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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

  • Report: Decent Housing Out Of Reach For Many (, Dec. 13th): "The National Low Income Housing Coalition reported that Vermont's "housing wage" - the income required to afford an average two-bedroom unit - was $15.34 an hour, and had increased about $2,800 on an annual basis, more than double the jump reported last year. The national housing wage had increased nearly $1,000 from 2005, to $33,900. The highest was in Stamford, Conn., where $63,000 in income was needed to afford a typical two-bedroom apartment. The lowest was a housing wage of $18,400 in Puerto Rico."
  • "Buyers Have Vanished" In California (Housingbubbleblog, Dec. 12th): "Ca. Ass'n of Realtors: The residential real estate market in 2006 was characterized by a gap between buyer and seller expectations. Sellers sensed that the peak of the market was approaching, yet still hoped to obtain the highest possible prices. Buyers’ sense of urgency waned as the number of homes on the market grew." San Francisco and other expensive coastal cities, including Monterey and Santa Barbara, have become unaffordable for the middle class. ‘I don’t see how the economy can continue with these prices,’ said Stephen Levy, senior economist of the Center for Continuing Study of the California Economy."
  • Housing Slump Cuts Wide Swath (Capital Times, Dec. 12th) Wisconsin: "Just 1,321 permits were issued for new single family homes or duplexes in Dane County through the end of November, down 39 % from last year... In fact, 2006 is one of the toughest years for the residential construction business in a decade. Nobody seems to know where the bottom is... Madison Builders Ass'n Pres. says "the worst is over"... But first, the [local] real estate industry must deal with the "excess inventory"... There are more than 5,200 homes listed for sale in south central Wisconsin, more than twice as many on the market as two years ago."
  • Median Price For Valley Home Drops (Daily, Dec. 10th) California: "The median price of a San Fernando Valley house finally fell last month, by just less than 1 percent. But... those inside and outside the industry agree that prices are leveling out, which means the Valley will remain a very expensive market. The median price, the point at which half the units cost more and half less, will remain closer to $600,000 than $500,000. ''I would be shocked if prices dip below the $500,000 level. That would take a major turn in the economy, and that's just not there,'' said Jim Link, executive VP of the Southland Regional Association of Realtors."
  • Housing Still Up In Some Areas (LA Times, Dec. 13th): "Home values continue to increase in the county's less-expensive neighborhoods like Bell, Inglewood and South Los Angeles, offsetting declines in higher-end ZIP Codes... These smoldering neighborhoods, considered more affordable, were the last to heat up during the recent housing boom... although they are expected to eventually cool off. ..The latest statistics indicated that the housing market in the L.A. county--the nation's most-populous county-- continues to settle down from its recent peak but is not yet exhibiting signs of a crash."

Real Estate Investing and Sentiment

  • Israel's Polar Inv To Invest $1 Bln Over Two Years (, Dec. 13th): "Israel's Polar Investments plans to invest much of the $1 billion for real-estate projects overseas, its new American shareholder said on Wednesday. Last week U.S. real estate developer Ziel Feldman, co-founder of Property Markets Group (PMG), agreed to acquire 40 percent of Polar Investments, the real estate arm of the Shrem Fudim Kelner group, for about $50 million. Feldman, who has a one-year option to raise his stake to 52 percent, said a main focus would be in Eastern Europe. He added that he sees potential in Israel's commercial real-estate market."

Mortgates and Real Estate Lending

  • A Cautionary Tale From The US Property Bubble (Money Week, Dec. 12th): "The pay option loan gives you the choice of payments - the most expensive monthly payment covers your interest and capital-- standard repayment mortgage; the middle option covers just the interest; and the cheapest option - coming in at about half the monthly payment of the middle option - is to pay as little as possible and hope that you can make up the shortfall later. Under this option, you are failing to even pay off the interest on the loan - so your debt is actually growing, rather than falling.... In 2003, less than 0.1% of all home loans to Californians were of the “pay option” type. But in the first eight months of this year, around 33% of borrowers in the state took out “pay option” loans."
  • Treasury Sets New Guidelines To Stem Rising Delinquency Threat (Seeking Alpha, Dec. 12th): "Industry insiders: No bottom yet in the housing market, and any rise in foreclosures in subprime mortgages (high-interest loans for people considered to be poor credit risks) invariably hits low-income families the hardest. Foreclosures increased in the second quarter, with the highest proportion those of subprime borrowers.These latest guidelines to financial institutions are designed to protect seekers of home loans from excessive risk... following directions given by federal regulators in September instructing banks to ensure that borrowers understand the risks involved in interest-only and other nontraditional mortgages."
  • Mortgage Market Problems Increasing (, Dec. 10th): "California subprime lender Ownit Mortgage Solutions has shut down... Subprime home borrowers getting into trouble and defaulting on loans at unprecedented speed… When people state that Fannie Mae and Freddie Mac have added liquidity to the mortgage market, they refer to the process when you get a home loan from a bank, the bank sells the loan to a larger institution. (Like Fannie or Freddie) who then “pool them” in to one giant mortgage bond. Then these institutions sell the mortgages to pension funds, mutual funds and other investment companies... We're seeing some very bad indicators that major financial trouble is on the horizon."

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

  • Bernanke, Seeing 'Mixed' Economy, Edges Away From Higher Rates (Bloomberg, Nov. 13th): "Fed chief Bernanke's Nov. 28th remarks on the economy: "Outside of the housing and motor vehicle sectors, economic activity has, on balance, been expanding at a solid pace.'' The Fed yesterday updated its economic outlook to say the housing market has undergone a "substantial cooling'' and that "recent indicators have been mixed'' in the broader economy. The FOMC added that growth will come at a "moderate pace on balance over coming quarters."
  • Housing Burden Grows: Costs Crush Mass. Poor (Boston Herald, Dec. 13th): "From 1990 to 2000, the number of "shelter poor" [when housing costs leave no money left over to pay for other necessities, like food and clothing] renters increased by 57 percent, from about 77,000 to 120,000 households. Boston City Councilor Sam Yoon: "The findings show just how out of touch traditional standards, like the federal poverty level and the 30 percent of monthly income benchmark for housing costs, are with the reality of struggling households." The study also demonstrates just how grave the housing affordability crisis is in the Bay State."
  • Forex-Dollar Slides As Fed Recognizes Weak US Housing (, Dec. 12th): "The dollar declined on Tuesday, after the Federal Reserve kept interest rates steady, as expected, but struck a slightly more dovish tone in its statement by noting the risks from a cooling housing market. The central bank's Federal Open Market Committee fueled a dollar sell-off by adding "substantial" to its description of the U.S. housing market slowdown, traders said."
  • housing starts Is The Housing Slump Over? (Barry Ritholtz in Seeking Alpha, Dec. 12th): "Despite rosy NAR predictions that the worst of the slump is over, "in the previous seven cycles since 1959, housing starts [seasonally adjusted] have fallen, on average, 50.7% from peak-to-trough. Each time housing starts have fallen more than 25% from their most recent peak, a recession has followed... See chart. Housing starts have dropped 34% so far since their peak in January of 2006. Just to get to the average drop we have another 20% or so drop in starts to go."

Hedging Your House Price With Housing Stocks

  • Eagle Materials Leads The Construction Raw Materials Industry (Eric Dellith in Seeking Alpha, Dec. 12th): "Eagle Materials (NYSE:EXP) has not only done a good job of improving its profit margins in the TTM [Trailing Twelve Months] span from its own five-year average, but it has widened its profit margins while other companies in the construction raw materials industry have experienced a narrowing of margins... Eagle has a relatively lower total debt to equity reading, a marginally lower long-term debt to equity ratio and Eagle seems to be in a superior cash position, with higher quick and current ratios."
  • Mortgage Lenders and the Deflating Housing Bubble (Asif Suria in Seeking Alpha, Dec. 11th): "Looking into mortgage lenders as potential candidates for put options: Some mortgage lenders like Accredited Home Lenders (LEND) have lost close to half their value over the last year just like home builders. Countrywide Financial (CFC) has held up amazingly well in this housing downturn and was in fact close to its all time high last week until an analyst downgraded the company last week. Why? Apart from the fact that the company generates well over $2 billion in year in earnings and has a single digit current P/E of 9.23, there is also speculation that Bank of America (NYSE:BAC) may acquire Countrywide Financial... I expect further price declines in CFC as it faces a tough 2007. I believe the probability of [an acquisition by BAC] is slim."
  • Burst Bubble: Similarities Between Toll Brothers Today and the Nasdaq 100 Five Years Ago (William Trent in Seeking Alpha, Dec. 8th): "We saw significant differences between the run-up in housing prices in the early 2000’s and, for example, the late-90’s run-up in tech stocks. That’s not to say it wasn’t a bubble - simply that we weren’t confident enough to call it one. We did, however, see a similarity in company’s desire to call a quick end to the troubles... So if history is any guide, Toll Brothers may be going essentially nowhere for the next five years."

Commercial Real Estate and REITs

  • Buyout Fever Ignites US Real Estate Boom (Financial News-US, Dec. 13th): "Blackstone Group is seeking investors for a new property fund within weeks of announcing its record-breaking $36bn buyout of Equity Office Properties Trust, the largest US real estate investment trust. The EOPT deal involved Blackstone deploying the bulk of its last $5.5bn fund, which is only five months old... Even before Blackstone’s move, private equity-backed real estate deal volume was running at $58bn in 25 deals this year, quadruple last year’s $13.7bn. But the EOPT deal has raised eyebrows in terms of leverage, with only $3.2bn of equity supporting about $33bn of debt or quasi-debt. Accountant PwC: "There is still too much money in the marketplace and too favourable a view of the asset class."
  • European Exchanges To Offer REIT Indexes (, Dec. 13th): "The British and German stock exchanges said Tuesday that they planned to create indexes for real estate investment trusts next year to make it easier for investors to track the stocks... REITs have already been created in 19 countries, including the US, Japan, Hong Kong and France. The US is the largest market with 190 trusts, and at least 19 REIT indexes. The Bloomberg real estate investment trust index, a US index with 144 members, has gained 22 percent in the past six months, beating the 14 percent increase in the Standard & Poor's 500-stock index."
  • New Century: This REIT Yields Over 20% In A Cooling Housing Market (Carla Pasternak in Seeking Alpha, Dec. 12th): "A dominant player in the lucrative sub-prime mortgage market, New Century may continue to generate solid interest income and capital gains from its loan portfolio. Moreover, while the housing market is cooling, it's not crashing, and demand for sub-prime mortgages is widely expected to stabilize over the next few years... Like most mortgage REITs, New Century operates in a cyclical industry that's highly sensitive to changing economic conditions largely beyond its control. This stock is not for the faint of heart. That said, NEW could provide a solid income stream for risk-tolerant investors with a long-term orientation."
  • Citigroup Raises $2.1 Billion for Real Estate Funds (Bloomberg, Dec. 11th): "Citigroup Inc.'s property unit raised $2.1 billion for its first high-return real estate funds in Europe and North America, as the bank seeks fee income from managing investment alternatives to stocks and bonds... "Improving real estate fundamentals, shifting demographics and liquid capital markets are creating opportunities"... The North American fund plans to invest in shopping centers, offices and hotels and resort communities... Wall Street banks [are] raising record funds for global property investment. Morgan Stanley is raising $8 billion for what would be the largest real estate fund of its kind and Goldman Sachs is also approaching institutions for a new real estate fund."
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