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Equity Research
Homebuilding (Homebuilding/Building Products) / MARKETWEIGHT/UNDERWEIGHT
Monthly Survey of Real EstateAgents
CHANNEL CHECK
Buyer Price Sensitivity Limits New Home Sales
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Price sensitivity remained the theme in February; low prices necessaryto spur traffic.
Our Monthly Survey of Real Estate Agents in February sawa continuation of buyer price sensitivity, with sales generally occurring at lowprice points (often foreclosure sales) and in markets where prices havefallen significantly. These areas that have experienced sharp price declinesare the markets that generated traffic, whereas other markets likely havefurther to fall before seeing improved sales activity. Our main concerncontinues to be that homebuilders will find difficulty competing against thelower-priced foreclosures, resulting in few orders and limited cash flow.
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Traffic in February consistent with trends in January.
Our traffic indexwas effectively unchanged in February, measuring 36.0 from 36.5 in January.Better traffic was generally found in the foreclosure-rich markets of Florida,Southern California, and Nevada, along with Washington, DC. Once again,we saw the highest levels of traffic in hard-hit markets facing significantforeclosure activity, as the foreclosure prices are low enough to spur traffic.
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Pressure on home prices, demand focused on low-end of market.
Ourprice index increased 1.2 points in February to 17.1, up from 15.9 in January.However, readings below 50 imply sequentially lower prices. We expectfurther pressure on home prices due to the continued supply of foreclosures,as loan modifications likely won’t fix the problem of negative equity. Inaddition, we think there will be a continued downward bias to pricing stats,as most buyers focus on the entry-level homes. Our home listings(inventory) index declined to 40.5 from 43.5 in January, with levels below 50indicating rising inventory (which we would expect as inventory increases atthe start of the Spring season). Our time to sell index, which is a goodleading indicator of pricing trends, improved slightly to 28.2 (up from 26.6 inJanuary), with anything below 50 indicating a lengthening time needed tosell a home.
Research AnalystsDaniel Oppenheim, CFA
212 325 5726dan.oppenheim@credit-suisse.com
Michael Dahl
212 325 5882michael.dahl@credit-suisse.com
Russell W. Lane
212 538 3992russell.lane@credit-suisse.com
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