Shi Xu +86(21)2401-8929 | shi.x.xu@goldmansachs.cn Goldman Sachs (China) Securities Company Limited 31 March 2026 | 7:30AM CST Equity Research CHINA PROPERTY WEEKLY WRAP Week 13 Wrap - Leading indicators continue to signal more muted volume outlook as peak season commences Key highlights for the week: Policy front: While central-level policy remained muted over the past week, local governments continued rolling out targeted demand-side support measures, focusing on Housing Provident Fund (HPF) easings and d ...

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. China Real Estate Equities From 'exit' to 'upgrade': why resale liquidity matters China The surge in secondary sales volume in key cities has continued to make headline news. In this note, we elaborate on why a liquid secondary market matters, restarting the transaction chain that ultimately supports primary sell-through, and devel ...

Shanghai tour: A spring season that packed an unexpected punch Robust spring peak season. After relaxation of home purchase restrictions in Feb (Homes and shops: Policy tailwinds and retail vitality, 26 Feb 26), Shanghai's housing market has staged a robust rebound in March, with synchronised recovery across primary and secondary markets. Secondary transactions are on track to exceed 30k units in March, likely the highest monthly level since 2021, on strong turnover in affordable "old and small" units (老破小) ...

Core Insights - KB Home reported first-quarter fiscal 2026 results with earnings in line with estimates but total revenues missing expectations, both metrics showing a year-over-year decline [1][5]. Financial Performance - Adjusted earnings were 52 cents per share, matching the Zacks Consensus Estimate, while total revenues were $1.08 billion, missing the consensus mark of $1.1 billion by 2% and decreasing 22.6% year over year [5]. - Homebuilding segment revenues were $1.07 billion, down 22.7% from $1.39 billion in the prior year, with home deliveries at 2,370 units, a 14% decline from 2,770 units [6]. - The average selling price (ASP) for homes decreased by 9.7% year over year to $452,100 [6]. Orders and Backlog - Net orders increased by 3% year over year to 2,846 units, with the value of net orders rising to $1.36 billion from $1.35 billion in the previous year [7]. - The cancellation rate was 12%, down from 16% in the year-ago period, indicating a stronger buyer base [7]. - The backlog at quarter-end totaled 3,604 homes, down from 4,436 homes a year ago, with potential housing revenues from the backlog declining 22.7% to $1.7 billion [8]. Margins and Expenses - Housing gross margin contracted by 480 basis points year over year to 15.5%, driven by pricing reductions and higher land costs [9]. - Selling, general and administrative expenses (SG&A) as a percentage of housing revenues increased by 120 basis points to 12.2% [10]. - Homebuilding operating margin fell to 3.1% from 9.2% in the prior year [10]. Financial Position - As of February 28, 2026, KB Home had cash and cash equivalents of $200.5 million, down from $228.6 million at the end of fiscal 2025, with total liquidity of $1.2 billion [12]. - The debt-to-capital ratio increased to 32.9% from 30.3% at the end of fiscal 2025 [12]. Future Guidance - For Q2 fiscal 2026, KB Home expects housing revenues between $1.05 billion and $1.15 billion, down from $1.52 billion in the year-ago period, with deliveries projected between 2,250 and 2,450 homes [14]. - Fiscal 2026 delivery expectations have been revised to 10,000 to 11,500 homes, down from 11,000 to 12,500 homes, with housing revenues expected to be between $4.8 billion and $5.5 billion [16].

Core Viewpoint - KB Home has faced challenges in gaining momentum, with recent financial results indicating a struggle in the housing market [1] Financial Performance - KB Home reported adjusted earnings of 52 cents per share, aligning with estimates, but revenue fell short at $1.08 billion [1] - The company's stock has decreased by 20% this month and is down 14% year-over-year, with significant resistance at the $67.50 level since September [2] Market Sentiment - Analysts have reduced their price targets for KB Home, with Barclays lowering its target from $62 to $56 [2] - The stock has a high put/call volume ratio of 2.83, indicating bearish sentiment, with 810 puts traded in the first hour of trading, significantly above the average [3]

Summary of Key Points from the Conference Call Industry Overview: China Real Estate - **Pivotal Year 2026**: The housing market is expected to bottom out in 2026, leading to household wealth stabilization after four challenging years. Home prices are projected to decline at a narrower rate, having peaked in 2024, which will improve consumer sentiment and encourage consumption [1][8][30]. - **Housing Wealth Erosion**: An estimated RMB28 trillion in housing wealth erosion affects those who purchased properties post-2017, while earlier buyers generally remain profitable. This erosion has negatively impacted consumer sentiment, leading households to prioritize savings over discretionary spending [2][22]. - **Excess Deposits as a Buffer**: Between 2020 and 2025, excess deposits are projected to reach RMB50 trillion. Even with a potential 2-4% decline in home prices in 2026, losses can be offset by these excess deposits, paving the way for household wealth stabilization [3][29]. Core Insights on Housing Market Dynamics - **Incentives for Housing Consumption**: The drag on GDP and household balance sheets from housing has decreased, creating incentives for home purchases. The analysis indicates that buying remains financially preferable even amid price pressures [4][35]. - **Quality Landlords Positioned for Upside**: Quality landlords like China Resources Land (CRL) and Seazen are well-positioned to benefit from the stabilizing wealth effect. CRL is noted for its strong luxury retail exposure and commitment to capital recycling, while Seazen is recognized for its mass-market appeal and diversified funding channels [5][46][47]. - **Valuation of Key Players**: - **CRL**: Buy rating with a target price of HKD39.00, current price at HKD30.30, indicating a 28.7% upside [11]. - **C&D International**: Buy rating with a target price of HKD20.10, current price at HKD14.18, indicating a 41.7% upside [11]. - **Seazen Group**: Buy rating with a target price of HKD3.20, current price at HKD2.22, indicating a 44.1% upside [11]. - **CR Mixc**: Hold rating due to limited earnings upside and high valuation [5][49]. Additional Insights on Consumption and Market Trends - **Correlation Between Housing Prices and Consumption**: In tier-1 and tier-2 cities, a 10% increase in house prices correlates with a 1.6% increase in consumption, highlighting the significant impact of property values on consumer behavior [12][13]. - **Retail Consumption Dynamics**: Chinese households hold RMB168 trillion in deposits, significantly larger than national offline retail sales. As the housing market stabilizes, this cash reserve is expected to drive retail consumption [38]. - **Selective Consumer Spending**: Despite discussions of a "consumption downgrade," certain retail segments, such as digital devices and experiential spending, continue to show robust demand, indicating a nuanced consumer behavior amidst macroeconomic challenges [39]. - **Resilience in Lower-Tier Cities**: Retail sales growth in tier-3 cities is outpacing that of top-tier cities, driven by healthier supply-demand dynamics and faster disposable income growth [43]. Conclusion The Chinese real estate market is poised for stabilization by 2026, with significant implications for household wealth and consumption patterns. Quality landlords are expected to capture the upside from this stabilization, while the correlation between housing prices and consumer spending remains a critical factor in the overall economic outlook.

Core Insights - Wall Street is concerned that rising prices and slower economic growth may negatively impact all stocks, yet small-cap stocks and the housing market are showing resilience [1] Group 1: Market Concerns - The overall sentiment on Wall Street is that inflation and decelerating growth could lead to a downturn in stock prices across the board [1] - Analysts are particularly worried about the implications of higher interest rates on corporate earnings and consumer spending [1] Group 2: Small-Cap Stocks - Small-cap stocks are demonstrating strength, with some analysts suggesting they may outperform larger companies in the current economic climate [1] - The resilience of small-cap stocks is attributed to their domestic focus, which may insulate them from global economic pressures [1] Group 3: Housing Market - The housing market is also holding its ground, with demand remaining steady despite broader economic concerns [1] - Factors such as low inventory and continued interest in homeownership are supporting housing prices [1]

Core Viewpoint - Lennar's stock is experiencing downward pressure following a quarterly earnings miss, raising concerns about future performance and investor sentiment [2]. Financial Performance - Lennar reported quarterly earnings of $0.88 per share, which fell short of the analyst consensus estimate of $0.96 by 8.24% [2]. - The company’s quarterly sales amounted to $6.619 billion, missing the analyst consensus estimate of $6.883 billion by 3.83% [2]. Earnings Outlook - The next significant catalyst for Lennar's stock is anticipated to be the earnings report scheduled for June 15, 2026 [3]. Stock Price Activity - As of the publication date, Lennar shares were up 0.90% at $96.81 [4]. - The estimated earnings per share (EPS) for the upcoming period is $1.38, down from $1.90 year-over-year [4]. - Revenue estimate for the next period is $8.10 billion, a decrease from $8.38 billion year-over-year [4]. - The current price-to-earnings (P/E) ratio is 13.8x, suggesting a potential value opportunity compared to peers [4].

Key Takeaways In 2024, according to the latest data available, people age 65 and older spent an average of $61,432 per year, or about $5,120 per month. The largest spending categories were housing, clocking in at $1,849 per month, transportation ($794.83), health care ($649.92), and food ($661.66). Spending also included an average of $252.08 per month on entertainment, such as shows, sporting events, club memberships, camping, and pets. Comparison is often called the thief of joy, but when it com ...

Core Viewpoint - Lennar Corporation is set to release its first-quarter earnings on March 12, with investors focusing on its dividend yield of 2.07% and potential monthly income from dividends [1]. Dividend Yield and Investment Calculation - To earn $500 monthly or $6,000 annually from dividends, an investment of approximately $289,710 or around 3,000 shares is required, while a more modest $100 monthly or $1,200 annually would need $57,942 or around 600 shares [1][2]. - The dividend yield is calculated by dividing the annual dividend payment by the stock's current price, which can fluctuate based on stock price changes [2][3]. Impact of Stock Price on Dividend Yield - If a stock's price increases, the dividend yield decreases, and vice versa; for example, a stock with a $2 annual dividend priced at $50 yields 4%, but if the price rises to $60, the yield drops to 3.33% [3]. - Changes in dividend payments also affect yield; an increase in dividends raises the yield if the stock price remains constant [4]. Earnings Expectations - Analysts expect Lennar to report quarterly earnings of 95 cents per share, down from $2.14 per share in the same period last year, with a consensus revenue estimate of $6.9 billion compared to $7.63 billion last year [5]. - Ahead of the earnings report, Truist Securities initiated coverage on Lennar with a Hold rating and a price target of $10 [5]. Stock Performance - Shares of Lennar fell by 2.2% to close at $96.57 on the day prior to the earnings announcement [4].