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07 December 2010 Americas/United States Equity Research Homebuilding / MARKET WEIGHT

Monthly Survey of Real Estate Agents Research Analysts Daniel Oppenheim, CFA 212 325 5726 dan.oppenheim@credit-suisse.com Michael Dahl 212 325 5882 michael.dahl@credit-suisse.com William Alexis 212 538 3992 william.alexis@credit-suisse.com

CHANNEL CHECK

Traffic Inches Higher in November ■ Buyers tire of waiting and decide to get off the fence: Our Monthly Survey of Real Estate Agents indicated a modest uptick in traffic in November, the first uptick since April. Traffic levels generally remained depressed once again, but there seemed to be a change among some buyers. We have some doubt as to whether this will be the start of a trend, as we saw mixed trends over the course of the month, with some markets seeing better trends at the start of November, before returning to a lack of traffic.

■ “Fear of higher rates”, “specific bargains”, “seasonal improvement”, and some “post election confidence” helped traffic: We heard varying reasons for the slight bounce in traffic, with some agents surprised and unsure of the real cause. One clear theme was the attractiveness of low mortgage rates and the fear of rising rates, which we think led some buyers to decide to act. In addition, many buyers emerged from their summer/fall sabbatical to see some of the bargains firsthand. The start of generally cooler weather brought out buyers in several warmer markets. Finally, there was a small group motivated by a bit more confidence following the election. Some of these trends may attract only a shallow buyer pool so we’ll continue to watch to see if this persists into December. Overall, our traffic index increased to 22.1 in November, up from 16.3 in October.

■ Pressure on home prices continues, high inventory likely to add to the challenges: Our home price index moved up slightly to 21.6 in November, from 20.5 in October, indicating continuing pressure, as any reading below 50 indicates sequentially lower home prices. We anticipate that this will continue through the end of the year, as some sellers choose to lower the price in order to complete a sale, and also into 2011, when foreclosures will likely return to the market. Our home listings (inventory) index improved to 41.3 in November from 35.5 in October, getting closer to a neutral level (readings of 50 indicate sequentially unchanged inventory with levels below 50 pointing to rising inventory).

■ Many markets emerge from the doldrums: Agents noted some improvement in both Dallas (traffic index of 28, up from 14 in October) and Houston (traffic index of 26, up from 3 in October), along with better trends in Atlanta, Ft Myers, Jacksonville, Phoenix, the Inland Empire, and Washington, D.C. Seeing the increase in many markets suggested that the trends were not a fluke, but the longevity of the improvement is unclear, as we have seen very choppy results in markets in recent months.

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. 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. Investors should consider this report as only a single factor in making their investment decision.


07 December 2010

Table of Contents Overview of Results………………………………..…..3 Survey Methodology…………………………………...5 Top 20 Housing Markets Atlanta, Georgia Austin, Texas Charlotte, North Carolina Chicago, Illinois Dallas, Texas Denver, Colorado Fort Myers, Florida Houston, Texas Jacksonville, Florida Las Vegas, Nevada Los Angeles, California Miami, Florida Minneapolis, Minnesota New York-Northern New Jersey Orlando, Florida Phoenix, Arizona Riverside-San Bernardino [Inland Empire], California Seattle, Washington Tampa, Florida Washington, D.C.

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Additional Key Housing Markets…………………… 27 Baltimore, Maryland Boston, Massachusetts Charleston, South Carolina Cincinnati, Ohio Columbus, Ohio Detroit, Michigan Nashville, Tennessee Philadelphia-Southern New Jersey Port St. Lucie, Florida Portland, Oregon Raleigh, North Carolina Richmond, Virginia Sacramento, California San Antonio, Texas San Diego, California San Francisco, California Sarasota, Florida Tucson, Arizona Virginia Beach, Virginia Wilmington, North Carolina

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47

Historical Survey Trends by Market……………… 48 *Markets are characterized based on permit activity and listed in alphabetical order

Monthly Survey of Real Estate Agents

2


07 December 2010

Traffic Inches Higher in November 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. Buyers tire of waiting and decide to get off the fence: Our Monthly Survey of Real Estate Agents indicated a modest uptick in traffic in November, the first uptick since April. Traffic levels generally remained depressed once again, but there seemed to be a change among some buyers. We have some doubt as to whether this will be the start of a trend, as we saw mixed trends over the course of the month, with some markets seeing better trends at the start of November, before returning to a lack of traffic. “Fear of higher rates”, “specific bargains”, “seasonal improvement”, and some “post election confidence” helped traffic: We heard varying reasons for the slight bounce in traffic, with some agents surprised and unsure of the real cause. One clear theme was the attractiveness of low mortgage rates and the fear of rising rates, which we think led some buyers to decide to act. In addition, many buyers emerged from their summer/fall sabbatical to see some of the bargains firsthand. The start of generally cooler weather brought out buyers in several warmer markets. Finally, there was a small group motivated by a bit more confidence following the election. Some of these trends may attract only a shallow buyer pool so we’ll continue to watch to see if this persists into December. Overall, our traffic index increased to 22.1 in November, up from 16.3 in October. Pressure on home prices continues, high inventory likely to add to the challenges: Our home price index moved up slightly to 21.6 in November, from 20.5 in October, indicating continuing pressure, as any reading below 50 indicates sequentially lower home prices. We anticipate that this will continue through the end of the year, as some sellers choose to lower the price in order to complete a sale, and also into 2011, when foreclosures will likely return to the market. Our home listings (inventory) index improved to 41.3 in November from 35.5 in October, getting closer to a neutral level (readings of 50 indicate sequentially unchanged inventory with levels below 50 pointing to rising inventory). Many markets emerge from the doldrums: Agents noted some improvement in both Dallas (traffic index of 28, up from 14 in October) and Houston (traffic index of 26, up from 3 in October), along with better trends in Atlanta, Ft Myers, Jacksonville, Phoenix, the Inland Empire, and Washington, D.C. Seeing the increase in many markets suggested that the trends were not a fluke, but the longevity of the improvement is unclear, as we have seen very choppy results in markets in recent months.

Monthly Survey of Real Estate Agents

3


07 December 2010

Exhibit 1: Home Prices Continue to Fall and Incentives are Increasing as Demand Remains Weak Buyer Traffic Month Index Apr-2008 33.1 May-2008 31.5 Jun-2008 29.0 Jul-2008 27.4 Aug-2008 25.9 Sep-2008 24.0 Oct-2008 19.6 Nov-2008 19.8 Dec-2008 25.3 Jan-2009 36.5 Feb-2009 36.0 Mar-2009 39.5 Apr-2009 48.4 May-2009 45.4 Jun-2009 43.1 Jul-2009 43.4 Aug-2009 44.5 Sep-2009 44.8 Oct-2009 43.5 Nov-2009 43.0 Dec-2009 41.1 Jan-2010 43.5 Feb-2010 41.4 Mar-2010 43.1 Apr-2010 48.7 May-2010 31.5 Jun-2010 19.1 Jul-2010 16.9 Aug-2010 17.0 Sep-2010 17.9 Oct-2010 16.3 Nov-2010 22.1 Point change 5.8

Home Price Index 20.6 21.4 22.1 21.0 20.1 17.5 15.3 15.3 13.3 15.9 17.1 20.5 24.8 27.0 30.9 33.6 34.5 36.3 37.6 34.1 35.6 35.0 35.7 39.9 43.4 38.9 32.1 26.8 22.9 22.0 20.5 21.6 1.1

Home Incentive Listings Index Index 28.3 27.2 30.8 32.1 28.8 33.6 30.5 34.7 29.7 37.5 30.6 39.5 29.6 41.0 30.3 45.3 30.3 48.0 32.1 43.5 31.1 40.5 32.5 41.7 35.3 45.3 37.5 47.0 41.2 52.4 40.3 56.0 40.4 55.9 41.0 57.2 43.8 57.2 40.2 60.2 41.6 61.6 41.8 51.3 41.9 46.1 42.9 39.5 43.1 38.2 41.2 42.0 43.7 38.9 40.7 36.3 37.1 30.0 38.4 28.2 36.6 35.5 34.1 41.3 (2.5) 5.9

Time to Sell Index 24.2 24.9 26.6 24.9 25.7 22.5 19.9 22.0 23.2 26.6 28.2 33.4 42.6 44.6 43.7 46.2 45.4 43.7 44.1 42.9 40.3 39.4 42.9 45.8 49.1 42.6 29.6 23.6 19.1 18.8 20.0 21.5 1.5

Source: Credit Suisse estimates

Exhibit 2: Traffic Saw a Modest Bounce as Lower Prices and the Fear of Higher Rates Brought Some Buyers Back Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

11% 70%

62%

23%

35%

40%

60%

58%

60% 50%

37%

37%

30% 20% 10%

66%

4%

5%

3%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

4


07 December 2010

Survey Methodology We survey real estate agents, as we believe agents provide an accurate assessment of local housing market trends in both the new and existing home markets. We view an understanding of the existing home market as crucial to homebuilders as it represents over 90% of total sales, and trends in the existing home market often dictate trends in the new home market. Each month, we survey agents about trends in buyer traffic levels, home prices, incentives, inventory levels, and the length of time needed to sell a home. In November, we received responses from 1,000 real estate agents across the country. We review responses and calculate an index for each of the questions with levels above 50 indicating positive trends, levels below 50 indicating worsening trends, and a level of 50 indicating a neutral trend. 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.

Monthly Survey of Real Estate Agents

5


07 December 2010

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 Market Atlanta, GA Austin, TX Charlotte, NC Chicago, IL Dallas, TX Denver, CO Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN NY - Northern NJ Orlando, FL Phoenix, AZ Seattle, WA Tampa, FL Washington, DC Total Exposure to Top 20

2009 1-Family Permits 5,397 6,669 4,426 4,442 14,130 2,709 906 22,360 4,557 3,320 3,791 3,388 2,272 3,631 6,416 3,707 8,657 5,019 3,933 9,014 118,744

DHI 2% 5% 2% 3% 7% 2% 4% 4% 3% 3% 1% 1% 1% 0% 1% 13% 1% 1% 55%

HOV 3% 8% 11% 5% 1% 3% 8% 6% 47%

KBH 5% 4% 2% 1% 9% 7% 4% 8% 3% 5% 5% 3% 58%

LEN 4% 2% 1% 5% 17% 5% 2% 4% 2% 3% 3% 2% 4% 5% 3% 62%

Estimated MDC 8% 6% 18% 3% 24% 59%

Market Exposure MTH NVR PHM 4% 11% 4% 10% 4% 3% 20% 5% 1% 1% 21% 3% 1% 4% 1% 2% 1% 3% 11% 12% 1% 1% 20% 3% 64% 32% 53%

RYL 5% 4% 4% 7% 2% 4% 4% 5% 5% 4% 44%

SPF 6% 13% 3% 12% 7% 40%

TOL 12% 21% 33%

Source: Company data, Builder Online, Credit Suisse estimates

Monthly Survey of Real Estate Agents

6


07 December 2010

November Market Trends

Atlanta, GA – Traffic Bounces but Buyers Remain Concerned

! ! !

Traffic Home Prices

(5,397 single-family building permits in 2009, 8th largest market in the country)

Incentives

Traffic up modestly from October but remains very challenged. Our buyer traffic index improved to 19 in November from 5 in October, suggesting a very modest pick-up in activity from depressed levels in October, but certainly not at any levels that could be considered healthy (readings below 50 indicate traffic below agents’ expectations). In addition, the traffic index remained below the reading of 20 in September. Agents who saw better traffic activity mentioned that it was driven by a combination of bargain hunters and relocation demand. One agent noted that an increase in interest rates led to an increase in traffic as buyers were spurred off the fence. However, most agents remained disappointed. “There is not a ton of traffic right now,” according to one agent. Other agents cited the litany of concerns shared among buyers: unemployment or underemployment, inability to sell current homes, and difficulty obtaining financing, to name a few. On the positive side, there were no mentions of the foreclosure disruptions, which may end up being less severe than we had feared.

“No local moves, only relocation.”

Inventory increases, pressuring prices. Home prices remained under pressure in November; as our home price index improved slightly to 15 from 12 in October but remained well below a neutral reading of 50 (readings below 50 point to sequentially lower home prices). We think further price declines are likely in the coming months based on the weak demand and high and rising inventory levels. Our home listings index dropped to 42 in November from 60 in October, indicating an increase in listings (any reading below 50), likely at least partially-driven by the re-listing of foreclosures. This increase in inventory offset the small bump in traffic, as our time to sell index indicated a longer time needed to sell in November. Our index fell to 21 from 23, with readings below 50 pointing to an increased length of time needed to sell a home.

Comments from real estate agents:

■ “There seems to be a significant increase in customers who want to rent. They previously were first-time home buyers.”

■ “Unable to get buyers qualified for mortgage loans; appraisals are coming in low and requiring more repairs.” Ryland and Pulte Homes have the most exposure. Ryland has the greatest exposure to Atlanta with approximately 5% of net sales, followed by Pulte Homes with 4%. Exhibit 4: Further Improvement in Demand Needed to Halt Price Declines Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

8% 73%

80%

58%

21%

60%

46%

50% 42%

40% 23%

20% 71%

4%

4%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

7


07 December 2010

Austin, TX – Traffic Slips, Rebound in Demand Last Month May Have Just Been a Blip

Traffic

(6,669 single-family permits in 2009, 5th largest market in the country)

Home Prices

Buyer traffic falls back in November after October rebound. Our buyer traffic index gave back some of the gains seen in October, falling to 23 in November from 42 and pointing to traffic levels below agents’ expectations (readings below 50). This suggests that demand remains choppy and has yet to sustain positive momentum, although one positive was that the index reading did remain above the level of 13 seen in September. One agent noted, “uncertainty over pending foreclosures and rising rates.” Another noted “no urgency to purchase.” Another agent commented, “People are still looking in larger numbers because so many are moving to Austin. They are, however, still sitting on the fence and I do not really know why!” One agent who saw better activity credited “record low interest rates” and an “improving local economy.”

Incentives

November Market Trends

! ! !

Agents say the market remains weak, but relocation buyers have helped.

Home prices remain under pressure. Prices fell in November, as our home price index improved to 26 from 14 in October, but remained well below a neutral reading of 50 (readings below 50 indicating lower home prices over the past 30 days). Inventory trends remain worrisome, especially given the tepid demand, as listings rose further in November. Our home listings index fell to 30 in November from 33 in October, indicating an increase in inventory versus last month (readings below 50 point to higher listings). This contributed to a longer time needed to sell a home – typically a negative leading indicator for home prices – as our time to sell index fell to 15 in November from 25 in October (any reading below 50 indicates a longer time needed to sell a home over the past month).

Comments from real estate agents:

■ “I think buyers waited for the bottom to drop out and now want to buy before the rates jump more. And they want to buy before year end.”

■ “Appraisals are coming in below market value.” Meritage, D.R. Horton and KB Home have the most exposure. Meritage has the greatest exposure to Austin with approximately 11% of net sales, followed by D.R. Horton with 5% and KB Home with 5%. Exhibit 5: Demand Remains Choppy as Buyers Are Still Nervous, Waiting for a Bottom Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

9% 80% 70% 60% 50% 40% 30% 20% 10% 0%

27%

64%

74% 52% 43%

Meets expectations

Less than expected

41% 22%

4%

Home Prices More than expected

55%

Increased

5%

4%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

8


07 December 2010

Charlotte, NC – Traffic Levels Remain Weak as Buyers Watch Prices Fall

November Market Trends

! ! !

Traffic

(4,426 single-family permits in 2009, 13th largest market in the country) Little change in November as buyers continue to wait on the sidelines. Buyer traffic remained essentially unchanged at weak levels in November, as our buyer traffic index came in at 21 (from 19 in October), with any reading below 50 indicating traffic levels below agents’ expectations. Agents said the air of uncertainty continues to be an overhang on buyer psychology, as buyers are willing to wait on the sidelines until signs of stabilization are evident. One agent noted “unmotivated, confused buyers,” and said that, “buyers are waiting for foreclosures to come back onto the market for ‘deals’.” Another agent deemed it, “the slowest buyer market I have seen in 7 years.” According to one agent, “Few buyers are actually making offers, although traffic is up slightly.” We think buyers will likely remain in standby mode in the coming months as home prices fall further and they anticipate better deals next spring.

Home Prices Incentives

“Appraisals are very low and banks are not lending.”

Price declines appear more widespread. Home prices continued to fall in November, as our home price index fell to 7 from 15 in October, well below a neutral reading of 50 (readings below 50 indicate sequentially lower home prices) and the lowest index level ever recorded in our index since we began surveying Charlotte in 2005. 87% of agents surveyed said prices declined over the past 30 days. Inventory increased only modestly, as our home listings index improved to 43 in November from 38 in October, moving closer to a neutral level of 50 (a reading of 50 signals flat inventory levels). However, it is still taking longer to sell a home, as our time to sell index fell to 11 in November from 12 in October (readings below 50 indicate a longer time needed to sell a home). We generally view a longer time to sell as a negative leading indicator for home prices.

Comments from real estate agents:

■ “There is too much inventory and buyers are looking at price only.” ■ “Short sales and foreclosures are killing appraisals.” NVR and Standard Pacific have the most exposure. NVR has the greatest exposure to Charlotte with approximately 10% of sales, followed by Standard Pacific at 6%. Charlotte represents approximately 4% of sales for Pulte, Ryland, and KB Home. Exhibit 6: Home Prices Under Increased Pressure Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

21%

100%

86%

79%

80% 0%

60%

43%

50%

40% 14%

20% 0%

0%

0%

79%

Home Prices More than expected

21% 7%

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

9


07 December 2010

November Market Trends

Chicago, IL – Bargain Hunters Pick Off Deals, but Not Much Other Activity

! ! !

Traffic Home Prices

(4,442 single-family permits in 2009, 12th largest market in the country)

Incentives

Low prices and rates tempt some in November. Buyer traffic improved modestly in November as our traffic index increased to 18 from 12 in October; however, this still points to traffic levels well below agents’ expectations (readings below 50). Agents who saw better traffic activity this month suggested that low prices and mortgage rates were the driving factors as bargain hunters reemerged. Several agents cited “value pricing,” and said “proper pricing” was drawing buyers out. However, despite these encouraging comments, the majority of agents still said that traffic was weak. One agent commented, “Phones are dead and no one is looking.” Another said, “Buyers have almost completely dried up.” One agent said buyers continue to lack urgency due to the “low interest rate with no threat of going up and uncertain employment.” Other agents said that buyers are still waiting for prices to fall and more foreclosures to come back to the market.

“Buyers are scared by dropping values.”

Sellers cut prices, attempting to lure buyers. Home prices continued to fall in November as sellers responded to the ongoing weakness in demand. Our home price index improved to 16 from 7 in October, but remains far below a neutral reading (any reading below 50 indicates sequentially lower home prices). Prices are likely to continue to fall in the coming months as demand remains weak and only buyers sensing a great deal are acting. Inventory trends also remain weak, as our home listings index came in at 36 in November (from 32 in October), with readings below 50 pointing to higher inventory levels. Meanwhile, our time to sell index, reflecting a combination of demand and inventory trends, pointed to an increased length of time needed to sell a home in November. Our index came in at 21, up from 18 in October but well below a neutral reading of 50.

Comments from real estate agents:

■ “Prices are still dropping so there’s no urgency to buy, and loans are still hard to get.”

■ “Surprising rental market, some sales interest. Perhaps we are far enough away from the tax credit expiration.” Ryland, Hovnanian, Pulte and D.R. Horton have the most exposure. Ryland has the greatest exposure to Chicago with approximately 4% of sales in the market, followed by Hovnanian, Pulte and D.R. Horton with approximately 3% of sales each. Exhibit 7: Some Buyers Find Good Values, but Most Are Waiting for Better Deals Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

5%

80% 70% 60% 50% 40% 30% 20% 10% 0%

27%

68%

71%

27% 2%

Home Prices More than expected

Meets expectations

Less than expected

67%

62%

Increased

31% 24% 8%

9%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

10


07 December 2010

November Market Trends

Dallas, TX – Low Rates, and the Fear of Higher Rates, Helped Traffic in November

! ! !

Traffic Home Prices

(14,130 single-family permits in 2009, 2nd largest market in the country) Traffic levels pick up as buyers act on low rates. Buyer traffic improved in November, as our index increased to 28 from 14 in October. While this still indicates traffic below agents’ expectations (any reading below 50), it represents the highest reading in our traffic index since the tax credit expired in April. Whether or not this will be a blip or the start of a better trend remains to be seen, given the mixed responses this month. Interestingly, all of the agents who noted better traffic levels commented that the low mortgage rate was the primary driver. Some said that the rate in and of itself was attractive enough to entice buyers, while others said a slight uptick in rates and the fear of further increases drove buyers into action. One agent also said her clients have “stronger confidence in the recovering economy.” Not all agents were as sanguine, however. Many others continued to cite weakness in traffic based on a lack of confidence due to economic/employment concerns and inability to qualify for loans.

Incentives

“More first-time buyers” helped traffic, according to one agent.

Prices drop despite stable inventory. Home prices fell further in November, as our home price index dropped to 18 from 23 in October, well below a neutral reading (readings below 50 point to lower home prices over the past 30 days). This is the lowest reading seen since we began surveying the market in 2005, suggesting price declines are likely becoming more widespread. Inventory levels were unchanged (albeit at elevated levels) for the second consecutive month, as our home listings index was flat at 46, essentially inline with a neutral reading of 50. However, the weakness in demand is leading to a longer time needed to sell a home, a negative indicator for future pricing. Our time to sell index measured 14 in November (versus 11 in October), well short of a neutral reading of 50.

Comments from real estate agents:

■ “The appraisal situation is a mess…I’ve had several deals cratered by badly done appraisals this year.”

■ “Possible concern over increasing interest rates.” Meritage, Hovnanian, D.R. Horton and Ryland have greatest exposure. Meritage has the greatest exposure to Dallas, representing 20% of its sales, followed by Hovnanian at 8% and D.R. Horton and Ryland with 8% each. Exhibit 8: Buyers Enticed by Attractive Mortgage Rates, but Confidence Remains Shaky Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

16% 72%

80%

64% 57%

60%

43% 36%

40%

28%

24%

60%

20% 0%

0%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

11


07 December 2010

November Market Trends

Denver, CO – Buyer Fears Continue to Trump Affordability

! ! !

Traffic Home Prices

(2,709 single-family permits in 2009, 33rd largest market in the country) Traffic falls again, fear remains. Buyer traffic fell again in November after a slight up-tick in October, as our traffic index slipped to 12 from 16. This suggests traffic remains at weak levels well below agents’ expectations (any reading below 50). Agents said buyers continue to lack confidence and numerous fears are keeping them on the sidelines. One agent said, “Home values are still falling. Unemployment is high. Lack of confidence in the economy.” Another agent commented, “Showings are very slow for everyone in our office.” Another agent noted, “FEAR – the buyers are unsure.” Agents appeared to be in agreement that while the affordability is very favorable given the low mortgage rates and falling home prices, buyer fears trump affordability. This is likely to continue at least in the near-term.

Incentives

“Getting a loan is like getting a financial patdown.”

Home prices continue to fall as demand remains weak. Agents indicated further home price declines in November, as our price index improved slightly to 21 from 18 in October but any reading below 50 indicates sequentially lower home prices. Prices are being hurt by the lack of demand and high inventory, and more buyers are sitting out as they wait for prices to fall, creating a challenging circular impact. Inventory increased modestly in November, as our home listings index improved to 39 from 30 in October but remained below a neutral reading of 50. In addition, our time to sell index was slightly lower at 19 in November from 20 in October, well below a neutral reading of 50, pointing to an increased length of time needed to sell a home over the past 30 days. We view the length of time needed to sell a home as a leading indicator for trends in home prices.

Comments from real estate agents:

■ “Clients are still afraid of the economic/job situation.” ■ “People that need to sell in order to buy are not getting buyers for their homes.” MDC Holdings, D.R. Horton and KB Home have the greatest exposure. MDC Holdings has the greatest exposure to Denver with approximately 8% of sales, followed by D.R. Horton and KB Home with approximately 2% of sales. Exhibit 9: Affordability is Still Second to Confidence and Means Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

6% 12%

70% 60% 50% 40% 30% 20% 10% 0%

82%

More than expected

66%

42%

Less than expected

38% 31%

0%

Home Prices Meets expectations

63%

58%

Increased

3%

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

12


07 December 2010

November Market Trends

Ft. Myers, FL – Traffic Gets a Boost from the Beginning of “Snowbird” Season

! !

Traffic Home Prices

(906 single-family permits in 2009, 93rd largest market in the country) Traffic improves to best levels seen since May. Traffic improved noticeably in November, as our buyer traffic index jumped to 44 from 20 in October. This is the best level since the reading of 45 in May (and the highest reading of any of the markets we surveyed in November) and indicates traffic levels nearly in-line with agents’ expectations (a reading of 50 would suggest traffic in-line with expectations). Interestingly, there was little mention of the foreclosure suspensions this month, after many agents cited the issue as the primary reason for weaker traffic in October. One agent did note, “REO fears based on scary news reports.” However, other agents commented that traffic improved as a result of the “snowbirds” returning to the market for the season and taking advantage of low home prices and mortgage rates. One agent noted, “Cold-climate based second-home buyers are shifting assets from stock market to Fort Myers’ bargain-basement priced housing.” Others had similar comments. Another agent said, “Foreclosures are decreasing, forcing demand to regular listings.”

Incentives

“Low prices and winter residents are back.”

Better demand and lower inventory help prices as well. Home prices were nearly stable in November, according to agents, as our home price index improved to 44 from 24 in October, close to a neutral reading of 50. This likely reflects both the improvement in traffic and the decrease in inventory. Our home listings index improved to 72 in November from 56 in October, well above a neutral reading (readings above 50 point to decreasing inventory levels). We worry that some of this decline is still both seasonal and somewhat related to the foreclosure issues, but further improvement would be a positive for pricing trends.

Comments from real estate agents:

■ “Attractive interest rates for mortgages and low prices on homes.” ■ “People are feeling more confident, and are tired of waiting.” Lennar has the most exposure. Lennar has the greatest exposure to Ft. Myers with approximately 5% of net sales. Exhibit 10: Home Prices Nearly Stable as Demand Improves, Inventory Falls Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

19% 80% 70% 60% 50% 40% 30% 20% 10% 0%

31%

50% More than expected

Meets expectations

75% 67% 56%

19%

25%

Increased

27% 7%

6%

Home Prices Less than expected

19%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

13


07 December 2010

November Market Trends

Houston, TX – Attractive Mortgage Rates and Home Prices Lead to Modest Increase in Buyer Traffic

! ! !

Traffic Home Prices

(22,360 single-family permits in 2009, largest market in the country) Traffic rebounds but uncertainty remains. Buyer traffic improved in November from the depths of October, as our traffic index rebounded to 26 from 3, still indicating weak demand (readings below 50 point to traffic levels below agents’ expectations) but at least slight improvement sequentially. This is the highest level since April. While overall comments continued to highlight the challenges in the market, those agents who saw better traffic relative to last month credited the low rates and better prices. One agent noted the better traffic was due to, “end of year deals.” In addition, several agents said better relocation demand helped this month. However, “People still don’t feel comfortable about the economy and spending their money right now – jobs are insecure, savings funds have been jeopardized, and people just feel they need to hold onto their money,” according to one agent.

Incentives

“Appraisals are on the low side.”

Price pressures ease somewhat, but further declines likely. Home prices remained under pressure in November, although the declines appeared less widespread as our home price index improved to 33 from 18 in November (readings below 50 point to lower prices over the past 30 days). However, incentives increased further, as our incentive index fell to 25 in November from 35 in October, with readings below 50 pointing to higher incentives. Inventory levels increased modestly, as our home listings index came in at 41, up from 35 in October but below a neutral reading of 50 (readings below 50 point to higher inventory). Despite the slightly better traffic, our time to sell index fell to 13 in November from 18 in October, with readings below 50 indicating a longer time needed to sell a home. The longer time needed to sell is typically a negative leading indicator for home prices.

Comments from real estate agents:

■ “Lack of job security, too many people are refinancing rather than purchasing.” ■ “Lack of certainty in jobs and the economy.” Meritage, Lennar, and Hovnanian have the most exposure to Houston with approximately 21%, 17%, and 11%, respectively, of their net sales. Exhibit 11: Buyers Attracted by Rates and Good Deals, but Confidence Remains Weak Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

13% 80% 70% 60% 50% 40% 30% 20% 10% 0%

26% 61%

74% 59%

57% 39%

32%

4%

Home Prices More than expected

Meets expectations

Less than expected

Increased

26% 9% 0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

14


07 December 2010

November Market Trends

Jacksonville, FL – Prices Fall, and Deals Bring Some Buyers Back in the Door

! ! !

Traffic Home Prices

(3,320 single-family permits in 2009, 23rd largest market in the country) Buyers tire of waiting, start to act on low rates and prices. Our buyer traffic index rebounded to 25 in November from 9 in October, indicating modestly better traffic over the past 30 days. This still suggests demand remains weak (readings below 50 indicate traffic below agents’ expectations), but is at least a little encouraging that it is the highest reading since May. Agents said buyers are still fearful and lack confidence, and are taking a long time to act. However, several mentioned that some buyers are tired of waiting and ready to purchase. One agent who saw better traffic noted, “These buyers have been searching for quite some time.” Another commented that “low interest rates and price reductions” have brought buyers off of the sidelines. There was no mention of the foreclosure issues this month, but a speedy resolution would likely help sales as buyers remain focused on finding the best perceived value, which they typically see as foreclosures and short sales.

Incentives

“Condo lending is difficult.”

Price fall as inventory increases further, time to sell lengthens. Home prices fell further in November, as our home price index dropped to 0 from 9 in November (readings below 50 point to sequentially lower home prices). Every agent surveyed this month said that prices declined. Unfortunately, the declines are likely to continue in the coming months, as inventory continued to rise and the time needed to sell a home lengthened – both negative leading indicators for home prices. Our home listings index fell to 10 in November from 32, well below a neutral reading (any reading below 50 suggests higher inventory levels), while our time to sell index fell to 10 in November from 18 in October (readings below 50 indicate a longer time needed to sell a home over the past 30 days).

Comments from real estate agents:

■ “Buyers are not getting financing and due to the economy do not feel the market is improving.”

■ “Buyers are not sure if this is the bottom.” MDC Holdings, Ryland, and KB Home have the most exposure to Jacksonville with approximately 6%, 4%, and 4%, respectively, of their sales. Exhibit 12: Buyers Creep Back Into the Market as Deals Sweeten Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

17%

120%

100%

100%

80%

80%

80% 60%

17%

40% 20%

67%

20% 0% 0%

20%

0%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

15


07 December 2010

November Market Trends

Las Vegas, NV – Anxious Buyers Don’t Want to Try to Catch a Falling Knife

! ! !

Traffic Home Prices

(3,791 single-family permits in 2009, 18th largest market in the country) Traffic falls as buyers await further price declines. Buyer traffic declined in November, as our buyer traffic index slipped to 20 from 24 in October, indicating traffic levels below agents’ expectations (readings below 50 suggest lower than expected traffic). Agents said the weaker traffic levels were primarily a result of increasing buyer fears over further home price declines. One agent commented, “Buyers are anxious and expect lower prices.” Another agent cited “buyer fear of price declines.” Agents also said the employment situation has yet to improve and many buyers still can’t quality for loans. Agents who saw healthier demand said it was generally being driven by finding great deals. One agent cited “reduced prices,” while another noted “short sale interest” as the reasons for better traffic. Another agent also noted that, “New construction incentives and realtor commission offerings are increasing.”

Incentives

“Too many foreclosures.”

Prices fall as distressed listings continue to hit the market. Home prices fell further in November, as our home price index declined to 25 from 33 in October, well below a neutral reading (readings below 50 point to lower home prices over the past 30 days). This is the lowest level we’ve seen in our survey since May 2009. Agents widely blamed the continued onslaught of distressed inventory hitting the market. Several agents also commented that appraisal values are below contract prices, which continues to cause challenges. Inventory levels worsened in November, as our home listings index fell to 21 from 28 in October, with readings below 50 pointing to higher inventory levels. Not surprisingly, the length of time needed to sell a home increased over the past month, as our index fell to 10 in November from 15 in October. These leading indicators suggest home prices are likely to fall further in the coming months.

Comments from real estate agents:

■ “Some buyers expect further declines or are uncertain about employment.” ■ “More foreclosures, increasing inventory.” MDC Holdings and KB Home have most exposure to Vegas. MDC has the greatest exposure to Las Vegas with 18% of net sales, followed by KB Home with 8%. Exhibit 13: Buyer Wait and Watch as Prices Fall Further Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

4% 100%

81%

80%

32%

62%

62%

60% 38%

40% 64%

20%

27%

19%

12% 0%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

16


07 December 2010

November Market Trends

Los Angeles, CA – Little Changed in November as Buyers Continue to Sit on Their Hands

! ! !

Traffic Home Prices

(3,388 single-family permits in 2009, 22nd largest market in the country) Buyer traffic remains at similar, weak levels in November. Buyer traffic appeared essentially unchanged in November relative to October, as our traffic index inched up to 25 from 24. This continues to indicate weak levels of demand (readings below 50 indicate traffic levels below agents’ expectations). Agents said that buyers continue to stay at home and sit on their hands, as they look out into the market and see little to be encouraged by with falling home prices and a weak economy. One agent commented, “Buyers are waiting for more price reductions and foreclosure properties.” Another said, “Continued high unemployment and edgy consumer confidence is discouraging people from making major purchases.” A third agent noted that buyers are willing to wait, with the “expectation that more REO will flood the market.” However, several agents did note a few incremental buyers in the market. One agent said, “Inventory is dropping and interest rates are moving up, so a little more sense of urgency is developing.” More urgency would certainly be welcome news.

Incentives

“A Malibu beach home appraised for less than land value.”

Inventory ticks higher, prices tick lower. Home prices remained under pressure, as our home price index was unchanged at 33 in November, below a neutral reading of 50 (any reading below 50 indicates lower prices over the past 30 days). The increase in inventory bodes poorly for near-term pricing trends, as our home listings index fell to 40 in November from 50 in October (readings below 50 point to rising inventory over the past month). The length of time needed to sell a home also worsened in November, as our time to sell index came in at 22 (from 15 in October), with readings below 50 indicating a longer time needed to sell a home.

Comments from real estate agents:

■ “Buyers and sellers are still nervous about prices.” ■ “Uncertainty in government moratoriums is adversely affecting buyers.” KB Home, Standard Pacific and MDC have the most exposure. Approximately 3% of sales for Hovnanian, KB Home and Standard Pacific come from L.A., the most among the large builders. Exhibit 14: Buyers Continue to Lack Motivation Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

10% 70% 60% 50% 40% 30% 20% 10% 0%

30% 60%

60% 53% 46% 40%

7%

Home Prices More than expected

Meets expectations

Less than expected

50%

Increased

37%

4%

3%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

17


07 December 2010

November Market Trends

Miami, FL – Traffic Got Off to a Hot Start, but Cooled Down as the Month Progressed

! ! !

Traffic Home Prices

(2,272 single-family permits in 2009, 43rd largest market in the country)

Incentives

Investors and foreign buyers help kick off the winter season, but traffic slowed as November progressed. Buyer traffic improved in November, as our buyer traffic index bounced back to 29 from 19 in October; however, this still indicates traffic below agents’ expectations for this time of year (any reading below 50). Interestingly, the month started off much stronger, with more than half of the agents noting traffic in-line with or better than expectations through the middle of the month. These agents credited investors and foreign demand. One agent said, “More foreign investors are lifting the market,” and another cited “cash and international buyers.” Other agents stressed the importance of price and said that “further price reductions” were behind the increase in buyer traffic. However, agents’ responses became less enthusiastic as the month progressed, with the majority of agents who responded in the last two weeks of the month citing “less than expected” traffic. These agents said buyers remained cautious. One agent noted “fear of the unknown.” Another agent said, “South Florida is entering its ‘season’ and the expectations are for an increase in buyer activity, but we are experiencing lower buyer activity.” It will be interesting to see which half of the month proves to be the trend over the next several months.

“Price, price, and price.”

Sellers cut prices as they compete for few buyers. Home prices fell again in November, according to agents, as our home price index fell to 22 from 29 in October, with readings below 50 indicating sequentially lower home prices. This was the lowest reading since April 2009. Inventory levels increased, after having held steady last month, as our home listings index fell to 33 in November from 50 in October (readings below 50 indicate higher inventory). In addition, our time to sell index fell to 26 in November from 31 in October, indicating a longer time needed to sell a home (any reading below 50).

Comments from real estate agents:

“Some buyers looking but closing a short sale is almost impossible.”

“Banks are pulling foreclosures off the market.”

D.R. Horton has the most exposure. D.R. Horton has the greatest exposure to Miami, but with only approximately 1% of sales. Exhibit 15: Investors Start to Come Off the Sidelines, Responding to Further Price Cuts Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

14% 70% 60% 50% 40% 30% 20% 10% 0%

29%

57%

60%

37%

Meets expectations

Less than expected

31% 10%

3%

Home Prices More than expected

59% 48% 48%

Increased

4%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

18


07 December 2010

Minneapolis, MN – Few Buyers Feel Compelled to Act Ahead of Anticipated Price Declines

November Market Trends

! ! !

Traffic Home Prices

(3,631 single-family permits in 2009, 20th largest market in the country) Traffic improves slightly but remains low. Traffic inched higher but remained at depressed levels in November, as our buyer traffic index increased to 14 from 10 in October (readings below 50 indicate traffic below agents’ expectations). Those few agents who did see better activity noted a combination of low mortgage rates and investors as the reasons. One agent noted, “We have seen a little uptick in activity with our buyers in the past couple weeks.” However, more agents reported continued weakness in conditions as buyers remain fearful and lack confidence, motivation, and urgency. One agent commented, “Buyers do no feel a sense of urgency in spite of the historically low interest rates because they believe that prices are going to continue to decline in the future.” Another said, “No time pressure for buyers and too many listings to choose from are slowing an already slow market.”

Incentives

“Seasonal slowdown coupled with lethargic buyers.”

Buyers ask for, and receive, further discounts. Our home price index fell to 11 in November from 13 in October, indicating further price declines over the past 30 days (any reading below 50). This marks lowest index readings since December 2008. Nevertheless, buyers appear to be holding out for further discounts, and are likely to get them based on the worsening inventory and time to sell. Our home listings index improved to 36 in November from 26 in October, but remained below a neutral reading of 50, indicating modestly higher inventory over the past month. Meanwhile, the length of time needed to sell a home increased (typically a negative leading indicator for home price trends), as our time to sell index fell to 13 from 19 in October (readings below 50 point to a longer time needed to sell).

Comments from real estate agents:

■ “Sales and pending sales have ranged from 30% to 55% lower than last year each month since the end of the federal tax credit.”

■ “No motivation to buy given buyers’ perception of the market outlook.” Ryland, Lennar, and Hovnanian have the greatest exposure. Ryland has the greatest exposure to Minneapolis with approximately 4% of net sales, followed by Lennar and Hovnanian with 3% each. Exhibit 16: Buyers Expect Further Price Declines and Are Willing to Wait Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

7% 100%

15%

78%

80%

78%

74%

60% 40%

23%

20% 0%

20% 5%

3%

0%

78%

Home Prices More than expected

21%

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

19


07 December 2010

November Market Trends

New York-Northern NJ – Buyers Fear Purchasing Before the Bottom in Prices

! ! !

Traffic Home Prices

(6,416 single-family permits in 2009, 6th largest market in the country) Buyers remain hesitant, fearing commitment. Buyer traffic remained at depressed levels below agents’ expectations in November, as our buyer traffic index was up slightly to 18 from 16 in November but well below a neutral reading (readings below 50 point to traffic below expectations). Agents said buyers remain fearful and want to wait for the bottom before committing. One agent said, “Are we there, yet? If you have children, you’ve heard this! Now, the buyers are wondering are we there (at the bottom). They expect prices to continue to go down. Also, they are worried about jobs.” Another agent noted “fear of commitment and difficult financing.” A third agent commented, “Continued worries about the economy, jobs, and the fact that we have not yet reached the bottom line of pricing. Appraisers in our area are projecting a continued downward trend in prices.” Based on these responses, it seems like a challenging winter lies ahead, with lower prices likely needed before activity picks back up.

Incentives

“Buyers are afraid to buy. Worried about selling present houses. Houses sitting on market for longer period.”

Sellers adjust pricing but gap remains relative to buyer expectations. Home prices fell again in November, as our home price index dipped to 20 from 24 in October, with readings below 50 indicating lower home prices over the past 30 days. Agents said that sellers have adjusted to try to meet buyer demands, “but buyers are still lower than sellers.” Inventory increased, but our home listings index moved closer to stabilization, improving to 38 in November from 23 in October (a reading of 50 would indicate flat inventory). Our time to sell index came in at 25 (from 21 October), still indicating a longer time needed to sell a home over the past month.

Comments from real estate agents:

■ “Pent-up demand, but buyers are still nervous because of employment uncertainties.”

■ “Buyers are still hesitant and think prices will come down further. Also, they are worried about job security.” Toll Brothers and Hovnanian have the greatest exposure. Toll Brothers and Hovnanian have the most exposure to the New York-Northern NJ area market, generating the largest percentage of sales in the area with 12% and 8%, respectively. Exhibit 17: Buyers Want Confidence that Prices Have Bottomed Before Committing Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

9% 80% 70% 60% 50% 40% 30% 20% 10% 0%

18%

74%

70% 61% 37%

Meets expectations

Less than expected

27%

22% 2%

Home Prices More than expected

62%

Increased

8%

11%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

20


07 December 2010

November Market Trends

Orlando, FL – Nervous Buyers Only Willing to Make Low-Ball Offers

! ! !

Traffic Home Prices

(3,707 single-family permits in 2009, 19th largest market in the country) Traffic a bit better but nothing to write home about. Traffic improved slightly in November, as our buyer traffic index increased to 17 from 9 in October. However, this remains far below a neutral reading of 50, suggesting traffic levels well short of agents’ expectations (readings below 50 point to traffic below expectations). Agents continued to stress buyers’ caution, looking out to a market with challenging unemployment, falling home prices, tough lending standards, and potential problems with foreclosures. One agent commented, ‘Many people are nervous about the economy. More people are thinking property values will go down again.” Another said, “The issue with banks and affidavit/robo-signing has had an overall negative impact on market activity.” Yet another agent noted, “Everyone seems afraid to buy, waiting for prices to go down more or making stupidly low offers.” Our fear is that these “stupidly low offers” may ultimately be closer to where prices end up.

Incentives

“Lenders now want DNA.”

Prices falling on weak demand. Home prices fell further in November, with our home price index slipping to 25 from 28 in October (readings below 50 point to sequentially lower home prices). This is a function of the weak demand and elevated supply, although inventory appeared to be nearly stable in November. Our home listings index improved to 42 from 38 in October, only modestly below a neutral reading of 50. However, the length of time needed to sell continued to increase – a negative leading indicator for home prices – as our time to sell index was essentially unchanged at 29 in November from 28 in October, below a neutral reading of 50.

Comments from real estate agents:

■ “Buyers have frustration with lenders and the inability to sell their homes.” ■ “I think there is way more traffic but also most of the buyers are bottom feeding on the numbers...deals that are good deals are being knocked down further by buyers’ perception that the prices should be slashed further.” Ryland and KB Home have the greatest exposure. Ryland and KB Home have the largest percent of sales from Orlando at approximately 5% each. Exhibit 18: Buyers Remain Cautious about the Economy, Jobs, and Home Prices Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

8% 80% 70% 60% 50% 40% 30% 20% 10% 0%

17%

75%

75% 67% 50% 42% 25% 17% 17% 8% 0%

Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

21


07 December 2010

November Market Trends

Phoenix, AZ – Investors and Seasonal Buyers Drive Better Traffic in November

! ! !

Traffic Home Prices

(8,657 single-family permits in 2009, 4th largest market in the country) Lower prices draw buyers out at start of winter. Buyer improved in November, as our buyer traffic index improved to 32 from 17 October. This still indicates traffic levels below agents’ expectations for this time of year (any readings below 50), but is the highest reading since May. Agents attributed the improvement in traffic to further home price reductions (which brought both investors and regular homebuyers out) and the return of seasonal buyers at the start of winter. “This is a price driven market. Buyers think every property is a short sale, and make very low offers,” according to one agent. Several agents mentioned that investors returned, although a couple others also said that investors are still hesitant to meet the banks’ asking prices. However, one agent said that while traffic may be up, it is often not going towards purchases. This agent said, “Much of the traffic I see is looking for long-term rentals. They have lost their home through foreclosure or short sale and still need housing, but are unable to qualify to buy anything.”

Incentives

“Snowbirds are back.”

Home prices remain under pressure. Home prices continued to decline in November, as our home price index inched up to 16 from 14 in October, but remains far below a neutral reading (readings below 50 point to lower home prices over the past 30 days). Agents highlighted the price sensitivity of buyers and how only great deals will bring traffic, so further declines are likely needed. Inventory increased further, as our home listings index came in at 28, up from 21 in October but any reading below 50 indicates higher inventory levels. In addition, it took longer to sell a home in November, as our time to sell index remained at 17 (readings below 50 indicate a longer time needed to sell a home). Rising inventory and a longer time to sell typically bode poorly for future pricing trends.

Comments from real estate agents:

■ “Lower prices are bringing our investors and homebuyers.” ■ “Buyers are concerned that interest rates will go up.” MDC Holdings, D.R. Horton, Standard Pacific, Pulte Homes, and Meritage have the greatest exposure. MDC has the largest exposure to Phoenix, contracting approximately 24% of total unit sales in the area, followed by D.R. Horton (13%), Standard Pacific (12%), Pulte (12%), and Meritage (11%). Exhibit 19: Investors and Bargain Hunters Search for Deals as Prices Fall Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

16% 80%

68% 45%

34%

32%

40%

53%

66% 53%

60%

20%

32%

0%

3%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

22


07 December 2010

November Market Trends

Riverside-San Bernardino, CA (Inland Empire) – If the Price is Right, Buyers are There

! ! !

Traffic Home Prices

(4,557 single-family permits in 2009, 11th largest market in the country) Buyers become more confident in good deals. Buyer traffic improved in November, though still below agents’ expectations for this time of year, as our buyer traffic index increased to 32 from 21 in October (any reading below 50 indicates traffic below expectations). This is the highest reading for the area since May. Agents said the increase relative to last month was due to slightly better confidence as lower prices gave buyers the sense that they were getting good deals. One agent noted, “Consumers are more confident in short sales.” Others cited “foreclosures” and “falling prices” as reasons for better traffic. However, one agent pointed out the difference between traffic and transactions. “If the property is priced right traffic is very good. However, the caveat is that few buyers are writing offers.” In addition, several agents said that the uptick in rates and the fear of further increases got some buyers off the sidelines. If rates remain flat or move lower again, it will be interesting to see if this proves to be just a short-term bounce in traffic or the start of better trends.

Incentives

“REO inventory is coming back slowly.”

Prices fall, inventory stable. Home prices continued to slip in November, as our home price index came in 37 (from 36 in October), with readings below 50 indicating lower prices over the past 30 days. Inventory levels appeared stable, as our home listings index fell to 47 in November from 64 in October but remained essentially in-line with a neutral reading (a reading of 50 would suggest flat inventory levels). Further progress reducing inventory levels would help prices to stabilize. However, it still took longer to sell a home in November, a negative leading indicator, as our time to sell index came in at 27 (from 24 in October), well below a neutral reading of 50.

Comments from real estate agents:

■ “There are not enough homes on the market for the number of buyers.” ■ “Very few REO’s – lenders are working with homeowners, and sellers aren’t listing due to lack of equity.” Standard Pacific, KB Home and Lennar have the greatest exposure. Standard Pacific has the largest percent of sales at approx. 13%, followed by KB Home (7%), and Lennar (5%). Exhibit 20: Buyers Remain Interested if There’s a Perception of Value Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

12% 70% 60% 50% 40% 30% 20% 10% 0%

47%

41%

60%

60% 53% 40% 33%

7%

Home Prices More than expected

Meets expectations

Less than expected

Increased

33%

7%

7%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

23


07 December 2010

November Market Trends

Seattle, WA – Prices Fall Despite Stable Inventory, Driven by a Lack of Demand

! ! !

Traffic Home Prices

(5,019 single-family permits in 2009, 9th largest market in the country) Buyers remain hesitant given lack of economic improvement. Buyer traffic deteriorated in November, as our buyer traffic index fell to 23 from 30 in October, indicating traffic well below agents’ expectations (readings below 50 point to traffic below expectations). Agents said they have seen little momentum in recent months, with demand remaining choppy, as buyers remain fearful and hesitant to commit. The two most widely cited reasons for the poor traffic levels were a lack of confidence in the employment outlook and fear that home prices will fall further. One agent commented, “Traffic seems to have slowed down. There is too much inventory, and buyers are fearful that prices are still to bottom.” One agent noted, “People are coming back for the 2nd, 3rd, and 4th visits,” which is typically a good leading indicator, but the traffic has yet to convert into sales. Given the lack of buyer confidence, we think it is likely that the market will remain at a stand-still until the spring selling season.

Incentives

“Fewer buyers, no showings.”

Inventory stable for second straight month, but prices remain under pressure. Home prices continued to fall in November, as our home price index fell slightly to 24 from 25 in October, with readings below 50 indicating lower home prices over the past 30 days. Inventory levels were stable for the second consecutive month, as our home listings index increased to 49 in November from 47 in October, in-line with a neutral reading of 50. Stable inventory trends should eventually be beneficial for pricing, but the lack of demand is outweighing this currently, as evidenced by the lengthening time needed to sell a home. Our time to sell index came in at 27 in November, up slightly from 25 in October but far below a neutral reading of 50 (readings below 50 indicate a longer time needed to sell a home relative to the prior month).

Comments from real estate agents:

■ “There is very little confidence in the market, job growth is poor, etc...same old story.”

■ “Concern that prices will continue to trend down.” D.R. Horton and Pulte have the most exposure to Seattle. D.R. Horton and Pulte generated approximately 1% of sales in Seattle. We expect larger, publicly traded homebuilders to further consolidate the market in the next several years. Exhibit 21: Buyers Continue to Lack Confidence, Waiting for Signs of Improvement Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

12% 80% 70% 60% 50% 40% 30% 20% 10% 0%

21%

67%

74%

36% 23% 0%

Home Prices More than expected

Meets expectations

Less than expected

55%

48% 52%

Increased

3%

9%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

24


07 December 2010

November Market Trends

Tampa, FL – Traffic Choppy in November, with Improvement in 1st Half and Weakness in 2nd

! ! !

Traffic Home Prices

(3,933 single-family permits in 2009, 17th largest market in the country)

Incentives

Traffic remains at weak levels. Buyer traffic increased slightly in November relative to October, but remained at depressed levels, as our traffic index improved to 18 from 13 (far below a neutral reading of 50). The handful of agents who saw better traffic over the past month generally noted reduced prices as the driver, especially as some seasonal buyers came back into the market. Interestingly, these responses were also weighted towards the first half of the month, whereas most agents who responded over the last two weeks of the month said that traffic was below expectations, indicating weakness as the month progressed. This underscores the choppiness of demand in recent months, and we will watch responses in early December closely to try to determine which path is more indicative of a trend. Agents who noted weaker traffic suggested “low consumer confidence,” a “lack of qualified buyers,” and fear of further price declines were to blame.

“Tight credit conditions and falling values are holding buyers back.”

Rising inventory adds to pricing pressure. Home prices remained under pressure in November as inventory increased again, as our home price index came in at 29 (up from 23 in October), far short of a neutral reading of 50 (readings below 50 indicate lower home prices over the past 30 days). Inventory ticked higher after temporarily stabilizing in October, as our home listings index fell to 32 in November from 48, below a neutral reading (any reading below 50 points to higher inventory levels). The weak demand and higher inventory contributed to a longer time needed to sell a home in November, as our time to sell index came in at 21 (from 18 in October), well below a neutral reading of 50. Sellers are typically pressured to reduce prices the longer their homes linger on the market.

Comments from real estate agents:

■ “No urgency. Foreclosures are being halted.” ■ “Lack of confidence in the economy and buyers believe prices will be going down further.” Standard Pacific Homes, Ryland, and Lennar have the most exposure. Tampa contributes approximately 7% of Standard Pacific’s net sales, followed by 5% each for Ryland and Lennar. Exhibit 22: Low Confidence Continues to Weigh on Demand Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

12% 70% 60% 50% 40% 30% 20% 10% 0%

12%

76%

59% 47% 47%

41%

6% 0%

Home Prices More than expected

Meets expectations

Less than expected

50% 50%

Increased

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

25


07 December 2010

November Market Trends

Washington, D.C. – Traffic Rebounds, but Urgency Still Lacking

! ! !

Traffic Home Prices

(9,014 single-family permits in 2009, 3rd largest market in the country) Traffic bounces back but buyers continue to take their time. Buyer traffic improved in November after dropping to the lowest levels of the year in October, as our buyer traffic index increased to 31 from 18. This still indicates traffic levels below agents’ expectations (any reading below 50), but is a step in the right direction. Agents noted a step up due to the improving local economic outlook, especially following the elections in early November as relocation demand started again. One agent commented, “The very healthy local economy in the close-in Washington, D.C. suburbs is creating low unemployment, positive job growth, a steady stream of relocations, decreasing inventory…There has been an uptick in traffic, buyer confidence, and contracts since the election.” However, there was a sense among some agents that despite the better traffic, buyers are still slow to actually commit to a purchase. According to one agent, “There are a lot of lookers but few buyers.”

Incentives

“Low interest rates and low prices are helping.”

Prices still under pressure, but better traffic and inventory should help. Home prices remained under pressure in November; our home price index improved to 27 from 22 in October, but any reading below 50 indicates sequentially lower home prices. However, price trends should be helped in coming months if demand continues to improve and inventory declines further. Our home listings index jumped to 56 in November from 28 in October, indicating lower inventory levels over the past month (readings above 50 point to declining inventory). Meanwhile, our time to sell index slipped to 26 from 28, consistent with agents’ comments that buyers remain hesitant (readings below 50 point to an increased length of time needed to sell a home).

Comments from real estate agents:

■ “Traffic is OK but people are looking more than buying. Low interest rates seem to be a factor. Having the elections over gives a little more sense of where the economy/nation might be headed.”

■ “Effort to close and be in the house before the holidays. This urgency wasn’t there last month.” Toll Brothers, NVR and Hovnanian have the greatest exposure. Toll Brothers and NVR have the most exposure to the Washington, D.C. market, as it represented approximately 21% and 20% of sales, respectively. Washington represented 6% of Hovnanian’s sales. Exhibit 23: Buyers are Looking Again, but Slow to Commit Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

8%

54%

60%

46%

50%

50% 50%

48%

52%

40%

46%

30% 20%

46%

10%

0%

0%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

26


07 December 2010

Additional Key Housing Markets

Monthly Survey of Real Estate Agents

27


07 December 2010

November Market Trends

Baltimore, MD

! ! !

Traffic

(3,110 single-family permits in 2009, 26th largest market in the country) Traffic comes in higher, but still short of expectations. Traffic was better in November, but still came in below agents’ expectations. Our buyer traffic index came in at 32 (from 0 in October), with readings below 50 indicating lower than expected traffic. 64% of agents said traffic did not meet expectations, 27% said it was greater than expected, and 9% said it met expectations.

Home Prices Incentives

Prices fall, incentives increase. Home prices fell further in November, as our home price index came in at 18 (from 13 in October), with readings below 50 indicating lower prices over the last 30 days. 64% of agents said prices were lower and 36% said prices were unchanged. Meanwhile, incentives increased slightly in November, as our incentive index came in at 44 (from 29 in October), just short of a neutral reading of 50 (readings below 50 suggest higher incentives). 89% of agents said incentives were unchanged and 11% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 20 in November, up from 13 in October, still well below a neutral reading of 50, suggesting an increased time to sell (readings below 50 point to an increased time to sell). 60% of agents said the time to sell a home increased and 40% said the time to sell was unchanged. We view an increased time to sell as a negative step toward price stabilization.

Comments from real estate agents:

■ “Traffic is slightly better, but it’s mostly made of ‘lookers’ instead of ‘buyers’.” ■ “I think buyers are waiting until next year to see what happens.” NVR and Ryland have the greatest exposure. NVR has the most exposure to Baltimore, as it represented approximately 9% of the company’s sales. Baltimore represented 5% of Ryland’s sales. Exhibit 24: Traffic Below Expectations, Lower Prices, Additional Incentives, Time to Sell Increases in November Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days... 100%

27%

89%

80%

64%

60%

60%

64%

9%

40%

36%

40%

11%

20% 0%

0%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

28


07 December 2010

November Market Trends

Boston, MA

Traffic

(3,054 single-family permits in 2009, 28th largest market in the country)

Home Prices

Traffic short of expectations. Traffic remained below agents’ expectations in November, as our traffic index came in at 32 (from 8 in October), still below a neutral reading of 50 (readings lower than 50 indicate traffic did not meet agents’ expectations). 55% of agents said traffic was below expectations, 27% said it met expectations, and 18% said it was above expectations.

! !

Incentives

Lower prices, unchanged incentives. Home prices faced additional pressure in November; our price index came in at 36 (from 35 in October), remaining below a neutral reading of 50 (readings below 50 indicate sequentially lower prices). 73% of agents said prices were unchanged and 23% said they were lower. Sellers held incentives steady in November, as our incentive index came in at 50 (from 36 in October), in-line with a neutral reading (readings of 50 suggest unchanged incentives). 60% of agents said incentives were unchanged, 20% said they were lower and 20% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 23 in November from 15 in October, remaining below a neutral reading of 50, pointing to an increased time to sell over the past 30 days (readings short of 50 indicate an increased time to sell). 55% of agents said the time to sell increased and 45% said the time to sell was unchanged. We believe the increased time to sell is a negative indicator for future pricing trends.

Comments from real estate agents:

■ “General economic uncertainty has been on buyers’ minds.” ■ “Fear of rising interest rates has sparked some interest, but nothing serious.” The Boston market represented less than 1% of sales for all homebuilders in our coverage universe. Exhibit 25: Traffic Below Expectations, Lower Prices, Stable Incentives, Increased Time to Sell in November Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

18% 80% 70% 60% 50% 40% 30% 20% 10% 0%

55% 27%

73% 60%

45% 27% 20%

Meets expectations

Less than expected

20%

0% Home Prices

More than expected

55%

Increased

0% Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

29


07 December 2010

November Market Trends

Charleston, SC

! ! !

Traffic

(2,902 single-family permits in 2009, 30th largest market in the country)

Home Prices

Traffic below expectations. Our buyer traffic index remained below expectations in November, coming in at 38 (from 25 in October), pointing to traffic short of expectations (readings lower than 50 suggest traffic did not meet agents’ expectations). 50% of agents said traffic was below expectations, 25% said it met expectations, and 25% said it was above expectations.

Incentives

Lower prices, higher incentives. Home prices fell further in November, as our home price index came in at 25 (from 21 in October), pointing to sequentially lower prices (readings below 50 indicate lower prices). 50% of agents said prices were lower and 50% said they were unchanged. Meanwhile, sellers offered additional incentives, as our incentive index came in at 38 (from 42 in October), short of a neutral reading of 50 (a reading lower than 50 indicates increased incentives over the last 30 days). 75% of agents said incentives were unchanged and 25% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 38 (from 43 in October), further from a neutral reading of 50, indicating an increased time to sell over the past month (readings lower than 50 suggest an increased time to sell). 75% of agents said the time to sell was unchanged over the last 30 days and 25% said the time to sell increased. We view an increased time to sell as a negative step toward price stabilization.

Comments from real estate agents:

■ “People can’t afford homes. There are no jobs in the area.” ■ “Buyers have negative sentiments on the economy and the employment picture.” Ryland and KB Home have the greatest exposure. Ryland has the most exposure to the Charleston market, at approximately 4% of the company’s sales. Charleston represented 3% of KB Home’s sales. Exhibit 26: Traffic Fails to Meet Expectations, Prices Fall, Incentives Increase, Longer Time to Sell in November Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

25%

80% 70% 60% 50% 40% 30% 20% 10% 0%

50%

25%

75% 50% 50% 25% 0%

Home Prices More than expected

Meets expectations

Less than expected

75%

Increased

25% 0%

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

30


07 December 2010

November Market Trends

Cincinnati, OH

! ! !

Traffic

(3,155 single-family permits in 2009, 24th largest market in the country)

Home Prices

Traffic remains short of expectations. Our buyer traffic index came in at 31 in November (from 17 in October), remaining below a neutral reading of 50 (a reading short of 50 suggests lower than expected traffic). 62% of agents said traffic was below expectations, 25% said it exceeded expectations and 13% said it was in-line with expectations.

Incentives

Prices decline, incentives increase. Home prices fell again in November, as our price index fell to 13 from 17 in October, further below a neutral reading of 50, indicating sequentially lower home prices (readings short of 50 point to decreased prices). 75% of agents said prices were lower and 25% said they were unchanged. Meanwhile, sellers increased incentives, as our incentive index came in at 31 (from 25 in October), remaining short of a neutral reading of 50 (readings below 50 suggest increased incentives). 62% of agents said incentives were unchanged and 38% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 13 in November (from 8 in October), suggesting an increased time to sell over the past 30 days (readings short of 50 indicate a longer time to sell). 75% of agents said the time to sell increased and 25% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “Those that can buy are being very cautious. They do not want to move forward.” ■ “Very few buyers have the credit or income required by banks for a mortgage.” NVR has the greatest exposure. NVR has the most exposure to the Cincinnati market, as it represented approximately 3% of the company’s sales. Exhibit 27: Traffic Below Expectations, Lower Prices, Higher Incentives, Time to Sell Lengthens in November Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days... 80% 70% 60% 50% 40% 30% 20% 10% 0%

25%

13%

63%

75%

38% 25% 0%

Home Prices More than expected

Meets expectations

Less than expected

75% 63%

Increased

25% 0%

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

31


07 December 2010

November Market Trends

Columbus, OH

! ! !

Traffic

(2,613 single-family permits in 2009, 36th largest market in the country) Traffic remains below agents’ expectations. Buyer traffic stayed below agents’ expectations in November, as our index came in at 22 (from 8 in October) with readings lower than 50 pointing to traffic short of agents’ expectations. 67% of agents said traffic was short of expectations, 22% said it met expectations, and 11% said it exceeded expectations.

Home Prices Incentives

Price fall, incentives increase. Prices declined again in November, but moved closer toward stabilization, as our price index came in at 39 (from 8 in October), with readings below 50 indicating sequentially lower home prices. 44% of agents said prices were lower, 34% said they were unchanged, and 22% said they were higher. Meanwhile, sellers increased incentives in November, as our incentive index came in at 33 (from 42 in October), further from a neutral reading of 50, with readings lower than 50 indicating higher incentives. 44% of agents said incentives were higher, 44% said they were unchanged, and 12% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 28 in November (from 17 in October), pointing to an increased time to sell over the past 30 days (readings short of 50 suggest an increased time to sell). 56% of agents said the time to sell was unchanged and 44% said the time to sell increased. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “People think buying now will put them underwater in the near future. They are worried about price declines.”

■ “The market is full of uncertainty and lost jobs.” The Columbus market represented less than 1% of sales for all homebuilders in our coverage universe. Exhibit 28: Traffic Below Expectations, Lower Prices, Higher Incentives, Longer Time to Sell in November Traffic Levels Versus Expectations

How Do the Recent 30 Days Compare to the Prior 30 Days...

11% 56%

60% 44%

50% 40%

22%

30%

44% 44%

44%

33% 22%

20%

11%

10%

67%

0%

0% Home Prices More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

32


07 December 2010

November Market Trends

Detroit, MI

! ! !

Traffic

(1,269 single-family permits in 2009, 74th largest market in the country) Traffic short of agents’ expectations. Buyer traffic remained short of expectations in November, as our traffic index came in at 13, unchanged from our reading in October, still short of a neutral reading of 50, suggesting traffic failed to meet agents’ expectations (readings below 50 indicate traffic was below expectations). 74% of agents said traffic was below expectations and 26% said it met expectations.

Home Prices Incentives

Prices fall, incentives increase. Home prices continued fall in November, as our price index fell to 16 from 32 in October, remaining below a neutral reading of 50 (readings short of 50 suggest sequentially lower prices). 74% of agents said prices were lower over the past 30 days, 21% said they were unchanged, and 5% said they were higher. Meanwhile, incentives edged higher, as our incentive index came in at 44, just shy of a neutral reading of 50 (readings lower than 50 suggest increased incentives). 76% of agents said incentives were flat, 18% said they were higher, and 6% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 17 in November (from 32 in October), further from a neutral reading of 50, pointing to an increased time to sell over the past 30 days (readings lower than 50 suggest an increased time to sell). 67% of agents said the time to sell increased and 33% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “The most critical issue is the lack of jobs.” ■ “Buyers are expecting and waiting for prices to drop. They want better deals and do not want to be caught with a home that’s worth less in a few months.” Pulte, Toll Brothers, and Centex have the greatest exposure. Pulte has the most exposure to the Detroit market, as it represents approximately 5% of the company’s sales. Detroit represents approximately 5% of Toll Brother’s sales and 2% of Centex’s sales. Exhibit 29: Traffic Below Expectations, Lower Prices, Higher Incentives, Increased Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0% 100%

26%

76%

74%

80%

67%

60% 33%

40% 20%

74%

21% 5%

6%

0%

0% Home Prices

More than expected

18%

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

33


07 December 2010

November Market Trends

Nashville, TN

! ! !

Traffic

(4,045 single-family permits in 2009, 16th largest market in the country)

Home Prices

Traffic remains below agents’ expectations. Buyer traffic fell further in November, as our traffic index fell to 15 from 17 in October, remaining below a neutral reading of 50 (readings short of 50 point to lower than expected traffic). 70% of agents said traffic was below expectations and 30% said it was in-line with expectations.

Incentives

Prices decline, incentives increase. Home prices remained under pressure in November. Our home price index came in at 33 (from 20 in October), below a neutral reading of 50, indicating sequentially lower home prices (readings below 50). 44% of agents said prices were lower, 44% said they were unchanged, and 12% said they were higher. Meanwhile, incentives were higher in November, as our incentive index came in at 39 (from 40 in October), short of a neutral reading of 50 (readings lower than 50 indicate increased incentives). 56% of agents said incentives were unchanged, 33% said they were higher, and 11% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 22 in November (from 27 in October), still below a neutral reading of 50, suggesting an increased time to sell over the past 30 days (readings short of 50 point to an increased time to sell). 67% of agents said the time to sell increased over the past 30 days, 22% said the time to sell was unchanged, and 11% said the time to sell decreased. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “People don’t have enough confidence to go out and buy.” ■ “The banks have become increasingly strict with lending, even to those with good credit.” Pulte and NVR have the greatest exposure. Pulte and NVR have the most exposure to the Nashville market, with approximately 2% of the company sales. Exhibit 30: Traffic Below Expectations, Lower Prices, Higher Incentives, Longer Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0% 70% 60% 50% 40% 30% 20% 10% 0%

30%

70%

67% 56% 44% 44% 33% 22% 11%

Home Prices

More than expected

Meets expectations

Less than expected

Increased

11%

11%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

34


07 December 2010

November Market Trends

Philadelphia, PA-Southern NJ

! ! !

Traffic

(4,857 single-family permits in 2009, 10th largest market in the country)

Home Prices

Traffic remains below expectations. Buyer traffic stayed below agents’ expectations in November, as our traffic index came in at 17 (from 15 in October), staying well below a neutral reading of 50 (readings below 50 indicate traffic did not meet agents’ expectations). 70% of agents said traffic was below expectations, 26% said it met expectations, and 4% said it exceeded expectations.

Incentives

Prices decline, incentives increase. Home prices fell again in November, as our price index came in at 15 from 12 in October, remaining short of a neutral reading of 50 (readings short of 50 indicate sequentially lower home prices). 70% of agents said prices were lower over the past 30 days and 30% said they were unchanged. Meanwhile, sellers increased incentives in November, as our incentive index came in at 36 (from 46 in October), coming in short of a neutral reading of 50 (readings lower than 50 point to higher incentives). 71% of agents said incentives were higher and 29% said they were unchanged. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 26 in November (from 6 in October), still short of a neutral reading of 50, pointing to an increased time to sell over the past 30 days (readings short of 50 indicate an increased time to sell). 52% of agents said the time to sell increased, 44% said the time to sell was unchanged, and 4% said the time to sell decreased. We view an increased time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “Buyers are waiting for the bottom. They don’t want to buy something now and lose equity right away.”

■ “I thought there would be more buyers looking. That said, offers are coming in too low or buyers are backing out of deals.” Toll Brothers and NVR have the greatest exposure. Toll Brothers has the most exposure to the Philadelphia-Southern NJ market, as it represented approximately 8% of the company’s sales, followed by NVR at 3% of sales. Exhibit 31: Traffic Falls Short of Expectations, Lower Prices, Higher Incentives , Increased Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

4% 80%

26%

71%

70%

52%

60%

43%

40%

30%

29%

20%

70%

0%

0%

4%

0% Home Prices

More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

35


07 December 2010

November Market Trends

Port St. Lucie, FL

! !

Traffic

(383 single-family permits in 2009, 171st largest market in the country)

Home Prices

Traffic remains below agents’ expectations. Buyer traffic remained below agents’ expectations in November, as our traffic index fell to 0 from 25 in October, with readings below 50 pointing to traffic short of expectations. 100% of agents said traffic was below expectations.

Incentives

Lower prices, flat incentives. Home prices fell again in November, as our price index fell to 0 from 21 in October, below a neutral reading of 50 (readings lower than 50 point to sequentially lower prices). 100% of agents said prices were lower sequentially. Meanwhile, sellers held incentives steady in November; as our incentive index came in at 50 (from 31 in October), in-line with a neutral reading, suggesting unchanged incentives (readings of 50 point to flat incentives). 100% of agents said incentives were unchanged. Length of time needed to sell a home unchanged in November. Our time to sell index came in at 50 in November (from 19 in October), coming in-line with a neutral reading of 50, pointing to an unchanged time to sell over the last 30 days (readings of 50). 100% of agents said the time to sell was unchanged. We view an unchanged time to sell as a positive step toward price stabilization.

Comments from real estate agents:

■ “Buyers are scared they may lose their jobs.” ■ “Buyer confidence is poor.” The Port St. Lucie market represents less than 1% of sales for all homebuilders in our coverage universe. Exhibit 32: Traffic Below Expectations, Lower Prices, Flat Incentives, Time to Sell Unchanged in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0% 120%

100%

100%

100%

100% 80% 60% 40% 20%

0% 0%

0%

0%

0%

0%

0% Home Prices

100% More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

36


07 December 2010

November Market Trends

Portland, OR

! ! !

Traffic

(3,028 single-family permits in 2009, 29th largest market in the country) Traffic remains below agents’ expectations. Buyer traffic came in short of agents’ expectations in November, as our traffic index came in at 20 (from 19 in October), remaining short of a neutral reading of 50 (readings below 50 suggest traffic did not meet agents’ expectations). 66% of agents said traffic was below expectations, 27% said it met expectations, and 7% said it was above expectations.

Home Prices Incentives

Lower prices, additional incentives. Home prices fell further in November, as our price index fell to 3 from 10 in October, remaining below a neutral reading of 50 (readings short of 50 point to sequentially lower prices). 93% of agents said prices were lower and 7% said prices were unchanged. Incentives increased slightly in November, as our incentive index came in at 44 (from 38 in October), just shy of a neutral reading of 50 (readings short of 50 suggest higher incentives). 87% of agents said incentives were unchanged and 13% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 23 in November from 15 in October, still short of a neutral reading of 50, suggesting an increased time to sell over the past 30 days (readings lower than 50 point to an increased time to sell). 67% of agents said the time to sell increased, 20% said the time to sell was unchanged, and 13% said the time to sell was lower. We view an increased time to sell as a negative step toward price stabilization.

Comments from real estate agents:

■ “Low priced inventory is moving, but most people are hesitant to make any type of commitment.”

■ “Data are starting to show that prices are falling. Buyers have caught on and are waiting for better conditions.” D.R. Horton has the greatest exposure. Portland represented approximately 1% of sales for D.R. Horton. Exhibit 33: Traffic Short of Expectations, Prices Fall, Incentives Increase, Longer Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

7% 93%

100%

87%

80%

27%

67%

60% 40% 20%

67%

0%

7%

20%

13%

13%

0%

0% Home Prices

More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

37


07 December 2010

November Market Trends

Raleigh, NC

! ! !

Traffic

(4,414 single-family permits in 2009, 14th largest market in the country) Traffic falls, remains below expectations. Buyer traffic remained short of agents’ expectations in November, as our index fell to 4 from 8 in October, staying below a neutral reading of 50 (readings below 50 point to lower than expected traffic). 92% of agents said traffic was lower than expected and 8% said it met expectations.

Home Prices Incentives

Lower prices, higher incentives. Home prices continued to face pressure in November, as our price index came in at 17 from 12 in October, pointing to sequentially lower prices over the last 30 days (readings below 50 suggest lower prices). 67% of agents said prices were lower and 33% said they were unchanged. Meanwhile, sellers increased incentives in November, as our incentive index came in at 25 (from 31 in October) further from neutral reading of 50 (readings below 50 point to increased incentives over the last 30 days). 50% of agents said incentives were higher and 50% said they were unchanged. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 8 in November from 4 in October, remaining well below a neutral reading of 50, suggesting an increased time to sell over the past 30 days (readings short of 50 suggest a longer time to sell). 83% of agents said the time to sell increased and 17% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “There is a fear of buying in a declining market.” ■ “There remains to be no urgency from buyers. People are still nervous over the direction of overall pricing.” Standard Pacific, KB Home and Pulte have the greatest exposure. Standard Pacific has the most exposure to the Raleigh market, as it represents approximately 5% of the company’s sales. Raleigh represents 4% and 3% of sales for KB Home and Pulte, respectively. Exhibit 34: Traffic Below Expectations, Prices and Incentives Worsen, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0%8% 100%

83%

80%

67% 50% 50%

60% 33%

40%

17%

20% 0%

0%

0%

0%

92% More than expected

Meets expectations

Home Prices

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

38


07 December 2010

November Market Trends

Richmond, VA

! ! !

Traffic

(2,650 single-family permits in 2009, 35th largest market in the country)

Home Prices

Traffic below expectations. Our buyer traffic index fell to 10 in November from 25 in October, remaining below a neutral reading of 50, suggesting traffic was below agents’ expectations over the last 30 days (readings below 50). 80% of agents said traffic was below expectations and 20% said it was unchanged.

Incentives

Prices decline, incentives increase. Home prices faced additional pressure in November, as our price index fell to 20 from 31 in October, remaining below a neutral reading of 50, indicating sequentially lower prices (readings short of 50 indicate lower prices over the last 30 days). 60% of agents said prices were lower and 40% said they were unchanged. Meanwhile, incentives increased in November as our incentive index came in at 20 (from 44 in October), short of a neutral reading of 50 (readings lower than 50 suggest higher incentives). 60% of agents said incentives were higher and 40% said they were unchanged. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 20 in November from 31 in October, short of a neutral reading of 50, suggesting an increased time to sell over the past 30 days (readings lower than 50). 60% of agents said the time to sell increased and 40% said the time to sell was unchanged. We view an increased time to sell as a negative step toward price stabilization.

Comments from real estate agents:

■ “Buyers are still concerned over the outlook of future employment.” ■ “People are resisting because of worries over the economy.” NVR and Pulte have the greatest exposure. NVR has the most exposure to the Richmond market, as it represented approximately 6% of the company’s sales. Richmond represented 1% of sales for Pulte. Exhibit 35: Traffic Below Expectations, Prices Decrease, Additional Incentives, Increased Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0% 20%

70% 60% 50% 40% 30% 20% 10% 0%

80%

60% 40%

0%

Home Prices

More than expected

Meets expectations

Less than expected

Increased

60%

60% 40%

40%

0%

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

39


07 December 2010

November Market Trends

Sacramento, CA

! ! !

Traffic

(2,445 single-family permits in 2009, 41st largest market in the country)

Home Prices

Traffic remains below expectations. Our buyer traffic index came in at 25 in November (from 7 in October), remaining below a neutral reading of 50, suggesting traffic levels failed to meet agents’ expectations (readings lower than 50 indicate traffic was below agents’ expectations). 60% of agents said traffic was lower than expected, 30% said traffic met expectations, and 10% said it exceeded expectations.

Incentives

Prices fall, incentives increase. Home prices fell further in November, as our home price index fell to 15 from 21 in October, with readings lower than 50 indicating sequentially lower prices. 70% of agents said prices were lower and 30% said they were unchanged. Meanwhile, incentives increased in November, as our incentive index came in at 29 (from 25 in October), still below a neutral reading of 50 (readings lower than 50 point to increased incentives). 57% of agents said incentives were higher, 29% said they were unchanged, and 14% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 25 in November (from 18 in October), staying below a neutral reading of 50, pointing to an increased time to sell over the past 30 days (readings lower than 50 suggest a longer time to sell). 50% of agents said the time to sell was unchanged and 50% said it increased. We view an increased time to sell as a negative step toward price stabilization.

Comments from real estate agents:

■ “One word - apathy. Buyers are not interested in committing to a mortgage right now.”

■ “Buyers do not think the employment outlook is safe. Mortgage criteria have also been very tight.” Pulte, Hovnanian, Lennar and KB Home have the greatest exposure. The Sacramento market represented approximately 2% of sales each for Pulte, Hovnanian, Lennar, and KB Home. Exhibit 36: Traffic Below Expectations, Lower Prices, Higher Incentives, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

10% 80% 70% 60% 50% 40% 30% 20% 10% 0%

30% 60%

70% 57% 50% 50% 30%

14% 0%

Home Prices

More than expected

Meets expectations

Less than expected

29%

Increased

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

40


07 December 2010

November Market Trends

San Antonio, TX

! ! !

Traffic

(5,443 single-family permits in 2009, 7th largest market in the country)

Home Prices

Traffic up, but still below expectations. Our buyer traffic index came in at 42 in November (from 24 in October), pointing to traffic still below agents’ expectations (readings short of 50 indicate traffic did not meet agents’ expectations). 50% of agents said traffic met expectations, 33% said it was below expectations, and 17% said it exceeded expectations.

Incentives

Prices fall, incentives increase. Home prices continued to face pressure in November, as our price index came in at 38 (up from 32 in October), but still below a neutral reading of 50 (readings below 50 indicate sequentially lower prices). 75% of agents said prices were unchanged and 25% said they were lower. Sellers offered additional incentives in November, as our incentive index came in at 33 (from 29 in October), remaining short of a neutral reading of 50 (readings below 50 suggest increased incentives). 50% of agents said incentives were unchanged, 42% said they were higher, and 8% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 30 in November (from 21 in October), still below a neutral reading of 50, suggesting an increased time to sell over the past month (readings lower than 50). 58% of agents said the time to sell was unchanged and 42% said the time to sell was higher. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “There are less people walking through the door. Financing is more difficult to obtain.”

■ “Traffic is usually slow this time of year, but the economy has made it worse this time around.” KB Home, D.R. Horton, and Ryland have the greatest exposure. KB Home has the most exposure to the San Antonio market, as it represents approximately 7% of the company’s sales. San Antonio represents 6% of sales for D.R. Horton and Ryland, and 5% of sales for Pulte and Standard Pacific. Exhibit 37: Traffic Short of Expectations, Fall Decline, Incentives Increase, Increased Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

17%

75%

80%

58%

33%

60%

50% 42%

40%

42%

25%

20%

8% 0%

50% More than expected

Meets expectations

0%

0% Home Prices

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

41


07 December 2010

November Market Trends

San Diego, CA

! !

Traffic

(1,777 single-family permits in 2009, 52nd largest market in the country) Traffic fails to meet expectations. Buyer traffic fell short of expectations again in November, as our traffic index came in at 15 (from 4 in October), with readings lower than 50 pointing to traffic below agents’ expectations. 76% of agents said traffic was below expectations, 18% said it was in-line with expectations, and 6% said it exceeded expectations.

Home Prices Incentives

Lower prices, flat incentives. Home prices faced pressure in November, as our price index fell to 18 from 30 in October, further below a neutral reading of 50 (readings below 50 point to sequentially lower prices). 70% of agents said prices were lower over the past 30 days, 24% said they were unchanged, and 6% said they were higher. Meanwhile, incentives were flat in November, as our incentive index improved to 47 from 36 in October, in-line with a neutral reading of 50 (readings of 50 point to unchanged incentives). 67% of agents said incentives were unchanged, 20% said they were higher, and 13% said they were lower. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index worsened in November, coming in at 3 (from 9 in October), remaining well below a neutral reading of 50, pointing to an increased time to sell over the last 30 days (readings short of 50). 94% of agents said the time to sell increased and 6% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “People are expecting prices to drop further.” ■ “There is very little confidence out there. There are no jobs returning to the work force.” Standard Pacific and Lennar have the greatest exposure. Standard Pacific has the most exposure to the San Diego market, as it represents approximately 5% of the company’s sales. San Diego represents 1% of Lennar’s sales. Exhibit 38: Traffic Below Expectations, Lower Prices, Unchanged Incentives, Longer Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

6%

94%

100%

18%

71%

80%

67%

60% 40% 20%

76%

24% 6%

13%

6%

0%

0% Home Prices

More than expected

20%

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

42


07 December 2010

November Market Trends

San Francisco, CA

! ! !

Traffic

(2,277 single-family permits in 2009, 42nd largest market in the country) Traffic short of expectations. Buyer traffic remained below agents’ expectations in November, as our traffic index came in at 26 (from 17 in October), below a neutral reading of 50 (readings lower than 50 point to traffic below expectations). 57% of agents said traffic was lower than expected, 32% said it was in-line with expectations, and 11% said it was above expectations.

Home Prices Incentives

Prices decline, incentives increase. Home prices fell further in November, as our price index fell to 11 (from 27 in October), still below a neutral reading of 50 (readings below 50 suggest sequentially lower prices). 84% of agents said prices were lower over the past 30 days, 11% said they were unchanged, and 5% said they were higher. Meanwhile, sellers increased incentives in November; as our incentive index came in at 38 (from 45 in October), below a neutral reading of 50 (readings below 50 point to additional incentives). 75% of agents said incentives were unchanged and 25% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index came in at 19 in November (from 28 in October), further from a neutral reading of 50, suggesting an increased time to sell over the last 30 days (readings below 50 indicate a longer time to sell). 72% of agents said the time to sell increased, 17% said the time to sell was unchanged, and 11% said the time to sell declined. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “Even if buyers think prices are ok, they do not want to lock themselves into a mortgage because they are not sure about their employment.”

■ “Sellers are holding out for better offers, but buyers are thinking prices are going to fall further. There is no middle ground.” Standard Pacific, KB Home and Lennar have the greatest exposure. Standard Pacific has the most exposure to the San Francisco area, as it represented approximately 4% of the company’s sales. San Francisco represented 3% of KB Home’s sales and 2% of Lennar’s sales. Exhibit 39: Traffic Below Expectations, Prices Decline, Incentives Increase, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

11% 100%

84% 75%

80%

72%

60%

32%

58%

40% 20%

25% 5% 11%

17%

11%

0%

0% Home Prices

More than expected

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

43


07 December 2010

November Market Trends

Sarasota, FL

! ! !

Traffic

(1,317 single-family permits in 2009, 71st largest market in the country)

Home Prices

Traffic below agents’ expectations. Buyer traffic fell further below agents’ expectations in November, as our traffic index fell to 20 from 23 in October, with readings below 50 pointing to traffic short of expectations. 80% of agents said traffic was lower than expected and 20% said it was greater than expected.

Incentives

Prices decline, incentives increase. Home prices fell again in November, as our price index came in at 40, up from 18 in October, but still below a neutral reading of 50, indicating sequentially lower prices (readings below 50). 40% of agents said prices were lower, 40% said they were unchanged, and 20% said they were higher. Meanwhile, incentives increased in November, as our incentive index came in at 30, unchanged from our reading in October, remaining below a neutral reading of 50 (readings short of 50 indicate increased incentives). 60% of agents said incentives were unchanged and 40% said they were higher. Length of time needed to sell a home increased – a negative indicator for future pricing trends. Our time to sell index worsened in November, coming in at 20 (from 23 in October), pointing to an increased time to sell over the past 30 days (readings lower than 50 suggest an increased time to sell). 60% of agents said the time to sell increased and 40% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends.

Comments from real estate agents:

■ “Perpetually high unemployment is draining confidence in the market.” ■ “We tend to have more traffic after Thanksgiving, but it is too tough to get a loan and buyers are worried about the economy.” Standard Pacific and Lennar have the greatest exposure. Standard Pacific has the most exposure to the Sarasota market, as it represented approximately 3% of sales. Sarasota represented approximately 2% of Lennar’s sales. Exhibit 40: Traffic Short of Expectations, Prices Decline, Additional Incentives, Increased Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

20%

70% 60% 50% 40% 30% 20% 10% 0%

0%

80%

60% 40% 40%

Meets expectations

Less than expected

40%

40%

20% 0%

Home Prices

More than expected

60%

Increased

0%

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

44


07 December 2010

November Market Trends

Tucson, AZ

! ! !

Traffic

(2,028 single-family permits in 2009, 47th largest market in the country)

Home Prices

Traffic remains short of expectations. Buyer traffic failed to meet expectations again in November, as our traffic index came in at 31, up from 19 in October, but still short of a neutral reading of 50 (readings short of 50 suggest traffic did not meet expectations). 54% of agents said traffic was below expectations, 31% said it was in-line with expectations, and 15% said it met expectations.

Incentives

Prices and incentives worsen. Home prices faced additional pressure in November, as our home price index came in at 23 (from 4 in October), suggesting lower prices over the last 30 days (readings below 50 point to sequentially lower prices). 62% of agents said prices declined, 30% said they were unchanged, and 8% said they were higher. Meanwhile, incentives increased in November, as our incentive index came in at 42 (from 27 in October), with readings below 50 pointing to increased incentives. 50% of agents said incentives were unchanged, 33% said they were higher, and 17% said they were lower. Longer time needed to sell a home in November. Our time to sell index came in at 33 in November (from 23 in October), below a neutral reading of 50, pointing to an increased time to sell (readings below 50). 50% of agents said the time to sell a home was unchanged, 42% said the time to sell increased, and 8% said the time to sell decreased. We view the longer time needed to sell as a negative indicator of future pricing trends.

Comments from real estate agents:

■ “Buyers are in no hurry because the market expects prices to fall further.” ■ “There is some interest, but buyers can not find what they want. Prices are still too high for them and they do not feel comfortable with lending requirements.” MDC, Meritage and Lennar have the greatest exposure. MDC has the most exposure to the Tucson market, as it represents approximately 14% of the company’s sales. Tucson represents 10% of Meritage’s sales and 7% of Lennar’s sales. Exhibit 41: Traffic Short of Expectations, Prices Decline, Incentives Increase, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

15%

70% 60% 50% 40% 30% 20% 10% 0%

54% 31%

62% 50% 31%

Meets expectations

Less than expected

33% 17% 8%

8%

Home Prices

More than expected

50% 42%

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

45


07 December 2010

November Market Trends

Virginia Beach, VA

! ! !

Traffic

(2,887 single-family permits in 2009, 31st largest market in the country)

Home Prices

Traffic still short of expectations. Buyer traffic fell further below agents’ expectations in November, as our traffic index fell to 10 from 18 in October, with readings below 50 indicating lower than expected traffic. 80% of agents said traffic was below expectations and 20% said it was in-line with expectations.

Incentives

Lower prices, higher incentives. Home prices faced additional pressure in November; our price index came in at 20, up from 14 in October, but still below a neutral reading of 50, suggesting declining prices over the last 30 days (readings below 50 indicate sequentially lower prices). 60% of agents said prices were lower and 40% said they were unchanged. Meanwhile, sellers increased incentives again in November, as our incentive index came in at 38 (from 35 in October), remaining below a neutral reading of 50, suggesting increased incentives over the past month (readings below 50). 75% of agents said incentives were unchanged and 25% said they were higher. Longer time needed to sell a home in November. Our time to sell index came in at 30 in November (from 9 in October), pointing to a longer time to sell over the past 30 days (readings below 50). 60% of agents said the time to sell was unchanged and 40% said the time to sell increased. We view the longer time needed to sell as a negative indicator of future pricing trends.

Comments from real estate agents:

■ “Consumer confidence is too weak to get the needle moving.” ■ “Traffic is bad for the same reasons. Buyers are worried about the economy and pricing.” Pulte and NVR have the greatest exposure. Pulte and NVR have the most exposure to the Virginia Beach market, as it represented approximately 1% of each company’s sales. Exhibit 42: Traffic Falls Below Expectations, Lower Prices, Higher Incentives, Longer Time to Sell in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0% 20%

75%

80% 60%

60%

60% 40%

40%

40% 25%

20% 0%

Home Prices

More than expected

0%

0%

0%

80%

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

46


07 December 2010

November Market Trends

Wilmington, NC

! ! !

Traffic

(1,534 single-family permits in 2009, 63rd largest market in the country) Traffic remains below agents’ expectations. Our buyer traffic index fell to 7 in November from 21 in October, pointing to traffic still below agents’ expectations (readings lower than 50 suggest traffic did not meet agents’ expectations). 86% of agents said traffic was lower than expectations and 14% said it met expectations.

Home Prices Incentives

Prices fall further, incentives increase. Home prices fell again in November, as our price index came in at 14, unchanged from our reading in October, and still well below a neutral reading of 50, suggesting lower prices over the last 30 days (readings below 50). 71% of agents said prices were lower and 29% said prices were unchanged. Meanwhile, incentives increased, as our incentive index came in at 29 (from 42 in October), shy of a neutral reading of 50 (readings lower than 50 suggest increased incentives over the past month). 57% of agents said incentives were unchanged and 43% said they were higher. Longer time needed to sell a home in November. Our time to sell index worsened in November, coming in at 8 (from 14 in October), remaining well below a neutral reading of 50, indicating an increased time to sell (readings below 50 suggest the time to sell increased over the last 30 days). 83% of agents said the time to sell increased and 17% said the time to sell was unchanged. We view the longer time needed to sell as a negative indicator of future pricing trends.

Comments from real estate agents:

■ “People are worried because of high unemployment and concerns over the economy.”

■ “People are afraid to make a move. They are reluctant to buy in this environment.” The Wilmington market represented less than 1% of sales for all homebuilders in our coverage universe. Exhibit 43: Traffic Below Expectations, Prices Fall, Incentives Increase, Time to Sell Lengthens in November How Do the Recent 30 Days Compare to the Prior 30 Days...

Traffic Levels Versus Expectations

0%

14%

100%

83% 71%

80%

57%

60%

43%

40% 20%

17% 0%

0%

0%

0%

86% More than expected

29%

Home Prices

Meets expectations

Less than expected

Increased

Incentives

Time to Sell

Remained the same

Decreased

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

47


07 December 2010

Historical Trends Traffic increased slightly in November, bouncing from low levels in October. However, pricing still remains a top concern for buyers amid worries over the economy and employment. Historical traffic trends: Exhibit 44: Traffic Levels [> 50.0: above seasonal expectations/ = 50.0: in-line with expectations/ <50.0: below expectations] Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern NJ Orlando, FL Phila.-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC Total

Nov-09 29.2 43.8 50.0 50.0 50.0 25.0 33.6 35.7 45.0 37.5 32.9 33.3 73.5 34.6 48.1 45.5 58.1 59.0 43.5 35.1 9.1 39.1 38.0 44.1 43.8 50.0 40.4 22.5 16.7 53.8 62.5 47.2 51.3 72.7 57.4 40.0 41.3 46.2 50.0 31.8 43.0

Dec-09 30.2 40.9 45.8 53.8 30.0 37.5 39.5 31.3 25.0 43.2 33.3 32.0 56.5 20.5 58.3 35.0 50.0 56.7 54.9 38.7 43.8 41.7 47.1 14.3 36.7 41.7 25.0 22.5 50.0 38.5 44.4 40.0 59.7 56.3 31.3 43.2 38.9 66.7 55.7 33.3 41.1

Jan-10 39.2 37.5 45.0 54.5 50.0 39.6 41.3 50.0 57.1 41.3 38.9 34.0 48.1 47.7 50.0 50.0 51.5 51.6 51.4 31.1 38.9 32.1 50.0 32.0 34.0 50.0 43.1 36.8 33.3 34.6 46.2 45.2 50.0 55.6 47.9 50.0 39.5 54.5 39.7 16.7 43.5

Feb-10 24.1 55.0 0.0 64.7 50.0 37.5 47.8 27.3 40.0 56.5 52.6 39.6 57.9 45.5 44.7 22.2 55.7 48.5 47.2 48.8 20.6 32.0 56.7 24.2 39.0 50.0 34.0 23.3 33.3 34.6 25.0 31.3 44.2 54.5 57.4 53.3 52.8 43.8 32.4 50.0 41.4

Mar-10 33.8 39.3 37.5 78.6 50.0 25.0 34.3 26.7 58.3 52.6 48.5 40.0 57.9 39.6 47.8 50.0 47.1 50.0 47.8 45.5 19.2 40.7 50.0 42.9 40.3 60.0 41.4 37.5 30.0 12.5 34.6 41.7 47.6 50.0 44.8 37.0 31.6 37.5 63.0 50.0 43.1

Apr-10 37.5 60.0 25.0 50.0 50.0 25.0 26.1 77.3 58.3 47.6 48.5 44.7 56.7 27.8 43.5 66.7 56.3 53.8 48.6 57.0 50.0 32.1 60.0 34.4 51.0 66.7 42.9 26.5 0.0 68.8 45.0 51.9 65.2 58.3 66.1 47.4 44.7 33.3 62.5 80.0 48.7

May-10 23.5 29.5 57.1 45.5 25.0 31.3 20.2 18.8 25.0 28.0 29.0 36.1 45.0 24.0 43.8 38.9 44.6 54.3 35.9 24.3 15.0 22.9 34.6 15.2 37.0 0.0 21.7 5.3 20.0 50.0 29.4 20.0 46.9 50.0 28.3 36.1 37.5 25.0 35.2 50.0 31.5

Jun-10 12.1 25.0 30.0 21.4 30.0 16.7 18.9 0.0 9.1 5.3 12.5 34.2 39.5 21.4 19.4 21.4 19.0 23.8 28.1 8.0 20.8 16.7 6.3 10.5 18.5 33.3 11.5 16.7 25.0 8.3 28.1 13.2 28.0 18.8 17.3 20.5 13.6 18.8 27.1 16.7 19.1

Jul-10 15.5 2.6 18.8 33.3 43.8 15.8 10.6 22.2 7.1 19.0 12.5 31.6 22.0 15.0 23.8 17.9 18.2 16.7 21.6 6.8 31.3 15.4 27.3 10.0 13.8 16.7 11.5 10.7 10.0 11.5 5.6 14.7 18.3 12.5 19.2 9.3 14.3 6.3 25.0 16.7 16.9

Aug-10 12.5 13.2 20.0 18.2 0.0 10.7 9.6 13.6 13.6 21.4 10.3 29.5 28.1 13.2 27.3 20.0 21.7 23.0 25.0 8.3 18.2 18.1 16.7 12.5 10.5 33.3 13.6 11.1 37.5 0.0 17.9 6.9 17.9 29.2 16.7 15.0 6.3 7.7 18.5 35.0 17.0

Sep-10 19.7 13.2 11.1 22.2 15.4 18.4 12.0 28.6 0.0 12.1 13.0 25.0 36.4 14.3 15.4 11.1 20.8 15.2 29.2 14.3 15.8 21.6 16.0 13.2 19.4 33.3 12.5 12.5 37.5 25.0 5.0 4.8 14.3 6.3 25.0 14.0 16.7 10.0 35.0 31.3 17.9

Oct-10 4.5 42.1 0.0 7.7 25.0 19.2 12.2 16.7 8.3 13.6 16.0 13.2 20.6 3.1 21.4 9.1 23.9 24.1 19.4 10.0 16.7 16.1 9.4 14.7 16.7 25.0 18.5 7.7 25.0 7.1 23.5 4.3 16.7 22.7 30.0 12.5 19.2 18.2 17.6 21.4 16.3

Nov-10 18.8 22.7 31.8 31.8 37.5 21.4 18.2 31.3 22.2 28.0 12.1 13.2 43.8 26.1 32.4 25.0 20.0 25.0 28.6 14.6 15.0 17.5 16.7 17.4 31.6 0.0 20.0 4.2 10.0 25.0 41.7 14.7 26.3 20.0 22.7 17.6 30.8 10.0 30.8 7.1 22.1

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

48


07 December 2010

Our home price index remained well below 50, reflecting continued declines. Historical price trends: Exhibit 45: Home Prices [> 50.0: higher than prior month/ = 50.0: flat versus prior month/ <50.0: lower than prior month] Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern NJ Orlando, FL Phila.-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC Total 20 Same-Store Markets

Nov-09 17.9 25.0 25.0 54.2 22.2 37.5 22.8 28.6 35.0 42.9 42.7 31.3 50.0 40.4 60.0 13.6 50.0 61.2 28.8 30.4 27.3 26.4 24.0 29.4 43.8 28.6 21.2 27.5 16.7 54.2 40.6 61.1 48.7 31.8 20.6 35.0 23.9 20.8 54.3 10.0 34.1 36.5

Dec-09 25.0 43.2 20.8 38.5 30.0 32.5 20.2 43.8 25.0 36.4 35.1 26.9 68.2 38.6 55.6 35.0 41.2 68.3 30.8 34.6 43.8 28.2 26.5 28.6 33.7 33.3 25.0 27.5 16.7 46.2 33.3 65.6 58.3 37.5 22.9 29.5 16.7 33.3 50.0 16.7 35.6 35.5

Jan-10 29.5 28.8 15.0 50.0 30.0 31.3 23.0 34.6 42.9 31.3 34.7 18.0 59.6 38.6 56.9 25.0 47.2 62.5 35.1 26.7 26.5 27.0 32.4 30.0 35.4 37.5 21.4 34.2 25.0 54.2 38.5 59.5 44.0 22.2 32.6 38.5 39.5 31.8 50.0 0.0 35.0 36.2

Feb-10 22.2 40.0 31.3 47.1 12.5 37.5 26.1 30.0 40.0 43.8 48.7 22.9 50.0 47.7 57.5 22.2 38.2 64.7 26.4 37.5 26.5 28.0 23.3 40.0 39.0 35.7 20.0 25.0 21.4 53.8 25.0 50.0 53.8 22.7 27.3 42.9 32.4 37.5 51.6 25.0 35.7 38.2

Mar-10 30.9 32.1 31.3 57.1 38.9 30.0 28.3 56.3 41.7 39.5 53.1 30.4 57.9 43.8 71.7 34.4 41.2 69.1 37.5 34.8 26.9 38.8 34.8 42.9 35.0 40.0 17.2 43.8 20.0 53.8 42.9 61.8 51.2 28.6 24.1 36.0 19.4 25.0 67.3 25.0 39.9 41.8

Apr-10 20.8 50.0 35.7 58.3 20.0 22.5 23.9 59.1 41.7 54.8 53.1 45.2 50.0 41.7 70.5 27.8 50.0 61.5 38.2 52.0 31.3 33.6 40.0 39.3 40.8 50.0 35.7 29.4 50.0 62.5 45.0 69.2 54.3 33.3 44.4 42.1 25.0 20.8 83.3 30.0 43.4 45.1

May-10 28.4 36.4 28.6 54.5 25.0 31.3 24.4 56.3 16.7 44.0 51.6 33.3 70.0 41.7 65.6 38.9 50.0 45.8 29.5 29.2 35.0 33.3 36.5 41.7 38.9 50.0 23.9 21.1 20.0 50.0 41.2 55.0 48.4 57.1 34.8 41.7 37.5 25.0 55.8 10.0 38.9 40.3

Jun-10 27.6 27.5 20.0 42.3 20.0 34.6 19.7 35.7 27.3 39.5 34.6 38.9 60.5 40.5 50.0 21.4 43.3 50.0 37.1 18.2 20.8 28.7 25.0 27.5 42.7 50.0 19.2 16.7 25.0 37.5 21.9 44.4 39.1 31.3 21.2 28.6 18.2 31.3 45.8 22.2 32.1 33.9

Jul-10 21.7 28.9 25.0 35.7 25.0 18.4 15.3 22.2 21.4 28.6 35.9 26.3 46.0 21.7 47.6 25.0 35.5 31.7 28.2 19.3 31.3 14.7 34.1 30.0 26.6 16.7 17.3 20.0 16.7 38.5 16.7 41.7 33.3 27.3 20.0 21.2 14.3 25.0 40.6 27.8 26.8 27.7

Aug-10 16.7 15.8 25.0 40.9 25.0 23.1 10.9 18.2 13.6 21.4 24.1 33.3 20.6 26.3 38.6 22.2 32.0 25.0 28.6 28.0 31.8 21.4 24.0 20.0 17.9 16.7 14.1 16.7 0.0 25.0 21.4 28.6 25.0 19.2 20.0 23.3 15.6 23.1 40.7 22.2 22.9 24.9

Sep-10 19.1 23.7 16.7 27.8 27.3 18.4 10.9 28.6 33.3 25.9 22.2 28.9 31.8 21.4 37.5 22.2 30.0 25.7 27.7 14.6 23.7 22.7 16.0 13.2 12.5 33.3 17.9 26.7 12.5 17.9 10.0 23.8 25.9 7.1 20.6 16.7 20.8 25.0 32.8 6.3 22.0 21.8

Oct-10 11.9 13.9 12.5 34.6 21.4 15.4 6.7 16.7 8.3 22.7 18.0 31.6 23.5 17.6 35.7 9.1 32.6 33.3 27.8 12.8 20.0 23.6 28.1 11.8 14.3 31.3 9.6 11.5 31.3 21.4 32.4 30.4 26.7 18.2 25.0 22.5 4.2 13.6 22.2 14.3 20.5 21.2

Nov-10 15.4 26.1 18.2 36.4 25.0 7.1 15.6 12.5 38.9 18.0 21.2 15.8 43.8 32.6 36.7 0.0 25.0 33.3 21.7 11.3 33.3 20.2 25.0 15.2 15.8 0.0 3.3 16.7 20.0 15.0 37.5 17.6 10.5 40.0 24.2 29.4 23.1 20.0 26.9 14.3 21.6 20.3

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

49


07 December 2010

Incentives increased again in November, as demand remains weak and sellers try to attract buyer. Historical incentive trends: Exhibit 46: Incentives [> 50.0: higher than prior month/ = 50.0: flat versus prior month/ <50.0: lower than prior month] Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern NJ Orlando, FL Phila.-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC Total

Nov-09 47.9 36.7 33.3 50.0 50.0 45.0 41.2 32.1 22.2 47.6 33.8 50.0 41.2 38.0 47.7 27.3 44.8 46.7 46.1 37.2 50.0 41.0 40.0 36.7 37.5 50.0 38.0 28.9 41.7 45.8 28.1 46.9 43.1 36.4 26.8 39.5 38.6 37.5 51.8 30.0 40.2

Dec-09 47.5 31.8 37.5 45.5 37.5 40.0 43.4 43.8 50.0 45.5 50.0 45.5 45.0 43.2 41.2 60.0 35.3 50.0 51.4 39.2 31.3 49.2 50.0 42.9 35.4 50.0 50.0 23.7 33.3 45.5 22.2 46.7 41.4 35.7 28.3 42.5 36.1 33.3 40.6 41.7 41.6

Jan-10 45.8 38.0 43.8 50.0 40.0 35.4 38.0 34.6 21.4 47.9 47.0 50.0 46.0 33.3 46.9 30.0 41.7 39.1 57.6 39.0 32.4 48.5 47.1 47.7 39.6 50.0 51.9 28.9 41.7 40.9 42.3 38.9 45.6 37.5 50.0 33.3 42.1 50.0 52.9 25.0 41.8

Feb-10 32.0 32.5 42.9 43.3 62.5 42.1 48.7 30.0 40.0 30.6 45.8 47.6 33.3 52.4 35.0 33.3 44.1 38.7 43.5 43.1 50.0 39.4 35.7 39.3 36.6 57.1 39.6 40.0 50.0 45.5 50.0 38.6 45.5 40.9 37.1 42.9 36.7 43.8 36.7 50.0 41.9

Mar-10 37.9 44.6 50.0 33.3 43.8 37.5 40.4 43.8 33.3 44.7 46.6 47.7 36.8 47.9 37.5 36.7 39.1 50.0 47.5 35.6 42.3 44.9 52.5 37.5 38.2 60.0 46.2 40.6 37.5 54.5 46.4 42.3 44.3 45.5 35.2 40.4 33.3 50.0 39.6 50.0 42.9

Apr-10 37.0 40.0 35.7 44.4 30.0 32.5 51.2 45.5 50.0 50.0 41.9 52.8 53.3 33.3 35.7 50.0 39.7 50.0 46.9 37.2 46.9 48.9 41.7 46.4 34.4 66.7 37.5 34.4 50.0 31.3 55.0 38.6 47.6 37.5 37.0 44.7 35.0 40.0 54.3 40.0 43.1

May-10 42.4 29.5 50.0 71.4 35.7 31.8 38.5 56.3 50.0 38.0 41.4 46.9 35.0 39.6 50.0 27.8 37.5 50.0 37.5 41.4 55.0 49.1 26.0 47.7 42.7 40.0 36.4 34.2 20.0 33.3 34.4 50.0 44.6 40.0 45.2 35.3 35.7 54.5 42.3 30.0 41.2

Jun-10 31.5 37.5 50.0 45.0 60.0 40.0 44.3 57.1 36.4 42.1 42.3 46.7 39.5 45.0 50.0 42.9 34.5 42.1 42.3 32.9 50.0 40.6 53.3 52.8 38.0 50.0 42.3 33.3 75.0 45.8 43.8 44.1 44.4 28.6 43.5 35.7 31.8 42.9 45.0 44.4 43.7

Jul-10 34.6 36.8 35.7 55.6 37.5 41.2 48.8 44.4 28.6 50.0 40.0 50.0 42.0 29.3 50.0 50.0 41.7 42.0 44.3 34.1 43.8 42.6 38.6 38.2 32.9 50.0 41.3 35.7 33.3 41.7 33.3 34.4 45.8 30.0 38.6 42.0 32.1 50.0 42.6 44.4 40.7

Aug-10 32.7 26.3 30.0 60.0 25.0 42.3 40.5 45.0 27.3 30.8 48.1 50.0 26.5 28.9 43.2 27.8 42.0 38.7 41.7 51.3 40.9 46.6 45.8 36.1 31.1 33.3 36.7 29.4 0.0 41.7 25.0 41.7 43.8 27.3 48.3 35.7 34.4 37.5 34.8 55.6 37.1

Sep-10 34.5 35.3 37.5 42.9 40.9 39.5 45.2 28.6 50.0 26.8 35.4 46.9 31.8 40.0 47.8 50.0 41.3 43.3 39.5 37.5 34.2 44.9 37.0 38.2 30.2 50.0 44.2 30.0 25.0 46.2 25.0 39.5 50.0 33.3 37.5 47.7 33.3 20.0 30.4 43.8 38.4

Oct-10 42.9 38.9 28.6 36.4 41.7 41.7 38.4 25.0 41.7 42.1 34.1 47.2 32.4 35.3 50.0 20.0 39.1 47.9 37.1 32.1 40.0 41.7 37.5 46.4 25.8 31.3 37.5 30.8 43.8 25.0 29.4 35.7 45.2 30.0 41.4 40.0 26.9 35.0 25.0 41.7 36.6

Nov-10 29.2 25.0 44.4 50.0 37.5 32.1 38.5 31.3 33.3 21.7 36.2 44.1 53.1 25.0 36.7 10.0 19.2 28.6 27.8 42.3 38.9 43.0 37.5 35.7 28.9 50.0 43.3 25.0 20.0 28.6 33.3 46.7 37.5 30.0 40.3 25.0 41.7 37.5 25.0 28.6 34.1

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

50


07 December 2010

Our home listings index moved closer toward stabilization in November, but still suggested higher listings, worse than the typical seasonal declines in inventory. Higher inventory will add to pricing pressure. Historical inventory trends: Exhibit 47: Homes listed for sale [> 50.0: Fewer homes listed versus prior month/ = 50.0: listings unchanged / <50.0: more home listings] Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern NJ Orlando, FL Phila.-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC Total

Nov-09 68.8 53.1 33.3 45.8 72.2 52.5 48.2 67.9 83.3 57.5 68.3 56.3 67.6 50.0 80.0 63.6 81.7 83.7 59.3 79.8 45.5 43.6 62.5 52.9 53.1 42.9 76.0 45.0 33.3 76.9 50.0 77.8 73.1 59.1 72.7 62.5 43.2 46.2 70.0 50.0 60.2

Dec-09 68.6 61.4 37.5 73.1 70.0 57.5 52.5 68.8 62.5 54.5 64.7 61.5 61.4 59.1 76.5 55.0 70.6 76.7 62.8 80.8 68.8 63.2 64.7 57.1 43.5 58.3 62.5 47.5 50.0 69.2 61.1 68.8 72.2 56.3 62.5 59.1 52.8 61.1 75.0 33.3 61.6

Jan-10 58.1 63.5 25.0 59.1 60.0 39.6 41.2 38.5 57.1 45.8 61.4 44.0 52.0 38.6 65.7 33.3 72.2 64.5 55.3 64.1 29.4 52.0 44.1 47.9 40.3 62.5 51.7 47.4 41.7 57.7 50.0 60.0 70.0 61.1 39.1 48.1 44.7 45.5 67.9 50.0 51.3

Feb-10 50.0 42.5 64.3 52.9 25.0 30.0 29.5 25.0 60.0 45.3 48.7 60.4 50.0 42.5 72.5 44.4 71.4 60.9 60.0 61.5 32.4 36.7 63.3 35.0 32.2 57.1 24.0 40.0 35.7 61.5 42.9 47.9 36.0 59.1 37.5 53.6 26.5 25.0 75.0 25.0 46.1

Mar-10 35.7 27.8 25.0 21.4 55.6 20.0 19.1 31.3 33.3 39.5 33.3 60.9 65.8 37.0 56.5 50.0 69.1 47.8 56.0 38.4 34.6 31.6 56.8 32.1 32.8 60.0 27.6 21.9 30.0 46.2 42.3 58.8 38.1 50.0 27.6 38.9 36.1 12.5 62.0 16.7 39.5

Apr-10 33.3 24.0 7.1 29.2 20.0 35.0 22.8 31.8 50.0 36.8 32.8 42.9 66.7 25.0 59.1 61.1 85.9 42.3 63.9 28.6 18.8 17.3 56.0 36.7 39.8 100.0 35.7 37.5 0.0 37.5 25.0 50.0 30.4 50.0 35.7 44.7 52.5 8.3 51.9 0.0 38.2

May-10 41.2 22.7 21.4 44.4 43.8 32.6 27.3 18.8 50.0 34.0 37.1 36.1 60.0 22.9 71.9 38.9 70.6 29.2 56.4 34.7 50.0 26.2 57.7 27.1 35.6 70.0 41.3 42.1 30.0 65.0 38.2 35.0 41.9 83.3 30.4 50.0 63.3 12.5 55.8 30.0 42.0

Jun-10 31.0 30.0 30.0 30.8 60.0 36.7 34.2 28.6 22.7 23.7 42.3 47.2 57.9 21.4 52.8 35.7 48.3 42.9 51.6 50.0 20.8 22.2 43.8 20.0 39.1 75.0 51.9 33.3 25.0 38.5 28.1 33.3 41.3 56.3 26.9 38.1 59.1 37.5 50.0 38.9 38.9

Jul-10 35.0 18.4 18.8 39.3 37.5 44.4 35.4 22.2 42.9 23.8 30.6 44.7 48.0 21.7 70.0 53.8 33.9 33.3 47.4 40.9 37.5 25.0 54.5 25.0 36.2 33.3 50.0 23.3 25.0 53.8 16.7 32.4 33.9 59.1 15.2 25.0 35.7 31.3 46.9 50.0 36.3

Aug-10 33.3 13.2 15.0 40.9 12.5 30.8 24.5 36.4 27.3 30.8 24.1 45.2 41.2 28.9 52.3 35.0 18.0 31.9 46.4 31.7 22.7 32.9 31.3 23.8 29.1 41.7 27.4 36.1 0.0 31.3 23.1 21.4 33.9 46.2 25.0 33.3 34.4 11.5 46.3 27.8 30.0

Sep-10 43.8 5.3 11.1 5.6 37.5 23.7 32.6 21.4 16.7 25.0 24.1 42.1 40.9 33.3 44.0 44.4 20.0 34.3 22.3 26.3 31.6 15.2 46.0 34.2 24.5 33.3 23.2 50.0 25.0 32.1 15.0 31.0 17.3 35.7 27.9 27.1 33.3 15.0 32.8 25.0 28.2

Oct-10 60.0 33.3 18.8 23.1 57.1 37.5 32.2 8.3 8.3 45.5 30.0 55.3 55.9 35.3 64.3 31.8 28.3 50.0 50.0 25.6 36.7 23.2 37.5 19.4 21.4 31.3 42.3 26.9 56.3 39.3 38.2 35.7 32.8 27.3 46.7 47.5 38.5 4.5 27.8 35.7 35.5

Nov-10 41.7 30.4 54.5 54.5 75.0 42.9 35.6 37.5 33.3 46.0 39.4 50.0 71.9 41.3 46.7 10.0 21.2 39.7 33.3 36.3 44.4 37.7 41.7 41.3 27.6 50.0 53.3 33.3 25.0 50.0 50.0 32.4 44.4 50.0 48.5 32.4 41.7 20.0 55.8 33.3 41.3

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

51


07 December 2010

Length of time needed to sell a home increased, reflecting a disparity on pricing as sellers hold out and buyers wait for better deals. Historical time to sell trends: Exhibit 48: Length of time needed to sell a home [> 50.0: Time to sell decreased/ = 50.0: time to sell unchanged / <50.0: time to sell increased] Atlanta, GA Austin, TX Baltimore, MD Boston, MA Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Inland Empire, CA Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern NJ Orlando, FL Phila.-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC Total

Nov-09 31.3 28.1 16.7 41.7 37.5 37.5 29.3 32.1 45.0 42.9 45.1 43.8 64.7 28.8 52.0 36.4 70.7 63.3 44.1 53.3 18.2 38.0 46.0 41.2 54.7 64.3 44.2 27.5 33.3 50.0 31.3 58.3 38.5 68.2 45.6 55.3 39.1 30.8 60.3 27.3 42.9

Dec-09 26.7 29.5 8.3 50.0 40.0 32.5 26.7 50.0 37.5 29.5 40.9 40.4 59.1 22.7 61.1 45.0 47.1 68.3 47.4 42.3 37.5 29.9 55.9 28.6 41.3 58.3 34.2 27.5 33.3 57.7 22.2 50.0 43.1 37.5 41.7 38.6 47.2 44.4 61.4 16.7 40.3

Jan-10 31.1 34.6 25.0 50.0 30.0 22.9 27.5 34.6 71.4 29.2 41.4 40.0 46.0 28.6 52.9 33.3 48.6 51.6 52.6 41.3 26.5 29.5 44.1 34.0 43.1 50.0 34.5 28.9 25.0 42.3 38.5 52.5 44.0 55.6 34.8 46.2 36.8 27.3 56.4 33.3 39.4

Feb-10 38.9 30.0 35.7 61.8 50.0 37.5 37.8 20.0 62.5 42.2 47.4 37.5 55.3 22.7 47.5 44.4 62.9 63.6 44.3 50.0 26.5 32.5 63.3 34.5 44.9 71.4 30.0 40.0 35.7 38.5 31.3 44.0 44.2 45.5 51.5 46.4 35.3 25.0 57.8 25.0 42.9

Mar-10 40.0 37.5 50.0 64.3 38.9 40.0 30.0 56.3 41.7 36.1 45.5 47.8 63.2 29.2 58.7 43.8 58.8 58.7 52.2 50.9 26.9 40.8 58.7 35.7 45.9 60.0 36.2 37.5 40.0 46.2 42.9 58.8 45.1 60.7 43.1 38.9 41.7 25.0 80.8 25.0 45.8

Apr-10 43.8 36.0 42.9 54.2 30.0 25.0 39.1 77.3 58.3 57.1 50.0 59.5 70.0 27.8 50.0 61.1 67.7 78.0 50.0 61.2 37.5 40.0 60.0 46.7 45.9 83.3 57.1 30.6 0.0 50.0 45.0 57.7 45.7 66.7 62.1 44.7 37.5 16.7 66.7 30.0 49.1

May-10 35.3 35.7 50.0 68.2 50.0 35.4 22.2 31.3 33.3 35.4 38.7 47.1 57.5 29.2 56.3 38.9 59.7 47.9 39.7 37.1 35.0 36.1 61.5 29.2 45.6 50.0 50.0 23.7 50.0 55.0 41.2 25.0 33.9 75.0 45.5 33.3 40.0 33.3 52.0 40.0 42.6

Jun-10 25.9 25.0 10.0 38.5 30.0 33.3 12.5 21.4 22.7 34.2 26.9 47.2 55.3 19.0 38.9 28.6 41.4 22.7 48.4 21.6 12.5 21.3 33.3 30.0 30.0 50.0 30.8 29.2 25.0 15.4 31.3 14.7 23.9 37.5 36.5 42.9 40.9 31.3 31.3 11.1 29.6

Jul-10 23.3 23.7 0.0 32.1 31.3 13.2 21.4 11.1 28.6 11.9 24.2 34.2 31.3 5.0 35.7 39.3 27.4 20.0 30.8 19.3 28.6 17.1 50.0 10.0 25.5 16.7 24.0 13.3 16.7 26.9 16.7 17.6 25.8 45.5 26.0 15.4 17.9 31.3 31.3 22.2 23.6

Aug-10 13.0 8.3 15.0 22.7 12.5 11.5 7.4 22.7 25.0 14.3 10.3 32.5 26.5 10.5 29.5 25.0 20.0 10.0 31.0 19.5 22.7 18.6 34.0 14.3 20.0 33.3 18.8 19.4 0.0 6.3 21.4 12.5 21.4 26.9 16.7 28.3 25.0 15.4 21.2 22.2 19.1

Sep-10 17.2 10.5 0.0 22.2 29.2 21.1 18.5 14.3 16.7 17.2 16.7 23.7 27.3 14.3 20.0 22.2 20.0 22.9 27.7 15.9 15.8 19.7 26.0 16.7 21.9 16.7 16.1 23.3 12.5 14.3 5.0 17.5 7.4 21.4 27.9 20.8 20.8 15.0 25.9 31.3 18.8

Oct-10 22.5 25.0 12.5 15.4 42.9 11.5 17.8 8.3 16.7 11.4 20.0 31.6 41.2 17.6 23.8 18.2 15.2 15.4 31.4 19.2 26.9 21.4 28.1 6.3 17.1 18.8 15.4 3.8 31.3 17.9 20.6 9.1 27.6 22.7 25.0 17.5 23.1 9.1 27.8 14.3 20.0

Nov-10 20.8 15.2 20.0 22.7 37.5 10.7 21.1 12.5 27.8 14.0 18.8 16.7 40.0 13.0 26.7 10.0 9.6 21.7 25.9 12.5 22.2 24.5 29.2 26.1 17.1 50.0 23.3 8.3 20.0 25.0 29.2 2.9 19.4 20.0 27.3 20.6 33.3 30.0 26.0 8.3 21.5

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

52


07 December 2010

Agent Recommendations Agents recommend Pulte and Toll Brothers. 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, while 24% said they would recommend Toll. We believe this is important since 35-40% of new home sales involve an agent. 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, which has seen its share of positive responses increase in recent months as its Open Series has gained traction. Exhibit 49: Toll and Pulte Most Highly Recommended by Agents

Rank

Ticker

Company Name

Net Recommendation

1

PHM

Pulte Group

25%

2

TOL

Toll Brothers

24%

3

DHI

D.R. Horton

17%

4

MTH

Meritage Homes

16%

5

LEN

Lennar Corp.

15%

6

SPF

Standard Pacific Corp.

14%

7

RYL

Ryland Group

9%

8

MDC

MDC Holdings

6%

9

NVR

NVR, Inc.

5%

10

BZH

Beazer Homes

4%

11

HOV

Hovnanian Enterprises

2%

12

KBH

KB Home

(9%)

Source: Credit Suisse estimates

Monthly Survey of Real Estate Agents

53


07 December 2010

Exhibit 50: Which of the following homebuilders would you most highly recommend to clients?

Market Atlanta, GA Austin, TX Baltimore, MD Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern New Jersey, NY-NJ Orlando, FL Philadelphia-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Riverside-San Bernardino, CA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC TOTAL

BZH 21% -9% 25% 0% ---12% ---17% 17% 23% ---10% -33% -21% --0% 0% 35% 10% 0% 6% ---12% --12% 14% 14%

DHI 33% 70% 36% 25% 20% 4% --48% 30% -19% 39% 33% 35% 10% 23% 32% -3% 8% 4% 18% 0% 13% 38% -18% 20% 67% 29% 5% -45% 35% 46% 0% 8% -26%

HOV --18% -7% 2% 0% 0% 36% -5% 0% 9% --19% -15% -16% 8% 17% 5% --0% -0% 10% -24% ---12% 15% 0% 23% -10%

KBH -17% 0% 25% 13% ---4% 12% -6% 9% 17% 19% 35% ----17% -11% 0% -15% -18% 20% 17% 18% -60% -12% 8% ---16%

LEN -30% 9% 0% 13% 17% --12% 21% -13% 39% 17% 35% 26% 30% 29% -12% 17% 4% 32% --23% -29% 0% 33% 18% 16% 60% -41% 46% -12% -23%

MDC --18% --0% --0% 30% --0% 0% 8% 3% -----4% 16% ----18% 0% -6% ---0% 38% -4% -9%

MTH -35% ------20% 6% -13% 17% -8% 3% ----42% -39% -----10% 8% -5% ---31% ---18%

NVR --18% 0% 13% -0% 0% -----------0% -22% ---0% 60% ---------0% 23% 0% 11%

PHM 42% 35% ---24% 0% 11% 24% 24% 53% 38% 17% 17% 58% 13% -34% -28% 33% 26% 42% --8% -29% 40% 67% 6% 11% 60% -24% 54% -35% -30%

RYL 29% -18% 0% 20% 15% 0% --24% -13% -33% 12% --29% --33% -13% ----6% 0% -6% ---6% --8% -15%

SPF -52% --13% ---36% 18% ---17% -23% 0% ---8% -16% --8% -24% 0% -12% 11% 20% -24% 8% ---17%

TOL -52% --27% 22% --28% 33% 68% --33% 42% 10% -10% -36% 33% 26% 58% --31% --10% 17% 12% 11% ---0% -42% -29%

Source: Credit Suisse estimates

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Agents discourage customers from buying a home from KB Home. KB Home received the highest percentage of negative recommendations by agents nationwide, although we expect this to improve as the more affordable “Open Series” gains traction. We also note that KB Home pre-sells a majority of its homes, which may negatively influence agents’ responses. Exhibit 51: From which of the following homebuilders would you most strongly discourage clients from buying?

Market Atlanta, GA Austin, TX Baltimore, MD Charleston, SC Charlotte, NC Chicago, IL Cincinnati, OH Columbus, OH Dallas, TX Denver, CO Detroit, MI Fort Myers, FL Houston, TX Jacksonville, FL Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN Nashville, TN New York-Northern New Jersey, NY-NJ Orlando, FL Philadelphia-Southern NJ Phoenix, AZ Port St. Lucie, FL Portland, OR Raleigh, NC Richmond, VA Riverside-San Bernardino, CA Sacramento, CA San Antonio, TX San Diego, CA San Francisco, CA Sarasota, FL Seattle, WA Tampa, FL Tucson, AZ Virginia Beach, VA Washington, DC Wilmington, NC TOTAL

BZH 17% -0% 0% 60% ---8% ---4% 17% 8% ---0% -0% -16% --31% 0% 0% 10% 0% 0% ---6% --12% 0% 9%

DHI 17% 0% 0% 25% 33% 2% --0% 12% -13% 4% 0% 12% 6% 3% 10% -0% 33% 4% 18% 0% 13% 8% -0% 10% 0% 0% 5% -12% 6% 0% 0% 12% -8%

HOV --9% -20% 2% 0% 0% 0% -5% 31% 4% --6% -10% -16% 0% 9% 16% --31% -12% 10% -0% ---0% 8% 0% 15% -9%

KBH -52% 0% 25% 47% ---44% 33% -25% 22% 17% 19% 10% ----33% -39% 0% -46% -24% 20% 17% 6% -20% -6% 46% ---25%

LEN -26% 0% 0% 27% 4% --8% 9% -6% 4% 0% 8% 3% 7% 12% -2% 17% 0% 5% --15% -6% 0% 8% 0% 0% 20% -12% 0% -15% -8%

MDC --18% --2% --0% 3% --0% 0% 12% 0% -----0% 3% ----0% 0% -0% ---0% 0% -8% -3%

MTH -9% ------0% 3% -0% 0% -4% 0% ----8% -3% -----0% 0% -0% ---8% ---3%

NVR --27% 0% 7% -25% 0% -----------0% -0% ---8% 0% ---------0% 8% 0% 6%

PHM 33% 4% ---4% 0% 0% 8% 3% 26% 0% 4% 0% 4% 0% -15% -2% 0% 0% 5% --15% -0% 10% 0% 0% 5% 0% -0% 8% -12% -6%

RYL 17% -9% 0% 13% 2% 13% --0% -0% -17% 8% --12% --0% -3% ----0% 0% -0% ---6% --12% -6%

SPF -0% --13% ---8% 0% ---0% -0% 3% ---0% -5% --8% -6% 0% -0% 0% 0% -0% 0% ---3%

TOL -9% --7% 0% --0% 0% 5% --0% 8% 0% -12% -2% 0% 22% 3% --15% --0% 0% 0% 0% ---0% -8% -4%

Source: Credit Suisse estimates

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Exhibit 52: Homebuilding Industry Comparative Valuations 12/6/2010

Beazer Homes BZH

D.R. Horton DHI

Hovnanian HOV

KB Home KBH

Lennar Corp. MDC Holdings LEN MDC RATINGS AND RETURN POTENTIAL Outperform Neutral $17.41 $26.95 $17.00 $25.00 1.2x 1.2x 0.9% 3.7% (1.4%) (3.5%) CAPITALIZATION $3,220 $1,270 $997 $1,611 $2,843 $1,242 42% (57%) EARNINGS

Meritage MTH

NVR Inc NVR

PulteGroup PHM

Ryland RYL

Toll Brothers TOL

Rating Current Price Target Price Target BV Multiple Dividend Yield Total Return Potential

Neutral $4.71 $4.00 1.1x 0.0% (15.1%)

Neutral $11.25 $10.00 1.2x 1.3% (9.8%)

Underperform $4.16 $2.00 NM 0.0% (51.9%)

Neutral $12.76 $11.00 1.0x 2.0% (11.8%)

Average

Neutral $21.63 $18.50 1.1x 0.0% (14.5%)

Neutral $668.66 $650.00 2.4x 0.0% (2.8%)

Neutral $6.68 $7.50 1.1x 0.0% 12.3%

Underperform $16.07 $15.00 1.2x 0.7% (5.9%)

Neutral $18.91 $18.50 1.12x 0.0% (2.2%)

1.1x 0.7% (3.8%)

Market Cap. ($ mln) Cash ($ mln) Debt ($ mln) Net Debt/Cap

$356 $568 $1,359 69%

$3,587 $1,634 $2,085 15%

$323 $509 $1,649 122%

$982 $1,036 $1,801 55%

$695 $420 $606 27%

$3,765 $1,078 $0 (177%)

$2,554 $2,656 $4,286 42%

$709 $878 $874 (1%)

$3,137 $1,640 $1,964 11%

$1,873 $1,184 $1,701 33%

CS Calendar Year Ests. 2009 2010E 2011E 2012E

($1.71) ($2.03) ($1.60) ($0.47)

($0.96) ($0.03) $0.32 $1.20

($7.36) ($3.27) ($2.05) ($0.92)

($1.33) ($1.68) ($0.70) $1.10

($2.45) $0.52 $0.01 ($1.09) $0.13 ($0.89) $1.21 $0.75 VALUATION

($2.12) ($0.06) $0.15 $1.50

$31.01 $31.30 $39.35 $68.25

($4.23) ($2.64) ($0.13) $0.55

($3.77) ($2.13) ($0.65) $0.55

($4.38) $0.05 $0.03 $0.61

NM NM NM NM

NM NM 34.9x 9.4x

NM NM NM NM

NM NM NM 11.6x

52.1x NM NM 36.0x

NM NM NM 14.4x

21.6x 21.4x 17.0x 9.8x

NM NM NM 12.1x

NM NM NM 29.5x

NM 389.1x 575.4x 30.9x

NM NM 98.4x 16.1x

$4.66 1.01x $3.53 1.33x

$8.20 1.37x $8.49 1.32x

($4.36) NM NM NM

$7.98 1.60x $11.03 1.16x

$12.96 $21.88 1.34x 1.23x $14.29 $21.71 1.22x 1.24x OPERATING METRICS

$15.38 1.41x $16.78 1.29x

$273.68 2.44x $273.68 2.44x

$4.95 1.35x $6.74 0.99x

$11.79 1.36x $13.02 1.23x

$14.90 1.27x $16.55 1.14x

1.20x

4,406 (17.8%) 4,152 (5.8%) 4,181 0.7% 5,223 24.9%

18,294 (7.5%) 19,272 5.3% 21,830 13.3% 27,288 25.0%

5,178 (13.6%) 3,961 (23.5%) 4,440 12.1% 5,328 20.0%

8,341 0.8% 6,830 (18.1%) 8,112 18.8% 10,546 30.0%

11,510 0.8% 10,841 (5.8%) 12,421 14.6% 15,527 25.0%

3,306 7.5% 3,399 2.8% 3,960 16.5% 4,921 24.3%

3,853 (16.6%) 3,246 (15.8%) 3,642 12.2% 4,549 24.9%

9,409 7.4% 9,569 1.7% 11,201 17.1% 14,407 28.6%

14,185 (7.3%) 14,862 4.8% 15,277 2.8% 19,096 25.0%

5,302 (12.2%) 3,706 (30.1%) 4,368 17.9% 5,461 25.0%

2,710 5.1% 2,664 (1.7%) 3,202 20.2% 4,162 30.0%

Total 86,494 0.7% 82,501 (4.6%) 92,636 12.3% 116,507 25.8%

4,411 (33.0%) 4,373 (0.9%) 3,835 (12.3%) 4,951 29.1%

18,164 (24.0%) 18,862 3.8% 20,687 9.7% 25,866 25.0%

5,245 (35.9%) 4,225 (19.4%) 4,212 (0.3%) 5,024 19.3%

8,488 (31.8%) 7,348 (13.4%) 7,387 0.5% 9,843 33.2%

11,478 (27.1%) 10,366 (9.7%) 11,702 12.9% 14,515 24.0%

3,013 (32.9%) 3,342 10.9% 3,869 15.8% 4,701 21.5%

4,039 (28.2%) 3,625 (10.3%) 3,392 (6.4%) 4,281 26.2%

9,042 (15.8%) 9,666 6.9% 10,259 6.1% 13,156 28.2%

20,603 (2.0%) 16,884 (18.1%) 14,822 (12.2%) 17,934 21.0%

5,129 (30.2%) 4,232 (17.5%) 4,084 (3.5%) 5,093 24.7%

2,896 (31.0%) 2,625 (9.4%) 2,896 10.4% 3,639 25.6%

11.5% 13.2% 10.3% 13.7%

13.1% 17.3% 15.2% 17.7%

2.8% 10.7% 9.5% 13.6%

18.3% 17.6% 16.4% 18.7%

15.6% 19.7% 18.6% 20.3%

17.9% 18.6% 16.7% 19.1%

13.8% 18.4% 16.9% 18.1%

18.4% 18.2% 17.7% 20.3%

9.8% 13.0% 11.9% 14.9%

10.3% 15.8% 13.6% 16.3%

16.2% 15.2% 14.6% 17.1%

92,508 (18.6%) 85,545 (7.5%) 87,146 1.9% 109,003 25.1% Average 13.4% 16.2% 14.7% 17.3%

22.7% 18.5% 18.3% 16.2%

14.7% 12.1% 11.9% 10.8%

21.1% 18.1% 18.7% 16.3%

17.2% 19.9% 16.8% 15.0%

14.7% 14.9% 13.9% 12.6%

8.7% 9.0% 8.2% 7.4%

19.0% 14.2% 12.6% 11.0%

14.7% 15.6% 14.7% 13.6%

18.3% 17.9% 17.5% 15.5%

17.9% 16.6% 15.5% 13.8%

Lots Controlled Years Supply % Owned % Optioned

29,768 6.8 80% 20%

116,928 6.2 77% 23%

34,829 8.2 51% 49%

39,800 5.4 82% 18%

20.5% 25.2% 18.4% 23.7% 17.5% 20.5% 16.4% 17.7% LAND EXPOSURE 105,580 11,939 10.2 3.6 80% 60% 20% 40%

14,500 4.0 71% 29%

51,600 5.3 0% 100%

149,253 8.8 89% 11%

22,721 5.4 69% 31%

35,800 13.6 81% 19%

7.1 67% 33%

Cumulative Impairments % of Average '06 Inventory

$1,541 43%

$5,001 44%

$2,436 54%

$2,898 38%

$4,866 48%

$1,214 39%

$1,005 56%

$607 36%

$11,481 54%

$1,216 42%

$2,254 35%

$34,517 46%

Current Inventory % of Assets % of Book Value

$1,318 63% 359%

$3,557 57% 135%

$1,106 55% NM

$1,790 56% 291%

$738 59% 149%

$515 22% 28%

$5,001 50% 152%

$730 42% 133%

$3,450 63% 138%

$23,731 52% 148%

Short Interest, % of Float

23.3%

9.3%

35.8%

24.7%

$4,772 $753 58% 28% 193% 73% SHORT INTEREST 20.5% 11.3%

9.0%

6.4%

13.7%

13.2%

8.8%

12.6%

Price/Earnings 2009 2010E 2011E 2012E Book Value Tangible BV/Share P/TBV Adjusted BV/Share P/Adj. BV CY Orders (Homes) 2009 % Ch. Yr/Yr 2010E % Ch. Yr/Yr 2011E % Ch. Yr/Yr 2012E % Ch. Yr/Yr CY Closings (Homes) 2009 % Ch. Yr/Yr 2010E % Ch. Yr/Yr 2011E % Ch. Yr/Yr 2012E % Ch. Yr/Yr Gross Margins, Ex-Charges 2009 2010E 2011E 2012E SG&A % of Housing Revs 2009 2010E 2011E 2012E

NM NM NM 14.4x

1.34x

Source: Company data, Credit Suisse estimates

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Companies Mentioned (Price as of 06 Dec 10) Beazer Homes USA (BZH, $4.71, NEUTRAL [V], TP $4.00) DR Horton (DHI, $11.25, NEUTRAL [V], TP $10.00) Hovnanian Enterprises (HOV, $4.16, UNDERPERFORM [V], TP $2.00) KB Home (KBH, $12.76, NEUTRAL [V], TP $11.00) Lennar (LEN, $17.41, OUTPERFORM [V], TP $17.00) M.D.C. Holdings, Inc. (MDC, $26.95, NEUTRAL, TP $25.00) Meritage Corp (MTH, $21.63, NEUTRAL [V], TP $18.50) NVR Inc. (NVR, $668.66, NEUTRAL, TP $650.00) Pulte (PHM, $6.68, NEUTRAL [V], TP $7.50) Ryland Group (RYL, $16.07, UNDERPERFORM [V], TP $15.00) Toll Brothers (TOL, $18.91, NEUTRAL [V], TP $18.50)

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* 45% (61% banking clients) Neutral/Hold* 41% (60% banking clients) Underperform/Sell* 12% (53% banking clients)

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Restricted

2%

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Industry_RealtorSurvey_12-07-2010.doc


Industry Market Realtor Survey Dec 2010