Housing Bubble and Real Estate Market Tracker

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

• Historic Downturn In Home Construction (Chicago Tribune, Dec. 2nd): "Chicago-area builders said local home construction, which fell by about 7 percent this year, will drop by another 3 percent in 2007... but will hold at levels of 2003... Developers plan to create about 36,000 units of new housing in the Chicago area next year, down from a peak of 40,000 units in 2005. Due to builders' rising costs for land, material and labor-- incentives, price cuts, free upgrades and special mortgage deals are coming to an end. Recently, sales have been slow [on inventory]... but the construction industry has been helped by a large number of jobs being created in office corridors rising near outlying expressways and toll roads."

• Block's Blemish (Press Enterprise, Dec. 2nd): "Foreclosures, abandonments create suburban eyesores: A sign of the softening real-estate market and a situation not limited to [inland southern California]. Tract-home blight is hard for those who want the still-growing community to mature well, who despair that property values will spiral downward if neighborhoods start to look seedy... Eastvale resident: "I like my house and my yard, but when other people don't keep their property up, it devalues mine. It seems like it's awful soon for having the houses look dumpy."

• Let's Talk Affordable Housing (Ocala.com, Dec. 2nd): "Now fewer than half of the families making the average income can buy the average home... Six years ago, the Ocala area was the second-most affordable place in the South for housing, and 10th-ranked nationally. In 2006, Ocala now ranks 41st in our region and 110 overall in the country. The sharp and rapid decline in housing affordability affects the long-term viability of our community's economy... which is dependent on the middle and working classes, now close to being priced out of the local housing market and being able to join the ranks of homeowners."

• Double Dose Of Bad News In Housing Market (Gazette.com, Dec. 2) Colorado Springs: "Pikes Peak Regional Building Dept.: Builders dramatically reduced construction in November, with single-family building permits at their lowest monthly rate in 12 years. About 1,800 fewer single-family permits will be issued in 2006 than in 2005 (5,300) ... The numbers should be kept in context: Permits are down, but the market hasn’t come to a halt... Through November, foreclosures climbed to nearly 2,400, already surpassing 2005’s total, according to the El Paso County Public Trustee’s Office."

• Historical Home Prices, Payments, Rents And Rates (Piggington.com, Dec. 1): "Using real monthly payments as a proxy for valuation, SD home prices have clearly overshot their fundamentals. Since the housing market bottomed in 1997: Real rents up 20%, real home prices up 138%, real monthly payments up 112%... Some of that home price rise can be attributed to "catch-up" after homes became undervalued in the mid-90s. However, since rates bottomed out in 2003 -- a year in which homes were already quite richly valued: Real rents are up 1%, real home prices are up 32% and real monthly payments are up 41%. That, my friends, is pure speculative mania."

• Home Prices Decline 2.5 Percent (Nevada Appeal, Dec. 2nd): "Carson City's housing boom hit a high in 2005 when the median price of a single-family home jumped 34 percent. The market has inched down in the last year, with a 2.5% decline in October... Fewer California buyers are coming into the Nevada market and are instead traveling farther east... Lower price range properties have dropped significantly. High-end properties - the $1 million properties - are holding value quite well." There's a lot of new construction going on, which is a sign the market is picking up," said Jim Shirk, a Realtor with Realty Executives."

Real Estate Investing and Sentiment

• Loans To Fund Real Estate Development (Central Penn Business Journal, Dec. 4th): "Gov. Ed Rendell delivered $12 million in loans to support real estate development in Dauphin, Lancaster and York counties. The taxpayer funding was made available through the state’s Building PA program. South Third Development Corp., an affiliate of Harristown Development Corp., was awarded $4 million to create a company focused on supplemental real estate project funding that will be used to support the Southern Gateway development in Harrisburg."

• Developers Rethink Plans In Slow Market (Palm Beach Post, Dec. 3rd): "Palm Beach developer Cliff Preminger will delay construction on luxury waterfront condos indefinitely until the market improves. In the interim he'll sit tight, neither canceling the condo nor selling the land. Building into a falling market is not an option. "Real estate is no field of dreams. We don't build it and hope people will come." Other developers are selling. Some can't handle their lands' carry costs. Others want to cash in on the growing investor interest in the next wave of real estate development. A new wave? If the current market shakeout lasts 18 months, as many experts predict, now is the time for new players to jump in."

• Brooklyn Tract, Home To 14,000, Goes On Block (NYTimes, Dec. 1): "Starrett City, a 140-acre apartment complex built 30 years ago on Jamaica Bay in Brooklyn for working-class New Yorkers, is on the auction block. [It's] the latest indication that even bland brick buildings are sought-after in a booming real estate market that has driven prices skyward for everything from condominiums to tenements in New York City. The Starrett City auction will follow the recent $5.4 billion sale of the 11,200 apartments at Peter Cooper Village and Stuyvesant Town. Tenants there fear the loss over time of an increasingly rare middle-class redoubt in Manhattan."

• CME Housing Futures Show Expectation The Housing Slump Will Continue (Ticker Sense in Seeking Alpha, Nov. 30th): "S&P/Case-Shiller recently released their September home price data. The CME now trades futures based on the S&P/Case-Shiller home price indices... February, May and August 2007 futures are forecasting further declines. (See chart)"

Mortgates and Real Estate Lending

• HELOCs: 'Financial Innovation' Of The Past (Tim Iacono in Seeking Alpha, Dec. 1st): "Home Equity Line of Credit's [HELOC] appeal has rapidly waned with the combination of monthly repayment rates now double what they were just a couple years ago and falling home prices that make "refinancing-away" HELOC debt much more difficult than back in 2004. Once you could borrow on credit cards, pay off the credit cards with newly borrowed HELOC money, then make the HELOC debt vanish by rolling it into a refinanced mortgage with a higher loan balance and a lower interest rate, while keeping that all-important monthly mortgage payment the same - maybe even bring it down."

Macro Impact, And Will The Housing Slump Cause A Recession?

• Chicago Fed President: Housing Weakness Won't Spill Over (David Jackson in Seeking Alpha, Dec. 4th): "Fed Pres. Michael Moskow: "There is still a risk that prices have been boosted by factors unrelated to demand fundamentals. If that is the case, prices in some regions could unwind and reduce residential construction. And the negative wealth effects from softening house prices could reduce consumption more than anticipated... Currently, we do not see the slowing in housing markets spilling over into a more prolonged period of weakness in the U.S. economy overall. On balance, the 95 percent of the economy outside of housing remains on good footing."

• Housing Prices Falling, New Construction Sluggish (Accountingweb.com, Dec. 4th): "Markets for building materials, where manufacturers had been producing at record volumes to meet demand, are correcting rapidly. In lumber, for example, the November Random Lengths Framing Lumber Composite price, the forest products industry’s key indicator, was 23 percent below the year-ago level. As a result, manufacturing plants across the Western and Southern U.S. are cutting jobs in the fourth quarter, as are major homebuilders, who are also reporting lower earnings."

• The Apartment Atop The Garage Is Back In Vogue (NewYork Times, Dec. 2nd): "From the pricey purlieus of East Hampton to the environmentally minded Northwest, towns in need of inexpensive housing are turning to garage apartments, mother-in-law units and cottages in the backyard. The aim is to enable people who would otherwise be priced out of the housing market to live close to their jobs and relatives. The revisions — allowing, say, backyard bungalows in Santa Cruz, Calif., and efficiency units in farmhouses in Vermont — have occurred largely in suburban and exurban areas where growth and efforts to control it have driven housing costs up."

Homebuilders and Housing Stocks

• U.S. Housing Is Key To Cemex's $12 Bln Rinker Bid (Reuters.com, Dec. 4th): "Mexican cement giant Cemex may be waiting for a sharper downturn of the U.S. housing market before turning up the heat on Australian building materials company Rinker to accept its $12 billion takeover. The hostile offer, which Rinker rejected last week, could hang for months as Cemex bides its time for the U.S. housing slump to hit bottom and hurt Rinker's results and stock price again, analysts say. The US accounts for about 80 % of Rinker's business and the weak housing market was weighing heavily on Rinker shares before Cemex (CX) made its Oct. 27 bid. If the downturn deepened or became prolonged, it could hit Rinker's stock again."

• Multifamily Builders Still Worried About Weakness In Condo Market (Building Online, Dec. 4th): "Fannie Mae MCM Index: Slower sales, growing inventory along with eroding builder confidence in condo market in the Q3 of 2006. NAHB: "Many of these condo communities are large, urban projects or high-rise communities in resort locations, and so take a long time to plan and build compared to a single-family home. Multifamily developers cannot simply turn off the supply overnight, so it is going to take a little while before we work through the large overhang of inventory in this sector..." Builder expectations for the condo market over the next six months was also down."

• The Long Case For Cavalier Homes (Value Investor Insight in Seeking Alpha, Dec. 1st): "Brandywine Global on Cavalier Homes (CAV) Business [down] for almost a decade, as financing dried up and low interest rates made traditional homes more affordable in comparison... Stock is very cheap with little downside... Cavalier’s market cap is currently $60 million and they have $20 million of excess cash and “idle” assets... on their balance sheet. The enterprise value of $40 million is under 20% of the $230 million in revenues we expect this year... Hurricane Katrina is likely to prompt rebuilding that hasn’t materialized yet and most of Cavalier’s factories are located within 350 miles of New Orleans."

Commercial Real Estate and REITs

• Icahn's American Real Estate Makes Reckson Bid (Marketwatch.com, Dec. 4th): "Carl Icahn's American Real Estate Partners L.P., said it's proposing to acquire all outstanding shares and units of Reckson Associates for $49 each. ARE's offer consists of about $1 billion in cash and $3.3 billion worth of a new class of merger preferred units that would be convertible into depositary units at a 30% premium to American Real Estate's close at $80.35 on Friday. In its letter to Reckson, ARE stated it believes its proposal is superior to Reckson's pending transaction with SL Green Realty and others."

• The Recession Of 2007 (Goldseek.com, Dec. 3rd): "Housing market recessions generally take years to work out, not months. This one's bottom probably not coming until the middle of 2007. As housing construction slows, the 15% of the growth in the US economy that has been related to housing is going to disappear... Market commentators looking for good news a few months ago cited nonresidential construction as performing well and adding to growth, we have seen that sector drop for the last two consecutive months by over 1%. Things will not grind to a halt, but they are going to slow down even more."

• Apartment REITs Stocks Should See Pressure (Daniele Guerini in Seeking Alpha, Dec. 1st): "The apartment REITs industry is now trading at approximately 25x the 2007AFFO... In the past few years this high multiple was justified by increasing housing prices. This increase had a double positive effect: it contributed to an increase in the NAV of the REITs (apartments and new developments increased in value), and it induced more people to rent instead of buying, thus improving occupancy rates... NAR data suggests this is now changing and prices are declining. The double positive effect could likely revert into a double negative effect and REITs like AvalonBay (AVB), Essex Property (ESS) and Equity Residential (EQR) – all with 2007 AFFO multiples above 25 – will probably start showing some weakness."

Web Site of the Day

Housing Tracker.net is a number crunching real estate site offering weekly, up-to-the-minute market statistics (including median asking prices and home inventory numbers) for cities/metros across the US.

Using official census defined Metropolitan Statistical Areas for monitoring inventory and asking prices, the site offers: "better metropolitan area definitions [that] lead to better data." The old HousingTracker data is also very useful for observing longer trends, as its data extends further back.

The housing slump affects different metropolitan areas in different ways-- some drastically and some very little. This site allows those investors who are looking for specific opportunities in the current housing slump to closely monitor individual cities for signs of a continuing slump or a bottom.

Tracking the Housing Market and Homebuilder Stocks You can track developments in the housing market and homebuilder stocks by bookmarking our Housing coverage or subscribing to our free email service. If you have a blog or website of your own, you can track developments in the sector and provide great content for your readers with our Housing Market widget (left). It's simple to add -- just select "Housing Market" from the drop-down menu here.