Housing Bubble and Real Estate Market Tracker

 |  Includes: DHI, KBH, MDC, PHM, ZIPR
by: David Jackson

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can get this sent to your blackberry or desktop email by signing up for our no-spam free email subscription service.

Real Estate Sales and House Prices

  • U.S. Home Prices Climb 1.17% (LA Times, September 6th): "Prices rose 1.17% in the second quarter over the year-earlier period, the slowest rate since the fourth quarter of 1999, according to an Office of Federal Housing Enterprise Oversight report. U.S. house prices increased 10% on average over the last 12 months, and prices are on track to increase 4.68% for the year, the report said. Every state in the nation saw prices appreciate in the last 12 months, the report found, but some regions saw a serious slowdown from the recent breakneck pace. Some states along the Atlantic — such as Florida, Virginia and Maryland — saw 12-month price appreciation slow to 13.7% at the end of June, down from growth of 17.4% in the 12 months ended in March. That is the most significant price deceleration since the early 1980s..."
  • Home Prices Rising After 2Q Slowdown (Associated Press on Forbes, September 5th): "All 50 states and the District of Columbia showed increases in home prices from last year's second quarter compared with the same period this year, but five states - Maine, Massachusetts, Indiana, Ohio and Michigan - registered small price declines in the most recent second quarter from the first... Despite a year-to-year decline of 9 percentage points, house prices in Arizona still showed the highest growth rate of all the states, about 24 percent."
  • "Buyers Market" in Rochester Home Sales (WXXI, September 5th): "The New York State Association of Realtors has released its data of sales of existing homes from January through July. Some of the results: Statewide, the number of existing home sold were down 2.8 percent compared to year ago. In Rochester, that figure was 3 percent. But the annual sales total remains strong despite that fall off, according to NYSAR. The statewide median price for existing homes rose 3.7 percent compared to a year ago. In Rochester, it rose 7.7 percent. In Rochester, there were 4-thousand-720 homes sold in the first seven months of the year, down 3 percent from a year ago. The median sales price of an existing home in Rochester is about half of the rest of the state at 132-thousand-500 dollars."
  • Living Large, By the Month (Review Journal, September 2nd): "The luxury rental market in Las Vegas has been limited to custom executive homes in upscale master-planned communities, a few midrise apartments such as Vegas Towers and the 30-year-old Regency at Las Vegas Country Club. That's changing as more high-rise and midrise condo projects are completed and investors dump their units onto the rental market... Look for Las Vegas rents to climb as luxury condos hit the market. The average apartment rent in the second quarter is $844 a month, up 5.5 percent from a year ago, Carl Sims of Hendricks & Partners reported. Reports from several brokerage firms project further rental rate increases as 6,000 to 7,000 new residents continue to move to Las Vegas each month."
  • To Woo Families, Builders Add Water Parks, Swanky Playrooms (RealEstateJournal.com, September 5th): "In a strategy developers and builders started during the booming housing market -- and one they say will help them stand out in a slowing one -- they're spending millions of dollars on elaborate water parks and fake fossil digs and promoting couture romper rooms by name-brand designers... Developers are adding these perks to gain attention and marketing mileage, of course. But they're also responding to the second U.S. baby boom, with about 73.5 million children currently under the age of 18, according to 2005 Census estimates, up from about 64 million in 1990. The amount of money parents spend on their 3-to-11-year-old children is up as well -- $115.6 billion annually, according to Packaged Facts, a New York-based consumer-research company. The cost of raising a child to age 18 is now $191,000 for a middle-income family, a 15% increase from five years ago, according to an annual survey by the Department of Agriculture."

Foreign Real Estate Markets

  • Growth in House Prices Keeps on Slipping (South Africa Mail & Guardian, September 5th): "Nominal growth of 13.6% year-on-year in [South African] house prices was recorded in August 2006, compared with a revised growth rate of 14% in July, the latest Absa house-price index shows... The average nominal year-on-year growth in house prices came to 15.1% in the first eight months of 2006... On a month-on-month basis, house prices declined by 0.1% in real terms in July this year... This was the first real month-on-month price decline since April 2002 when it was -0.5%..."
  • Kuwait Real Estate Sales Remain Strong (Kuwait Times, September 6th): "In its latest economic brief on the monthly statistics of registered real estate contracts issued by the Ministry of Justice, excluding sales conducted through agents, National Bank of Kuwait (NBK) reports that real estate sales rose sharply in July, registering one of the strongest months ever. The rise followed a drop in June which was in line with the usual seasonal slowdown during the summer months. A total of 854 units were sold in July at value of KD 226 million, up 29% and 41% from June, respectively. The value of sales was the highest monthly figure on record which goes back more than ten years. Units sold and the value of sales were up 52% and 72% compared to a year ago, respectively. NBK notes that most of the growth during July came from the residential sector, where sales rose by 43% in value and 32% in number. Still, sales of apartments and commercial property also showed notable increases in the value and number of sales by 37% and 15%, respectively."

Realtors, and Buying and Selling Real Estate

  • How to Get More for the Money In a Cooling Housing Market (RealEstateJournal.com, September 5th): "One in five home sellers sells their properties through a FSBO [For Sale By Owner], according to Colby Sambrotto, chief operating officer of ForSaleByOwner.com, a Web site that provides home-selling services to homeowners for a flat fee instead of a real-estate commission. Buying a FSBO property presents a cost-cutting opportunity for home buyers because "if you are selling a property and aren't forced to take on a 6% to 7% commission, you will pass that [savings] along to the buyer," he says. Some FSBO sellers list their homes through the Multiple Listing Service (MLS) and can be found on Realtor.com, Mr. Sambrotto says. (Sellers going through ForSaleByOwner.com pay a higher-priced service package to get listed on the MLS.) He adds that only about 15% of his clients take that option..."
  • Customer Reviews -- Adding Spice to a Bland Housing Market (Eli Hoffmann in Seeking Alpha, September 6th): "Operators of real-estate Web sites ZipRealty Inc. (NASDAQ:ZIPR) and Reply Inc. have begun encouraging customers to write reviews of homes for sale. Early indications are that the reviews can be harsh but honest, threatening to detract from the gushing language used in agents' marketing materials, this in a time when a homes-glut is already allowing buyers to take their time, dwell on defects, and demand price cuts. Operators of the sites say the reviews provide valuable information for home shoppers. The phenomenon also affects rental properties: Apartment Ratings Inc. says it has about 425,000 apartment ratings and reviews. Yahoo! Inc. (NASDAQ:YHOO) is encouraging users to rate apartment complexes, as well as real-estate agents. Reviews are screened for racial discrimination, inappropriate content, phone numbers or advertisements, but not for whether reviewers' descriptions are accurate."

Real Estate Investment Trusts [REITs]

  • Crescent in Talks to Divest, Go Private (Houston Business Journal, September 3rd): "Crescent Real Estate Equities Co. (CEI), a publicly traded real estate investment trust with large office holdings in Houston, is negotiating to go private in a deal that could be valued at nearly $6 billion. Fort Worth-based Crescent is one of the largest landlords in Houston, owning a stake in 22 office buildings with a total of nearly 12 million square feet. The company owns less space -- 9 million square feet -- in its home base of Dallas/Fort Worth. According to REIT Newshound, a California trade newsletter that covers REITs and other property-linked stocks, Crescent is in "advanced talks" to sell the entire firm to Istithmar, a Dubai-based investment holding company... A potential price for Crescent's remaining holdings could be in the $23.50 to $25.50 per share range, estimates Mike Kirby, co-founder and research director for Newport Beach, Calif.-based Green Street Advisors, an independent research and consulting firm focusing on publicly traded real estate securities. Crescent shares were trading at $21.38 Aug. 30, with 102.6 million shares outstanding."
  • When a $210,000 Second Hand Wallet is a Good Deal (Eddy Elfenbein on Seeking Alpha, September 5th): "In late 1999, a man paid $210,000 for a wallet... Inside the wallet, Buffett left a stock tip. The stock he recommended was First Industrial Realty (NYSE:FR)... the stock has climbed over 67% from the price after the Buffett news was made public. If you include the very generous dividends, which are now at 70 cents a share, the investment in FR would have made you over 180%. Over the same period, the S&P 500 is down about 8%, although dividends have given the index a slight gain."

Macro Impact of Housing Market

  • Job Losses May Turn Housing Slump Into a Rout (John F. Wasik in Bloomberg, September 5th): "Nevada and Arizona, leaders in home sales and appreciation for the past several years, are forecast to more than double their 2000 population, followed by Florida (80 percent). The influx of people into the heart of the Sunbelt is propelling home prices. Through the first quarter, the greatest annual home-price gains have been in Arizona (33 percent), Florida (27 percent) and Hawaii (25 percent). Yet if jobs are leaving, the double whammy of rising financing costs and unemployment can amplify a housing slump. Generally, communities that are hurt most by job losses tend to be dependent on manufacturing industries. States suffering most are Michigan, Ohio, Pennsylvania and South Carolina. And there are growing concerns in the Texas population centers, outlying Atlanta, central California, the Denver area and St. Louis, where the U.S. Labor Department reports higher-than-average unemployment..."
  • The Housing Collapse Heard Round the World (The Globe & Mail, September September 3rd): "The housing market has been a perfect conduit for economic activity, funnelling and leveraging billions of dollars worth of household wealth into consumer spending in recent years. The U.S. savings rate is negative now, but even a relatively modest shift toward savings now could have a dramatic effect on consumption, sending the economy into reverse. Joining a growing number of anxious forecasters, Prof. Morici puts the risk of recession in 2007 at 50-50... The ability of Americans to afford a home is the worst it's been in two decades, according to the National Association of Realtors... In the past decade, the percentage of U.S. household wealth tied up in homes has climbed to 48.5 per cent from 38.7 per cent. Americans have also super-sized their abodes. From 1975 to 2005, the average size of new single-family homes grew by 48 per cent — from 1,645 square feet to 2,434 sq. ft. — even as families shrunk in size, according to new data from the U.S. Census Bureau. These larger homes come with more bedrooms and more bathrooms, spawning a bevy of retail chains to help homeowners furnish all that space, such as Crate & Barrel, the Pottery Barn and Bed, Bath and Beyond. In 1975, only 4 per cent of homes had more than 1½ baths. Today, nearly half of new homes do. That has changed the way Americans spend. Nearly 15 per cent of every dollar consumers spend now goes toward housing-related items. That compares with 11.5 per cent in the early 1990s."

Homebuilders and Hedging Your House Price By Shorting Stocks

  • Analyst: Inventory Hurts Vegas Home Mkt (Chron.com, September 5th): "The Las Vegas housing market, the nation's ninth largest, will be flat or slightly lower in 2006 because of a rising inventory of homes for sale, Merrill Lynch said Tuesday. Existing home sales in Las Vegas are down 36 percent year over year... In 2005, the top builders in Las Vegas were KB Home (NYSE:KBH) with a 10 percent market share and Pulte Homes Inc. (NYSE:PHM), which had a 9 percent market share. Other homebuilders vastly expanded their work in the area since 2000, with the number of units built by MDC Holdings Inc. (NYSE:MDC) growing 45 percent and the number built by DR Horton Inc. (NYSE:DHI) growing 29 percent. Construction jobs represented 20 percent of total job growth in 2005, 29 percent in 2004 and 25 percent in 2003..."

Web Site of the Day

Apartement Ratings

The Wall Street Journal's page one article today discusses web sites that allow home buyers and renters to post reviews of houses they've seen.

Sure, there's debate about whether reviews are fair or may be subject to manipulation. "Some agents and homeowners already are howling that the reviews are hatchet jobs, perhaps motivated by spite or a desire to discourage competing bids for property the reviewers want to buy."

However, we think reviews and ratings of rental apartments are particularly useful. The people who live in a property know most about it, but when they're trying to sell they won't tell the truth. But with rental apartments, the current tentants who know the building best have no vested interest in painting an unrealistically rosy picture of their building.

And rentals generally are attractive to all those convinced we're in for a real estate collapse...

The site to use? Try Apartment Ratings.com.

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