Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (7848)	1/4/2003 6:21:05 PM
From: Les H	Read Replies (1) \| Respond to of 306849

China's property bubble risk news.bbc.co.uk

To: ild who wrote (7848)	1/6/2003 12:59:53 PM
From: ild	Respond to of 306849

JPM on Homebuilders : In a research note this morning, J.P. Morgan commented on the earnings prospects for the homebuilders. The title of the note-- Short-term Rally Ending; Negative Long-term Stance Beginning to Unfold-- pretty much says it all in terms of the firm's cautious outlook. Not surprisingly, the homebuilding shares have been notable laggards in today's broad market rally. By and large, J.P. Morgan thinks the short-term rally in the homebuilding sector that it called for in early October (and got) has run its course and that the sector has entered a more challenging period over the next year. Four factors were cited for the tepid outlook, namely decelerating housing starts, slowing order growth, rising inventory levels, and a more challenging earnings environment. Another consideration is that the easier yr-ago comparisons supporting strong order growth in 2H02 have begun to end. Looking ahead, J.P. Morgan is introducing 2004 earnings estimates for the group that are on average down 30%. That bearish forecast stems from an expectation that operating margins, down on average 290 basis points, will be pinched by softer demand and pricing in 2003. Consequently, P/E multiples are expected to remain under pressure and the price to book value of the group should approach or even fall below 1.0x. According to J.P. Morgan, the latter is consistent with historical patterns when the group falls out of favor and represents more than 20% downside from current levels. Strikingly, J.P. Morgan acknowledged the possibility that many investors might actually believe, as trends worsen, that its estimates for a 30% decline in EPS could be optimistic. Suffice it to say, that is a bothersome consideration for investors, and despite a rash of positive earnings news and data points regarding sales of new and existing homes, it speaks directly to the relatively disappointing performance of the sector for many months now. Briefing.com, for its part, has maintained for some time that the homebuilding sector would be hard-pressed to outperform the market as it battles the perception that the best of times are behind it. The disconnect between the group's stock performance and its good earnings news suggested as much to us. Frankly, we continue to believe that will be the case as notes like the one from J.P. Morgan today will simply fuel concerns that there is a disconnect between relatively low P/E multiples and actual earnings prospects for the homebuilders.-- Patrick J. O'Hare, Briefing.com