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U.S.Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investorsshould consider this report as only a single factor in making their investment decision. Customers of Credit Suisse in theUnited States can receive independent, third party research on the company or companies covered in this report, at no costto them, where such research is available. Customers can access this independent research at www.credit-suisse.com/ir orcall 1 877 291 2683 or email equity.research@credit-suisse.com to request a copy of this research.08 July 2009Americas/United States
Equity Research
Homebuilding / MARKET WEIGHT
Monthly Survey of Real EstateAgents
CHANNEL CHECK
Low-End Buyers Represent Majority of Activity
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Traffic off slightly, but remains at reasonable levels.
Our Monthly Surveyof Real Estate Agents showed a market heavily-influenced by foreclosureswith buyers remaining extremely price sensitive, seeking out “deals.” Overall,buyer traffic declined modestly to 43.1 in June from 45.4 in May, the secondstraight decline. Agents cited modestly lower traffic in several foreclosure-heavy markets (resulting from the decreased supply of attractive foreclosureproperties), but traffic was generally still at fairly healthy levels.
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Strength in Washington, D.C.; continued weakness in Texas.
Our trafficindex in Washington, D.C. increased to 63 in June from 53 in May, withagents highlighting some pent-up demand among buyers. The majority ofother markets with strong readings for traffic were foreclosure heavymarkets in Florida and the Southwest. In contrast, we saw further weaknessin the Texas markets, as our traffic index in Austin fell to 28 from 35 in May,the traffic index in Dallas was up slightly to 41 from 39 in May, but fell slightlyin Houston to 22 from 24 in May. Charlotte was another area where agentscited weakness in traffic, with the index falling to 25 in June from 36 in May.
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Reaching a bottom on foreclosure pricing; further weakness at thehigh end.
Our price index increased 3.9 points in June to 30.9, up from 27.0in May. This is improvement, but any reading below 50 still indicatessequentially lower prices. Agents noted flat prices sequentially in several ofthe foreclosure-heavy markets such as Fort Myers, the Inland Empire, andPhoenix. Agents saw rising prices in Washington, D.C., the first sequentialincrease in that market since the downturn started four years ago.Interestingly, in contrast with other foreclosure-heavy markets, agents arestill see pricing declines in Las Vegas, with our price index at 32 (up from 23in May). Agents noted some of the weakest pricing in the Southeastern andFlorida markets.
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Appraisal issues cause hiccups for more transactions.
Agents indicatedmore challenges with appraisals (i.e., appraisals coming in below thecontract price), although the concerns have shifted to “poor qualityappraisers” following the enactment of the Home Valuation Code of Conduct(HVCC) rather than simply conservatism among the appraisers. We expectthis issue to continue to disrupt transactions in the coming months.
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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