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Seven analysts and top management from sixteen sector firms examine the homebuilding industry sector in this special 89-page Homebuilding Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info506.htm

TWST: Despite the weakness in the economy, new and existing home sales broke records in 2001 with mortgages that originated last year apparently reaching an historic high of $2 trillion. What chance does 2002 have of beating or, for that matter, meeting last year’s numbers?

Mr. Campbell: From a mortgage ori-gination standpoint there’s probably not much of a chance, but that’s simply because you had such a large amount of refi activity in 2001. From a mortgage purchasing standpoint, as it relates to homebuilding in general, we’re looking for the housing markets to be roughly flat to slightly down in 2002, relative to 2001. Nonetheless, we’re obviously looking for housing activity to remain near the record levels that we set in 2001. So there will be some moderation, although no-thing significant, and by and large we expect that as the economy continues to firm and/or turn up, it should have a positive effect on housing, particularly as we move into the latter stages of the year.

TWST: Scott, which categories do you find greatest interest in?

Mr. Campbell: In the current environment, the lower end of the market is going to continue to be strong. And that’s where we’re hanging our hat. The first time homebuyer in this interest rate environment will continue to be a very strong component of housing activity. In fact, we see anecdotal evidence of that in some of the other real estate areas that we follow, particularly the multi-family or apartment space. Specifically, we follow multi-family REITs and we’re seeing a pretty precipitous decline in occupancy rates among the apartment REITs. Naturally, a number of companies are attributing some of that decline to the economy — in a slowing economy people generally move back with family or double up with friends. But they’re also seeing a larger number of people who are exiting the apartment lifestyle to move into a single family home, taking advantage of the rent versus own differential that was mentioned earlier. However, I also believe that as we move into the back half of 2002, you will start to see the luxury end of the market revive, assuming the economy continues to firm and the stock market moves higher.

TWST: Scott, which homebuilders are furthest along in delivering a range of housing products and services, and what are the advantages or benefits of this strategy in your view?

Mr. Campbell: I believe, as Jim just mentioned, Centex is probably furthest along in the process. Centex (NYSE:CTX) is in the chemical lawn maintenance, pest control and security monitoring businesses — fee-based services where they touch not only their immediate homebuyers, but also third-party customers. If you think about it from the perspective of future growth, Centex is currently selling roughly 25,000 to 26,000 homes per year. That number will continue to grow and offers internal opportunities to leverage that growth among Centex’s ancillary services, not to mention a continued ramp-up in the third-party customer base.

TWST: Scott, will you look back at the performance of the homebuilders over the past six to nine months, and more specifically at the impact that the events of September 11 had on this group?

Mr. Campbell: I think we were all holding our breath as to the specific impact that the horrific events of September 11 were going to have on the consumer in general, and the housing market specifically. During the immediate two-week period following September 11, not much housing activity took place at all. Traffic declined significantly and order volumes fell more than 30% on a year-over-year basis. However, over the next several weeks and months, traffic patterns gradually improved and order trends clearly picked up, showing sequential improvement from October through December.

This special issue includes:

1) Homebuilding Industry - In an in-depth (13,500 words) Analyst Roundtable, Scott H. Campbell, Vice President-Homebuilding and REIT Equity Research at Raymond James & Associates, David Jarrett, Vice President at Credit Lyonnais Securities (USA) Inc., Samuel A. Lieber, CEO of Alpine Management & Research, LLC, Joseph Sroka, Vice President at Merrill Lynch & Co., Inc., James Wilson, Managing Director at Jolson Merchant Partners Group, LLC, examine the outlook for the sector including industry consolidation, interest rate outlook and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance of eight sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Outlook for Homebuilding Stocks - In an in-depth (5,000 words) Analyst Interview, Carl E. Reichardt, Principal at Banc of America Securities, examines the outlook for the sector including and shares specific stock recommendations.

4) Building Materials Manufacturers - In an in-depth (3,900 words) Analyst Interview, Robert Marshall, Senior Analyst following the housing/building materials sector at Wachovia Securities, examines the outlook for the sector including and shares specific stock recommendations.

5) CEO interviews (average 2,500 words). Top management of sixteen sector firms examine the outlook for their firm and the sector.