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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: Jim, are there any regulatory or zoning issues that could benefit some companies and be onerous for others?

Mr. Wilson: There certainly are plenty of regulatory issues across the country. I am not sure if it’s as much company-specific as it is market-specific, depending on where the companies operate. That being said, certainly the higher end of the market in many parts of the country has more development and zoning issues than the lower end of the market.

TWST: Why is that?

Mr. Wilson: Homes tend to be closer in to the center in more expensive desirable locations that may be more infill in nature and fairly well developed already. People living there and those in political power in those regions would prefer not to see any significant level of development. The lower end of the market tends to be much further out from the center of any given regional market. There are far fewer growth constraints. A community may be located in a county and have no city jurisdiction at all. So it becomes much easier to get permits to build and develop.

TWST: Jim, which markets and which product categories are you focusing on for 2002-2003?

Mr. Wilson: For the near term — the next 12 months or so — I would continue to focus on the lower end, entry-level sector until the economy gets kick-started a bit more. I would also focus mostly on the West, where I think the supply/demand imbalance is the most attractive. We favor most parts of the West, other than those that have been more high-tech sensitive from a job standpoint, such as Northern California and perhaps Denver. Outside of those markets, I think that the builders focused on the West are going to do the best for the next 12 months, as well as those focused on the entry-level area. As we get into 2003 and start to look forward, I think then might be the right time to look at the move-up and luxury end of the market for a little more activity.

TWST: Jim, what are the key factors with regard to consolidation, in your mind?

Mr. Wilson: I think we’ve hit on most of them, but I think the best opportunity to grow is by acquiring the larger private companies that are starting to realize that it’s going to be more and more difficult to compete as they keep moving forward and as the big guys get bigger. I think they’re finally realizing that without a booming economy and given that we are in the early slow stages of an economic recovery, now might be a good time to get out. Thus, I think there’s a reasonable chance that consolidation activity steps up a little bit more over the next 12-18 months, particularly if you can get some help from stock prices of public homebuilders.

TWST: Jim, are there any others that you think people should have on their radar screens?

Mr. Wilson: I would mention a couple that are basically focused out here in the western part of the country — Standard Pacific (NYSE:SPF) and Meritage (NYSE:MTH). They’re both a little more move-up oriented, so they might favor Scott’s theme there about Toll Brothers. Standard Pacific first benefited, and has now been hammered, by the Northern California economy, particularly Silicon Valley, because they generated a significant amount of their profits during the last two to three years from this market. It was not necessarily a significant percentage of their home closings, but definitely a significant percentage of their profits. That has taken its toll on their backlog and their earnings for 2002. But when the Silicon Valley and tech markets of Denver and Austin pick up, Standard Pacific is definitely the most leveraged to a turnaround in activity at the high and luxury end of those markets. So Standard Pacific could be interesting.

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.