Morgan Stanley starts US homebuilders with 'cautious' view, flags affordability worries

By Reuters News

** Morgan Stanley initiates coverage of US homebuilders with a "cautious" industry view

** Affordability, incentives and margin pressure key challenges - brokerage

** MS says affordability concerns keep existing-home sales range-bound, limits resale supply and continues to pressure new housing; lower mortgage rates improve affordability

** Starts Toll Brothers TOL.N with "overweight" rating on an affluent, less rate-sensitive customer base and strong pricing power

** D.R. Horton DHI.N remains vulnerable to affordability pressures among first-time buyers; PulteGroup's PHM.N favorable buyer mix does not translate into stronger EPS growth - Analysts

** Ratings and price targets:

Company name

Rating

PT

Toll Brothers

Overweight

$159

D.R. Horton

Equal weight

$151

Pultegroup

Equal weight

$128

Lennar Corporation

Underweight

$65

KB Home

Underweight

$39

NVR Inc

Underweight

$5,058

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