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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: Will you begin by telling us about the sectors that you follow most closely for Wachovia Securities?

Mr. Marshall: I cover the small and mid-cap building materials manufacturers, several value-added building products distributors, and a couple of the manufactured housing producers. In addition, I cover the pre-engineered metal buildings segment, as well as several HVAC manufacturers. So my coverage is building materials manufacturers and distributors with manufactured housing thrown in.

TWST: How would you differentiate among these groups in terms of performance over the past 12 months?

Mr. Marshall: From the standpoint of fundamentals, the underlying business of the building materials manufacturers and distributors looks as if it bottomed back in April or May 2001. Since that time we've seen a steady sequential modest improvement in unit volumes and a firming in terms of pricing. The manufactured housing segment has gone through some secular earthquakes, so to speak. The segment has literally been in a tailspin for the past three years. The downward spiral was initiated by overly loose consumer credit in the mid-1990s. This loose credit led to a spike in repossessions, as a lot of folks who should have never gotten financing did. When the lenders realized the errors of their ways, they tightened their underwriting standards fairly aggressively, which in turn sparked a retail consolidation. The past 30 months have seen the number of manufactured home sales centers fall from approximately 10,000 to roughly 5,500 today. The good news is that at this juncture the retail consolidation looks like it's wound down, and that has led to some improvement in the wholesale shipment numbers over the past several months.

TWST: What are you telling investors with regard to these stocks?

Mr. Marshall: We have a Strong Buy on Clayton Homes (NYSE:CMH). They have essentially no debt and are vertically integrated into finance. In terms of that, they have had the best underwriting history in the industry for the past 10 years. They’re in a position to really start rolling up this segment if they choose to, buying assets for 0.25 on the dollar. Going forward they’re going to be growing market share by buying additional retail locations, and we’ll probably see them do some portfolio buying in terms of manufactured home loans. So they’re really in the catbird seat. The other two companies that we cover in the segment, Fleetwood (NYSE:FLE) and Champion (NYSE:CHB), are definitely struggling. Their balance sheets are semi-stressed. They both jumped into the retail game in 1998 when there was a consolidation going on. They overpaid for their retail locations and put a lot of goodwill on the books. The retail game has really changed at this point and you’re seeing them start to close down locations. So those two companies are struggling and Clayton is really in a position to come out of this rough patch as the winner. In general I think we have seen the worst. Repossessions are going sideways; they’re not increasing at this point. The general rule of thumb is that if a loan is going to go bad, it goes bad within 27-30 months. So we’re reaching the tail end of that window in terms of the bad paper that was written in the 1996-1998 time frame. I think the picture has been blurred somewhat because the national economy has weakened just as we’ve come to the end of that window. But in my opinion the worst has passed here and we’re going to make slow but steady progress going forward.

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.