Real Estate Sales and House Prices
- Women Unafraid of Condo Commitment (New York Times, Dec. 10th): "The impact of female buyers may be most pronounced in the Brooklyn condominium market, because women who are first-time home buyers can break into the market more easily… Good news for Brooklyn developers, who are beginning to see the same troubling market conditions that are hitting Manhattan and the rest of the country. While average sales prices have not dropped in Brooklyn, apartments are taking far longer to sell. Apartments in Dumbo, Williamsburg and Brooklyn Heights sat on the market for an average of 111 days last quarter, compared with 62 days in the corresponding period in 2005."
- CMG Financial Chief Copes With Housing Woes (Contra Costa News, Dec. 10th) "Christopher George, President of CMG Financial Services, a San Ramon-based mortgage and financial services firm: "Lender's increasing inventory... is putting a lot of pressure on home prices right now in the Bay Area… Our hottest market in the United States is St. Louis. Dearborn, Michigan is our worst. If you want to buy one heck of a house go to Dearborn. You can buy a gorgeous home that was owned by executives who were with Ford or General Motors. They are pricing them to sell."
- Fort Myers High-Rises: Buyers, Experts Split On Market's Future (Newspress.com, Dec. 10th): "Southwest Florida: "Some investors are optimistic. They see a bright future for a downtown with thousands more apartments plus the office and retail space. Others say the burst of construction is too much, too soon — the harbinger of a bust to come... Condo sales have slowed during the past few months. In September, 61 existing condos were sold, compared to 126 during the same month a year ago. The median price dropped, from $316,800 in September 2005 to $305,600 this year."
- Housing Prices, Sales Volume Fall In Escambia, Santa Rosa (Pennsacola News Journal, Dec. 9th): "Housing prices continue their steady decline in the Pensacola Bay Area, accompanied by huge drops in sales volumes for new (40% in Escambia) and existing single-family residences. In Santa Rosa County, sales volume fell 46 percent. Median home prices are also declining, but [local realtor says it's] "a return to a normal market." The record-high inventory of new and older homes for sale in the two-county area is largely the result of Hurricane Ivan and the surge of investors and speculators who bought after the September 2004 storm."
- It's Not The Bells And Whistles But The Price That Draws In Home Buyers (Naperville Sun, Dec. 7th): "Local realtor: "We keep trying to make things attractive for the buyer, but the bottom line is, it is the price that matters." This October, home sales in Naperville fell 28 percent to 125 from 173 single family homes sold in Oct. 2005, according to the Realtor Association of West/South Suburban Chicagoland. Year-to-date home sales experienced a 21 percent drop, from 1,932 homes sold in 2005 to 1,535 sold in 2006."
Real Estate Investing and Sentiment
- Series Of Meetings To Get Input On School Construction Starts Monday (Charlotte Observer, Dec. 10th): "Meetings this week will launch the Charlotte-Mecklenburg Schools' effort to get public input into a 10-year master plan for construction. The meetings are designed to inform the public about the school system's revised schedule of construction projects over the next 10 years. The new plan calls for building 63 new schools at a cost of $2.4 billion. Superintendent Peter Gorman and his staff have ranked more than 300 projects according to priority."
- A Building Boom On Campus (Boston Globe, Dec. 10th): "Large residential housing projects planned for Berklee College of Music, Harvard University, and Massachusetts Institute of Technology...In the next decade, construction on eight college and university campuses will create thousands of jobs and alter the Boston landscape. Boston Globe: The plans call for building more than 5 million square feet. They would cost well over $1.3 billion... Boston-area colleges large and small are taking advantage of their wealth, their rising national reputations, and their expanding research programs to undertake historic levels of growth."
- Real Estate Revisited: What I Said In May Of '05 (Maine Today.com, Dec. 6th): "[Yale economist] Robert Shiller: Real estate is now the bubble [because of] home price increases beyond historical proportions, along with unfounded consumer optimism for future returns... When rates rise and the economy stalls, there will be fewer buyers and those buyers will be bargain hunters. Homeowners will be more and more reluctant to sell at bargain bids since they are holding on to mortgages with low interest rates. Supply and demand will work itself out where real estate values gradually deflate in a slow ongoing fashion for a long period of time."
Mortgates and Real Estate Lending
- Key Facts About Slowdown In U.S. Housing Market (Reuters.com, Dec. 11th): "1) The default rate of subprime mortgages rose "dramatically" in the 12 months through August to 7.74 percent from 5.53 percent. 2) Defaults on prime loans rose to 0.24 percent in August, matching the average since 2000, from 0.16 percent a year earlier. 3) Subprime loans originated in 2006 are "going bad" at a 50 percent higher frequency than those issued in 2005. 4) Deterioration in credit quality is also seen in second-liens and mortgages on more than 80 percent of the property… Standard & Poor's downgraded credit ratings on a record 132 residential mortgage bond issues last quarter, mostly due to poor performance of subprime loans."
- US Housing Market Is Different This Time - It's Worse (Money Week, Dec. 11th): "In the modern mortgage market, loans are parceled up into bond-type structures called mortgage-backed securities (MBSs) and sold on to investors. The buyers range from hedge funds and pension funds to the Chinese government diversifying its dollar assets away from Treasuries... UBS: Nearly 4% of subprime mortgages issued and bundled into MBSs this year are 60 days or more behind on their payments. It’s the highest rate in over a decade - almost one percentage point higher than in the 2001 recession - and the economy as a whole isn’t even officially in trouble yet. High delinquencies in year one are generally a sign that higher-than-usual defaults can be expected later on."
- Masked mortgages (OC Register.com, Dec. 11th): "With the housing boom over, government data show more criminals – and more consumers – lied to sell or buy expensive homes. Mortgage fraud ballooned as the housing market heated up… Don Currie of HighTech Lending: Loan volume is falling with the market, and people who work on commission are struggling to keep up their incomes… taking desperate measures to keep their lifestyles up… And more consumers stretch the truth when home prices or interest rates are high, exaggerating their income and assets to qualify for loans."
- Mortgage Applications Perking Up (David Andrew Taylor in Seeking Alpha, Dec. 7th): "I'm not the biggest believer in the real estate market being the biggest reason the U.S. economy pushes forward. Now, incomes are going to push the economy forward. For those of you that feel the real estate industry IS that important: The mortgage applications for the week have hit some higher numbers. We've been sort of bottoming out at these levels with mortgage applications, and appear to be moving moderately higher. I don't foresee any kind of real estate booms like we just witnessed. But, I do foresee some support."
- Fed Regulators Restrain CRE Lending (WSB in Seeking Alpha, Dec. 7th): "Federal regulators are clamping down on the proportion of commercial real estate [CRE] loans within bank portfolios. The Federal Reserve, the Comptroller of the Currency and the FDIC have proposed thresholds that are designed to avoid dangerously high concentrations of CRE loans that could spell disaster for smaller banks in the event of a serious economic downturn... Many bankers fear the regulatory scrutiny triggered by the crossing of the suggested thresholds will function as a de facto limitation. The regulators' goal is to avoid a repetition of the 1980s scenario in which many banks failed when the real estate market collapsed."
- Housing Prices: The Not-So-Hidden Truth (Barry Ritholtz in Seeking Alpha, Dec. 7th): "The one saving grace of residential real estate these days has been plummeting yields -- the 10 Year has dropped from 5.25 down to 4.4% over the past 6 months. That has provided some cushion for non specualtive sale price across the country. The bottom line is that housing prices have already fallen dramatically, and could still have more room to the downside -- especially if the economy slows even further."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Economists Expect Slower U.S. Growth On Housing, Cars (Bloomberg, Dec. 11th): "A report this month showed manufacturing contracted for the first time in more than three years in November… suggesting the economic slowdown is spreading beyond housing. Still, economists say job and income growth will be strong enough to keep consumers spending and the economy growing, allowing the Federal Reserve to hold rates steady through March. Fallout from the housing and auto downturns is too limited to support recession scenarios, but [economists] are more pessimistic for the immediate future."
- Is This The End Of The Housing Bust? (Barry Ritholtz in Seeking Alpha, Dec. 6th): "Jeffrey Gundlach, CIO at TCW Group: "No bottom in the slump until at least 2008 and no meaningful recovery until at least 2010... A 60% probability of the U.S. falling into recession by mid-2007 with housing alone lopping off at least 1.5 percentage points in growth. A weak housing market [means] consumers are less likely to spend freely when their biggest asset is getting drilled; housing accounts for a major chunk of U.S. employment (all the construction, finance and retail jobs that depend on a lusty new-construction and resale market); Weak prices means no more cash-out refinancings for U.S. consumers to underwrite their lifestyles."
Homebuilders and Housing Stocks
- Consumer Stocks In U.S. Rise On Jobs, Incomes As Housing Slips (Bloomberg, Dec 11th): "Growth at U.S. service industries, including retailers, banks and hotels, unexpectedly accelerated in November for a second month as a strong labor market lifted spending in the face of housing slump. Investors are pushing retail stocks higher because U.S. unemployment is near the lowest rate since May 2001 and average hourly earnings last month rose the most in more than five years, the Institute for Supply Management reported. [Sector] gains may accelerate: "When the economy is creating a lot of jobs, people have more money in their pockets.''
- Locked In, No Exit In Sight (Washington Post, Dec. 9th): "Some developers have added certain provisions that further strengthen contracts that have, bit by bit over the past decade, increasingly favored homebuilders. As a result, contracts became more prevalent during the frenzied real estate boom that block consumers from getting any "remedy" beyond reimbursement of their earnest money, or that prevent them from taking the dispute to court but instead force them into arbitration, when differences of opinion arise… But some buyers are trying to get back their deposits just the same, and at times are finding that persistence can prevail."
- Assessing the Homebuilder Stocks (Bill Cara in Seeking Alpha, Dec. 8th): "Citigroup has taken a very aggressive stance on the U.S. house-builders. Credit Suisse says Toll's upbeat guidance lacks meaningful supporting evidence. CEO Hovnanian: "Although Texas and the Carolinas are having a pretty good day, most of the states in the U.S. move in unison, and there are some countries—China, India, Russia—that are having pretty solid housing markets right now. So, it would be reasonable diversity in some of those markets... [They] can provide a nice domestic balance... Globalization makes sense... We’re all still relatively small in terms of normal globalization standards."
- Zillow to Realtors: Really, We're Not Going to Eat Your Lunch (David Jackson in Seeking Alpha, Dec. 7th): "Zillow.com just launched a volley of products, and is trying to claim that these products pose no threat to real estate agents. But with services like free advertising to sell your home, and setting the price with pricing and home related data contributed directly to its site and unavailable elsewhere-- once its site has becomes the marketplace for homes, Zillow will bill [everyone] a transaction fee. I'd be nervous owning any stock with exposure to traditional realtors, including H, IACI, MOVE, SOLD, and ZIPR."
Commercial Real Estate and REITs
- Southwest Florida Avoids Mergers (HeraldTribune.com, Dec. 11th): "Both the CB Richard Ellis Group Inc. and the Trammell Crow Co. merger and the buyout of Equity Office Properties Trust by the Blackstone Group, are unusual in that they involve the full spectrum of the industry, both on the asset and service sides of the business. Typically, real estate mergers have been limited to property portfolios, or the securities and debt that control them. "This shows that we are seeing a continuation in mergers and acquisitions in the industry, both on a property ownership side and, especially, on the service side."
- Duke Realty Raises 2007 Outlook (Businessweek.com, Dec.7th): "Duke Realty Corp., which specializes in office and industrial real estate, on Thursday raised its guidance for 2007, after a boost from its recent convertible debt offering. In November, the company announced plans to sell $575 million of exchangeable senior notes due 2011 to institutional buyers… The company said it expects FFO to grow as pipelined rentals are brought to market and more properties are sold."
- Homebuilders Speak About the Housing Market (Seeking Alpha, Dec. 7th): "Freddie Mac Chief Economist Frank Nothaft said the correction is about two-thirds finished, and that by the second half of '07 home sales would begin rebounding, showing 3% gains by year end... Lennar CFO Bruce Gross said the slowdown offered developers a change to optimize operations: "As things slow down, we can focus on efficiencies." Commenting on industry consolidation, Toll CFO Rassman said: "I think there's a reason to believe that when the big builders control 50-60% of a market, they'll probably have to eat each other."
Web Site of the Day
Rain City Guide's lofty mission is to "be the best resource for real estate information in the Seattle area."
The blog is run and written by a group of real estate professionals who provide a constant stream of updates and anecdotes about the local real estate market. The blog format is meant to "provide context to the vast amounts of information that is available on Seattle's market."
What's uniquely appealing about this site is the variety of professionals writing-- real estate agents, lawyers, escrow specialists and even a "database guru". The blogs are high level, varied, eminently readable and extremely useful to local investors or just anybody who is interested in the rainy city.
|Tracking the Housing Market and Homebuilder Stocks
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.