Housing Bubble and Real Estate Market Tracker

Sep.12.06 | About: Centex Corp. (CTX)

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

  • Home Price Anecdotes vs. Statistics: Which Is the True Market Barometer? (Tim Iacono in Seeking Alpha, September 12th): "Anecdotal reports, builder incentives, median vs. mean, wildly divergent geographical sampling, the role of home improvements in successive sale pricing, and a myriad of other factors have made it exceedingly difficult to assess the true state of housing markets, both in the U.S. and around he world..."
  • Rising Inventories Bring Falling Home Prices (Eli Hoffman in Seeking Alpha, September 12th): "Home inventories rose 4.7% in August, signalling more downward pressure on prices. The biggest increases: 1) Dallas (16%) 2) Seattle (13%). Of 18 areas studied, only two saw a drop in inventory (Boston [-1.5%] and Washington D.C. [-1.6%]). Prices are falling as sellers become more realistic; over 35% of homes' prices have been reduced. Yet buyers, it seems, still await further price drops."
  • North Texas Home Sales Drop (Dallas News, September 11th): "Real estate agents sold 8,386 pre-owned homes last month. That's a dip of 8 percent from year-earlier sales, the North Texas Real Estate Information System reported Friday... Median sales prices for pre-owned homes are up this year. In August, the median sales price was $152,500 – 3 percent higher than a year earlier. But median prices have declined a fraction from monthly highs in the spring, records show."
  • Homeowners Have Trouble With Market
    (Hollister Free Lance, September 9th): "he Realty Times reported that the median price of a home in the Silicon Valley dropped in the past two months by $50,000 from $820,000 - just more than 6 percent - while homes in San Benito County have dropped in price by less than 1 percent over the past year... the median price, which locally is $589,888, according to the regional MLS provider. In May, however, the local median home price was $670,000."
  • The Valley Economy: Home Sales Dip Again (Review Journal, September 9th): "Home sales continued to slide in Las Vegas during August, dropping 37 percent from the same month a year ago to 2,097, the Greater Las Vegas Association of Realtors reported Friday. It's the 11th consecutive month of declining single-family home sales, starting with a 1.2 percent drop in October to a 38.5 percent drop in July.'
  • Big Isle Home Prices Fall 14% (Star Bulletin, September 8th): "Median home prices were higher in August than a year ago on Maui and Kauai, but not on the Big Island, which saw a 14 percent price drop. The number of sales of previously owned homes dropped on all three islands, according to statistics released yesterday by Hawaii Information Service and the Realtors Association of Maui."
  • Buyers Play Wait and See (LA Times, September 10th): "DataQuick Information Systems reported that the Southern California median price slipped from $493,000 in June to $492,000 in July. The number of sales dropped to 24,669 in July, down about 27% from 33,561 in July 2005. With an estimated one-third of Southland properties currently "wildly overpriced," according to John Karevoll, chief analyst at DataQuick, a La Jolla-based real estate research firm, patience could be a home shopper's best virtue."
  • Shift to Buyer's Market Stymies House Sellers (Baltimore Sun, September 9th): "The number of houses sold in the Baltimore area fell more than 25 percent in August compared with August 2005, and prices went up less than 5 percent, leaving frustrated sellers with houses sitting on the market longer than expected... Prices rose, on average, 4.54 percent in the region -- from less than 2 percent in Howard and Carroll Counties to an area high of 6.86 percent in Baltimore City."
  • Jackson County Median Home Prices Fall First Time Since 1984 (KGW.com, September 9th): "The median price of a home sold in Jackson County has declined for the first time since 1984. The median price for August dropped $5,000, from $274,900 to $269,900, compared to the same month last year... The countywide inventory of houses available through the Southern Oregon Multiple Listing Service is up 120 percent to 1,971 single-family residences over a year ago."
  • Moribund Market (Southwest Florida Herald Tribune, September 9th): "ccording to statistics compiled by John Lafabregue at RE/MAX Properties in Sarasota, just 4.9 percent of listed houses and 3.1 percent of listed condominiums were sold in August by members of the Sarasota Association of Realtors. a far cry from the 30 and 40 percent absorption rates (the percentage of listings that sold) recorded during the hysteria of 2003-05."
  • Home Sales in a Slump (WHOtv.com, September 8th): "According to the Iowa Association of Realtors, from July 2002 to July 2003, the number of home sales jumped 22 percent. However, from July of last year to July of this year, home sales dipped by nine percent. And this July, for the first time in three years, the median sales price in Des Moines fell, from 149,200 dollars to 148,500."
  • UK House Prices Set to Soar Even Higher (The Business News Source, September 12th): "The latest news that energy and food prices are dropping rapidly in the UK will put pressure on the Bank of England’s monetary policy committee (NYSE:MPC) to hold off any increase in rates the next time it meets. This is likely to push house prices further through the roof. Homebuyers desperate to get into the UK’s overheated housing market shrugged off the last rate increase in August. With prices in areas of London still seeing rises of up to 11 percent per annum, buyers are getting desperate and panicking into hugely leveraged debt."

Real Estate Investing and Sentiment

  • A Realtor's Reality (RGJ.com, September 10th): "...membership in the [Reno-Sparks Association of Realtors] increased 13.5 percent, from 2,278 members in July 2005 to 2,586 in the same month this year... membership in the national association is also up in every state but Michigan... the National Association of Realtors is forecasting a loss of 8 percent of its membership in 2007..."

Macro Impact, and Will a Housing Crash Cause a Recession?

  • House Prices to Hit Spending (Toronto Star, September 12th): "A cooling economy and a return to historical rates of return may remove much of the strong "wealth effect" that has supported consumer spending in recent years and could prompt households to increase their savings, a report by Scotiabank suggests... Canada Mortgage and Housing Corp. said Monday that housing starts fell a 9.6 per cent to 213,700 annualized starts in August, the lowest rate since last October. The slowdown followed a report last week that Canada's jobless rate rose to 6.5 per cent in August from 6.4 per cent in July, the third month in a row the Canadian economy has lost jobs after a huge gain in May."

Homebuilders, and Hedging Your House Price By Shorting Stocks

  • Homebuilders' Robust Incentives to Buyers are Telling Indeed (Barry Ritholtz in Seeking Alpha, September 12th): "Whenever I hear anyone say home prices are holding up up, I have to laugh. That's like saying the NY Knicks are undefeated (except for their losses)... So while home prices may look the same, the net to the builder has changed dramatically -- as the freebies listed below make clear..."
  • Builders Sweeten the Deal (SaanLuisObispo.com, September 10th): "After several years of heated demand and accelerated home building, home builders in San Luis Obispo County are scrambling to lure buyers. Incentives — such as home upgrades, attractive financing and low-price guarantees — are being offered at a pace not seen since the early 1990s when the housing market suffered a serious downturn... In the first half of the year, Centex Homes (CTX) was seeing two to three cancellations a week, estimated Chris Bowley, division manager on the Central Coast for Centex Homes. The cancellations at Centex and other area home builders have slowed considerably over the summer to a few each month as new incentives are used to retain buyers and investors get out of the market."
  • Housing Market's Landing Will Get Rougher (Faisal Laljee in Seeking Alpha): "I believe that stocks are a leading indicator of where the housing market is going. Considering that these stocks have been cut by 50%, we are nowhere near the end of the housing bottom. The "soft" landing is going to be a little harder than most people expect. The next 6-12 months will see housing, especially in markets like Southern California, Florida and New York, go down by another 15-30%."
  • One Cookie Short of a Toll House: Mr. Toll Still Doesn't See the Housing Bubble (Vitaliy N. Katsenelson in Seeking Alpha): "I don’t know if housing stocks are cheap enough. I am aware that one has to be able to differentiate between a good company and a good stock. There is a possibility that despite the housing market going through some tough times, the housing stocks’ valuations reflect an outlook that is a lot worse that could possibly transpire. I know some very smart investors who have made that case. I have an unquantified hunch that they probably are not cheap enough – Toll Brothers (NYSE:TOL) is still trading at above 2004 levels. I am not sure that 2004 earnings will be coming back. Looking at past earnings is fruitless as they are meaningless for the forward analysis. And in this industry in particular, the past is unlikely to repeat for quite awhile."
  • The Contrarian in Me Made Me Buy KB Homes (David Neubert in Seeking Alpha, September 11th): "I will continue watching KB Homes and Toll Brothers (TOL) for the right time to buy outright and in size. For now, I'm just putting on small positions so that I pay attention to the sector. One thing I do know about real estate cycles is that they tend to last about 15 years. That means this bubble may take as much as 7 years to unwind. But in that vein, the home builders do seem a better deal than REITS (Real Estate Investment Trusts)."

Web Site of the Day

Sell Your Preconstruction.com

SellYourPreconstruction.com's sale pitch: "Why wait for the developer's resale program to sell or flip your pre-construction property? Assign your contract and find a buyer before the property is ever built. View our listings online. 24 hours a day, 7 days a week. We may doze, but we never close."

It continues: "Our web site will help you find a buyer prior to or at closing. List your property for only $199.99. A one time fee until your property is sold."

Now, it's not clear whether this web site will really help you sell your unbuilt property, or whether the fees are worth it. After all, the site itself states that it received only 3,180 visitors per week in August.

But for those tracking housing sentiment, the explosion of sites like this is another data point that suggests there's demand from desparate sellers.

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