virtue of their receiving the report. The investments or services contained or referred to in this report may not be
suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report
constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise
constitutes a personal recommendation to you. CS does not offer advice on the tax consequences of investment and you are advised to contact an independent tax adviser. Please
note in particular that the bases and levels of taxation may change.
CS believes the information and opinions in the Disclosure Appendix of this report are accurate and complete. Information and opinions presented in the other sections of the report
were obtained or derived from sources CS believes are reliable, but CS makes no representations as to their accuracy or completeness. Additional information is available upon
request. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that liability arises
under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in
the future issue, a trading call regarding this security. Trading calls are short term trading opportunities based on market events and catalysts, while stock ratings reflect investment
recommendations based on expected total return over a 12-month period as defined in the disclosure section. Because trading calls and stock ratings reflect different assumptions and
analytical methods, trading calls may differ directionally from the stock rating. In addition, CS may have issued, and may in the future issue, other reports that are inconsistent with, and
reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared
them and CS is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. CS is involved in many businesses that relate to
companies mentioned in this report. These businesses include specialized trading, risk arbitrage, market making, and other proprietary trading.
Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future
performance. Information, opinions and estimates contained in this report reflect a judgement at its original date of publication by CS and are subject to change without notice. The
price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject
to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR’s, the
values of which are influenced by currency volatility, effectively assume this risk.
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and
assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and
forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a
structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase.
Some investments discussed in this report have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that
investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in
such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make
the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may
prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed.
This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked
site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS’s own website material) is provided solely for your
convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or
CS’s website shall be at your own risk.
This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in
the United Kingdom by The Financial Services Authority (“FSA”). This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am
Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States by Credit Suisse Securities (USA) LLC ; in
Switzerland by Credit Suisse; in Canada by Credit Suisse Securities (Canada), Inc..; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A.; in Japan by Credit Suisse
Securities (Japan) Limited, Financial Instrument Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The
Financial Futures Association of Japan; elsewhere in Asia/Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong
Kong) Limited, Credit Suisse Equities (Australia) Limited , Credit Suisse Securities (Thailand) Limited, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse Singapore Branch,
Credit Suisse Securities (India) Private Limited, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse Taipei Securities Branch, PT Credit Suisse Securities
Indonesia, and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse Taipei Securities Branch has
been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia)
Sdn. Bhd., to whom they should direct any queries on +603 2723 2020.
In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary
from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers
wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so
only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S.
Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market
professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for
any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or
in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case
are available upon request in respect of this report.
Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved
this report and/or any of the statements made herein.
If this report is being distributed by a financial institution other than Credit Suisse, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution
should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit
Suisse to the clients of the distributing financial institution, and neither Credit Suisse, its affiliates, and their respective officers, directors and employees accept any liability whatsoever
for any direct or consequential loss arising from their use of this report or its content.
Copyright 2009 CREDIT SUISSE and/or its affiliates. All rights reserved.
CREDIT SUISSE SECURITIES (USA) LLC
United States of America: +1 (212) 325-2000
