- Banc of America notes they are shifting their stance on homebuilders to neutral from cautious as they are seeing improvement in traffic, affordability, and construction - it was deterioration in these factors that led them to become more cautious in '05. Firm does not expect a smooth upward move, but expect choppiness over the next 12-24 months based on the excess inventory, as it will take time to work through the oversupply. They raising Standard Pacific (NYSE:SPF) to Buy from Sell and Meritage Homes (NYSE:MTH), NVR (NYSE:NVR), Pulte (NYSE:PHM), Ryland (NYSE:RYL), and Toll (NYSE:TOL) to Neutral from Sell.
BAC's Monthly Survey of Real Estate Agents shows improved buyer traffic in 33 out of 39 markets in November relative to October, although traffic is still below the expectations of agents in 38 of the 39 markets. They view traffic as the leading indicator of sales and pricing. Lower mortgage rates, price declines, and higher incomes are helping to ease strained affordability. Firm expects affordability to continue to improve over the coming year.
Tough times ahead for subcontractors; a positive for builders. Homebuilders have shown more discipline, with permits off 32% yr/yr in Oct. Expects continued discipline, which should help inventories and ease construction costs.
A seasonal increase in inventories in the Spring could lead to further pressure on prices and additional cancellations. Higher long-term interest rates would also likely lead to additional weakness.
Firm expects the stocks to trade in a range over the next 3- 6months.
Notablecalls: Historically, housing downturns have lasted between 26 and 52 months with new home unit sales averaging around a 50% decline. Even in best case, we're not there yet. And I'm strongly inclined to believe we are not heading towards the best of outcomes.
BAC's Monthly Survey of Real Estate Agents shows improved buyer traffic in 33 out of 39 markets in November relative to October, although traffic is still below the expectations of agents in 38 of the 39 markets. They view traffic as the leading indicator of sales and pricing. Lower mortgage rates, price declines, and higher incomes are helping to ease strained affordability. Firm expects affordability to continue to improve over the coming year.
Tough times ahead for subcontractors; a positive for builders. Homebuilders have shown more discipline, with permits off 32% yr/yr in Oct. Expects continued discipline, which should help inventories and ease construction costs.
A seasonal increase in inventories in the Spring could lead to further pressure on prices and additional cancellations. Higher long-term interest rates would also likely lead to additional weakness.
Firm expects the stocks to trade in a range over the next 3- 6months.
Notablecalls: Historically, housing downturns have lasted between 26 and 52 months with new home unit sales averaging around a 50% decline. Even in best case, we're not there yet. And I'm strongly inclined to believe we are not heading towards the best of outcomes.
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