Remember - not all builders are equal!! (Read my previous posts)


UPDATE 1-Goldman upgrades US homebuilders sector to attractive
24 Sep 2009 - Reuters
Sept 24 (Reuters) - Goldman Sachs upgraded the U.S. homebuilders sector to "attractive," saying stable home prices, low mortgage rates and a strength in sales activity should lead to higher equity values.

The brokerage expects a 30 percent growth in new home sales in 2010 and said as new home sales continue to rise toward its 2010 forecast of 525,000 to 550,000, it expects share appreciation for homebuilders.

The brokerage expects new home sales to grow 50 percent over the next two years.

"Additionally, we give a greater than 50 percent probability of a federal tax credit extension which should allay fears of a 'double dip' in housing," Goldman wrote in a note to clients.

The Commerce Department said sales of newly built U.S. single-family homes rose 9.6 percent to a 433,000 in July. New U.S. single-family home sales are expected to have risen in August to an annual rate of 440,000 units, according to a Reuters poll.

The brokerage, which sees profitability on the the horizon for the sector, also upgraded U.S. home builder Meritage Homes Corp (MTH) to "conviction buy" from "neutral."

"Early-2009 land purchases, strong SG&A control, and low levels of antiquated land make Meritage the most likely homebuilder to return to profitability," the brokerage said, and raised its price target on the stock to $28 from $22.

Goldman also raised its price targets on stocks of several other U.S. homebuilders, including Toll Brothers Inc (TOL), D.R. Horton Inc (DHI), KB Home (KBH) and Lennar Corp (LEN).

Credit spreads continue to grind tighter, reflecting both signs of housing stabilization and a broader credit market rally, the brokerage said.

"So long as the credit markets remain open to homebuilders, we think the risk of zeros across the group is limited," it said, adding that there have seen nine successful debt placements since April.