Williams Financial Group Initiated Coverage on Homebuilder Stocks: Cautious but Positive Bias; Macro Pressures Remain, but Some Growth Likely

This morning, Williams Financial Group initiated coverage on nine homebuilder stocks (2 at Buy, 7 at Hold)

Analyst, David N. Williams, said, "Short-term, we see increased earnings potential through the spring selling season as a near-term sector catalyst, with longer-term slow marginal improvements expected over the next several quarters. Optimism surrounding the spring selling season and speculation of a bottoming in the housing market has driven significant recent appreciation that could continue into 2Q12, but lingering high unemployment, lackluster GDP and persistent tight credit conditions will likely keep demand fairly anemic and limit major step-function improvements for at least the intermediate-term."

'Our base asssumptions are that U.S. GDP grows between 2-2.25% annially in 2012...We look for an unemployment rate of 8.0-8.5% into 2013...We expect foreclosure and shadow inventory to continue pressuring the supply side, but are encouraged by recent evidence that some regions, particularly non-judicial states appear to be working down foreclosures to new post crisis levels."

"In our opinion, Lennar (NYSE: LEN), D.R. Horton (NYSE: DHI), Meredith (NYSE: MTH), Toll Bros. (NYSE: TOL) and Ryland (NYSE: RYL) are the better positioned homebuilders in the group, with DHI & RYL being initiated at Buy."

Beazer (NYSE: BZH), KBHome (NYSE: KBH), Lennar (NYSE: LEN), Meredith (NYSE: MTH), PulteGroup (NYSE: PHM), Standard Pacific (NYSE: SPF) and Toll Bros. (NYSE: TOL) started at Hold.

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