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3 Likely Homebuilder M&A Candidates: Stock Picker

Tuesday, 28 Sep 2010 | 3:21 PM ET

Single-family home prices dipped in July, and are seen stabilizing near the lows without the homebuyer tax credit that ended in April, according to Standard & Poor's/Case-Shiller home price indexes. What does this mean for the overall housing market? Josh Levin, homebuilding analyst at Citi, shared his outlook.

Homebuilders Regain Footing
Insight on homebuilders, with Josh Levin, homebuilding analyst at Citi.

“I wouldn’t say there’s significant recovery—the housing market is still in a pretty tough situation,” Levin told CNBC.

Levin said expectations in homebuilders are very low and would take a very small catalyst, such as a small uptick in home sales, in order to get stocks moving.

“Or you can have a bigger catalyst—M&A is a possibility in the sector as well,” he said.

Medium-sized builders such as Beazer, Meritage or Ryland could be acquired by the likes of DRHorton , MDC or even KBHome , said Levin.

"Homebuilders usually rally in December in anticipation of the spring selling season," he added.

“They could rally now, but it probably wouldn’t be in anticipation of the spring selling season, but [instead] in recognition of the fact that things are bad—but not getting much worse in the housing market,” he said.

Levin’s Homebuilder Picks:

Beazer Homes

Pulte

Meritage Homes

Toll Brothers

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Scorecard—What He Said:

  • Levin's Previous Appearance on CNBC (Aug. 31, 2010)

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Housing Market News & Analysis:

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CNBC Slideshows:

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CNBC Data Pages:

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Disclosures:

Citi owns shares of and has investment banking clients who own shares of BZH and TOL.

Citi currently has, or had within the past 12 months, BZH, TOL, PHM and MTH as clients and non-investment banking, securities-related services were provided.

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Disclaimer

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