Existing Home Sales 03-23-2009

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Equity Research

Homebuilding / MARKET WEIGHT

Existing Home Sales

ECONOMICS

Improving Affordability Drives Better thanExpected Sales

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Sales up 5.1% as first-time buyers gain confidence.

Total existing salesincreased 5.1% to 4.72 mln units annualized in February, with single-familysales up 4.4% to a 4.23 mln unit annual pace from 4.05 mln units annualizedin January. This was better than our expectation for a 3% decrease andconsensus of -1%. We believe this reflects increased demand from first-timehomebuyers, who accounted for half of transactions last month, as a resultof better affordability from lower prices, especially on foreclosures(foreclosures accounted for 40-45% of transactions during the month). Withforeclosures selling for approximately 20% below non-foreclosure pricing,we still think traditional (non-foreclosure) sellers must lower prices further inorder to compete. Importantly, we believe the 7.7% decline in Februarypending sales will likely lead to lower existing sales in March.

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Higher inventory levels (+5.2% sequentially) offset increased salespace in February.

The total supply of homes for sale remained at 9.7months in February, with absolute inventory levels increasing 5.2% to 3.8mln units. The months’ supply of single-family homes decreased slightly to9.1 from 9.2 in January, as the 4.4% pick-up in sales activity more thanoffset the 2.6% rise in absolute inventory (to 3.2 mln single family homes).The sequential rise in inventory levels in February is consistent withhistorical trends, as more houses typically come to market for the Springselling season. However, we believe that the mounting foreclosures comingto market could further elevate inventory levels and continue to pressurehome prices throughout ’09, despite the increased government emphasis onloan modification programs.

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Inventory remains the key metric to watch

. We also think reportedinventory levels remain understated as not all foreclosed homes appear tobe reflected in reported inventory levels since many aren’t sold through theMLS and banks have yet to list many others. In addition, inventory will likelyrise further as we move through Spring, as it typically does. We are watchingfor a peak in inventory, as that may signal an inflection point since it is thefirst step towards stabilization in home prices.

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Increase in sales led by Northeast (+14.6%).

Single-family salesincreased 4.6% in the South, 2.8% in the West, and 1.0% in the Midwest.

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The median single-family home price fell 15% to $164,600 in February;elevated inventory levels will pressure prices throughout ‘09

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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

23 March 2009

Existing Home Sales

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Existing Home Sales Monitor

Exhibit 1:Months’ Supply at 9.1 in February – Likely to Peak Near 11 Months

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,000

1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

I n v e n t o r y o f E x i s t i n g S i n g l e - F a m i l y H o m e s f o r S a l e

2.03.04.05.06.07.08.09.010.011.012.0

M o n t h s ' S u p p l y

Inventory (left scale)Months' Supply (right scale)

Inventory likely to peak at 11.0 months supply in '09.

Source: National Association of Realtors, Credit Suisse estimates

23 March 2009

Existing Home Sales

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Exhibit 2:Single-Family Existing Home Sales Increased 4.4% in February

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,000

J a n - 6 8 J a n - 7 0 J a n - 7 2 J a n - 7 4 J a n - 7 6 J a n - 7 8 J a n - 8 0 J a n - 8 2 J a n - 8 4 J a n - 8 6 J a n - 8 8 J a n - 9 0 J a n - 9 2 J a n - 9 4 J a n - 9 6 J a n - 9 8 J a n - 0 0 J a n - 0 2 J a n - 0 4 J a n - 0 6 J a n - 0 8