Real Estate Sales and House Prices
- LI's '07 Economy Likely To Be Dèja Vu (Newsday. Com, Jan. 15th): "Long Island, NY: "The price of homes on the Island has cooled and isn't likely to warm up in 2007, although the worst of the housing slump may be over, according to the experts. The median price for houses in Suffolk was virtually flat: $395,000 in November, compared to $390,000 a year earlier. In Nassau, the median was $485,000, compared to $490,000 in November 2005. Additionally, residential housing inventory has risen to 13,313 homes in Suffolk from 9,847 a year ago. In Nassau the number of houses on the market jumped to 9,457 from 6,786."
- Forecasting The Future (The Reporter.com, Jan. 14th) California: "UCLA Forecaster Ed Leamer: "Price appreciation probably between 2-3%, anywhere from another 1-5 years… Robert Kleinhenz, Economist, California Association of Realtors "[No] huge deterioration in home prices, expect some small declines." Drew Kusnick, KB Home South Bay: Optimistic about 2007. The past six weeks have been profitable and he's able to raise prices on new homes after six months of cutting them. Payam Zamani, CEO, Reply!: 2006 saw a slowdown of sales, no slowdown in consumer demand… in '06 Web site rose from 50,000 to 80,000 consumers per month."No market uptick in 2007, it's still too early."
- Apartment, Art in Itself, Hits Market for First Time Since 1920s (NYTimes, Jan. 14th): "Since 1020 Fifth Avenue opened in 1925, the Kress family has lived in the duplex apartment on the top two floors of the building. [It] has 17 rooms, with five bedrooms, six baths, a grand salon and solarium, as well as large roof terraces… the asking price: in excess of $50 million, which if reached would challenge the records for the highest price of a prewar Manhattan co-op apartment. Local broker: “It is a unique, one-of-a-kind penthouse, with a remarkable provenance, and it is this category of property that has been fetching record prices in the last year."
- Sunday Real Estate Roundup (Luxist.com, Jan. 14th): "San Francisco Chronicle: Andy Warhol's estate Eothen has been sold to Millard Drexler, CEO of clothing retailer J. Crew. The exact price hasn't been given but it is said to be well below the $50 million asking price and could be below the $30 million mark. NY Observer's Manhattan Transfers: Philanthropist Loida Lewis has put her ninth- and 10th-floor duplex at 834 Fifth Avenue on the market for $45 million. The home has four wood-burning fireplaces, a "restaurant kitchen" and "breakfast room" and a one-bedroom "mezzanine" apartment between the ninth and 10th floors."
- Housing Prices Expected to Fall (Morning News, Jan. 13th) Northwest Arkansas: "Washington County reported the first decline in average home prices in Northwest Arkansas after 11 months of price increases despite oversupply and sagging sales. Kathy Deck, Director, Business and Economic Development Center at the University of Arkansas: "The market must continue to work through the oversupply that has been building for the past two years. We simply can't absorb all the product available and soon to come through the pipeline overnight. Inventory surplus rose by 22% from the year before. Oversupply will put additional downward pressure on prices with single digit declines lasting through 2007 and into 2008."
- Economist: Real Estate Slump Only Temporary (In Business Las Vegas, Jan. 12th): "Local economist Keith Schwer: Nevada's economy will see slower growth, a continued housing slowdown, and more increases in the cost of living… the real estate market slump [to last] only a year: 2007 and 2008 would be good years for the Nevada economy despite a residential real estate slump… 40% fewer housing permits in 2007, as a glutted market corrects itself. About 20,000 units will be approved in 2007, 10,000 fewer than in 2006… But in 2008 the excess housing stock will be scooped up by new residents and investors and more permits will be approved in 2008."
- Housing Prices Hit All-Time High (Denver Business Journal, Jan. 12th): "The cost of buying a home in the metro Denver area last year was at an all-time high despite record numbers of foreclosures. Figures released Friday by the Colorado Association of Realtors [CAR] show the median price of a single-family home in 2006 was $251,780, a modest increase of 2 percent over the median price in 2005. Compare that with the median price of a single-family home sold in 1975, the first year CAR started keeping statistics: $36,601."
- Hawaii's Housing Boom Takes Toll On The Homeless (Post Gazette.com, Jan. 11th): "In Hawaii… land costs are more than five times the national average. In recent years, investors and second-home buyers swooped in to buy up properties. Developers converted aging apartment complexes into swank condos and luxury rentals… Rental rates for available units surged... Median rents are the highest in the nation. The going monthly rate for a typical two-bedroom apartment is about $1,901, up $792, or 71 percent, from 2001… Hawaii's economy is robust. In 2005, the hot real-estate market, coupled with record tourism business, helped Hawaii rank as the ninth strongest state economy."
Real Estate Investing and Sentiment
- Northern Virginia Buyer Wonders If Now Is The Time To Buy (Realty Times, Jan. 15th) Northern Virginia: "Sooner or later, someone else is going to step in and buy that house you say you want. They'll pay more than you're willing to pay. It's people like that who will turn the market around. You'll wish you had acted sooner. It may be happening already. Many economic indicators point to a rebound in housing. Just last week, the volume of mortgage applications rose 16.6 percent higher than the week before, according to the Mortgage Bankers Association. This is only one number, but it suggests buyers are preparing to buy."
- Realtors To Push Housing In TV, Radio, Print Ads (Palm Beach Post, Jan. 15th): " A $40 million ad blitz by the National Association of Realtors starts today, targeting home buyers, home sellers, FSBOs (For-Sale-By-Owners), commercial real estate owners and Realtors. The gigantic trade group is determined to convince everyone it's a good time to buy, a good time to sell, and a good time to hire a Realtor if you want to do either… The FSBO ads say, "Two-thirds of For-Sale-By-Owners would use a Realtor next time. The other third swear to never, ever move again."
- Homeowners Challenge Whopping Assessments (The Capital, Jan. 14th) Maryland: "The average property assessment statewide will go up 18.7% a year over the next three years, a 55.5% increase by 2009. The increase is less than last year's record of 20.1%… Last year, the median price for county homes dropped 3.5% to $337,500. Home sales also fell by 20% in 2006. Local resident: "Maryland is a good place to live if you don't work for a living. The county tax will go up 2%, the state tax will go up 10% every year for the rest of my life until the day I die."
- Welcome Mat Is Still Out In Mexico (Herald Net, Jan. 14th): "GMAC International Mortgage recently announced a 30-year, fixed-rate mortgage for Americans buying property in Mexico in addition to a "stated income" or limited documentation option for a slightly higher interest rate. Both components also are available to borrowers for "cash-back" refinances, allowing customers to pull out up to 50 percent of the cash value of their primary residence or second home in Mexico. The cash-back ratio will be increased to 70 percent in January… Borrowers can often get a home equity loan with a lower interest rate on their home in the States. But if they don't have that equity in their U.S. home, they are finding that their Mexican home often has appreciated and can look to those funds via refinance."
Mortgates and Real Estate Lending
- If You Don't Have Liquidity, You're Gone (HousingBubbleBlog, Jan. 15th): "Clear Choice Financial Inc. announced Friday that it is insolvent, has laid off 120 of its 150 workers nationwide, and closed its mortgage-lending subsidiary, Bay Capital… At least two more midsized subprime firms, both non-depositories, hurt by buybacks, are considering selling their shops. (One, we’re told, is owned by a large publicly traded company.)… Clayton Holdings advising on $7 billion in loan buybacks and an article by Brian Collins on Congress holding hearings on the subprime industry and foreclosure… There are a ton of subprime industry account executives looking for work."
- Home-Loan House Of Cards Ready To Fall (Contrarian Chronicles, MSN Money, Jan. 15th): "An update on the deterioration, from two very knowledgeable friends. One of them, a former top executive at a subprime lender (whose chronicling of the unwind has been amazingly accurate and timely), told me that large companies like New Century Financial (NEW), Accredited Home Lenders (LEND) and NovaStar Financial (NFI) will, in his words, "hit the wall" very soon… Stated-income loans are now finished for all the unemployed people around. We will quickly see cash-out loans curtailed…We are in the second inning of the unwinding."
- High-Risk Lenders May Face Lawsuits (Providence Journal, Jan. 14th): "Advocacy groups say that as delinquencies and foreclosures mount, so too will lawsuits against lenders… John Taylor, the chief executive of the National Community Reinvestment Coalition, an advocacy group for low-income borrowers: "I think a class action is coming." Taylor contends that lenders have marketed their riskiest loans to low-income borrowers in violation of so-called fair-lending laws, which require that a loan be made only when there is a substantial likelihood of repayment."
- Good Employment Report Lifts Mortgage Rates and Eases Fears About National Economy (Realty Times, Jan. 12th): "Freddie Mac: Jan. 12th weekly Primary Mortgage Market Survey: The 30-year fixed-rate mortgage [FRM] averaged 6.21%, up from last week's 6.18%. The Jan. '06 30-year FRM averaged 6.15%…"December's employment report came in higher than expected, but stronger employment and higher wages put upward pressure on inflation, which translates into higher interest rates. "We expect rates on 30-year fixed-rate mortgages to remain below 6.5 percent in the coming year, and the adjustable rate mortgage [ARM] share of home purchase mortgages in 2007 will fall below 20% for the first time since 2003."
- Pricing Error on Mortgages Led to Lender's Collapse (Bloomberg, Jan. 12th): "Mortgage Lenders Network, a provider of home loans to people with poor credit, said "human error'' caused it to lend $600 million at below-market rates, fueling losses that led to the closure of its biggest unit. The mistake cost MLN about $20 million at a time when a slowdown in the mortgage market was eroding the value of another $2 billion in loans the company planned to sell... Securities firms and investors that buy such mortgages bonds have reduced the premium they're willing to pay and in some cases are offering less than even the face-value of the loans."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Housing Bubble Bloodbath (Atlantic Free Press, Jan. 14th): "From Michael Hudson’s “The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse”: "This real estate bubble has lured homebuyers into circumstances detrimental to their own best interests. The bait is easy money. The trap is a lifetime spent working to pay off debt on an asset of rapidly dwindling value… Debt serfdom: Homeowners who bought at the top now face decades of payments on houses that soon will be worth less than they paid for them… while the mortgage remains the same or even increases. Eventually, the house price falls into a state of negative equity."
- Why A Bad Real Estate Market Isn't Good (New York Post, Jan. 14th): "Let's say prices are 30% higher than they should be… A 30% drop in value would wipe out a whole lot of wealth. The drop in wealth could force homeowners to [foreclose and] turn their homes over to the mortgage holders, and most mortgages these days have probably been packaged into securities that have been sold to investors by Wall Street. Those many investors would suffer. And that doesn't even take into account the realtors, electricians, plumbers, furniture makers and a whole host of others who'd be hurt by a big housing downturn."
- Expert: Worst To Come (Press Enterprise, Jan. 12th): "Christopher Thornberg, a former senior economist with the UCLA Anderson Forecast and founder of Beacon Economics, warned that the housing slowdown has appeared slower and less daunting than it really is, because it takes a while for home prices to drop. "This isn't going to hit bottom in 2007. This is going to be a mess for quite a while," he said. As a result Thornberg said construction-related jobs should feel a bigger pinch and the Inland Empire's employment growth should slow."
Global Issues And The Housing Slump
- Countrywide Delays Shareholder Vote On 3i's Offer (Bloomberg, Jan. 15th): "Countrywide Plc, the U.K.'s largest residential real estate broker, delayed a shareholder vote on 3i Group Plc's 1.02 billion pound ($2 billion) takeover bid after some investors said the offer is too low… Three investors owning about 16.5 percent of Countrywide said this month that 3i's offer doesn't reflect the U.K.'s booming housing market. Higher borrowing costs may put a brake on the market, according to some lenders. House prices fell in December for the first time in six months, according to HBOS Plc, the U.K.'s largest mortgage provider."
- London Prime Home Prices Have Biggest Gain Since 1979 (Bloomberg, Jan. 15th): "The prices of London's most expensive homes rose last year at the fastest pace since 1979, as bankers receiving record ($16.8 billion) bonuses competed for a limited supply of properties. Prices of prime properties in the U.K. capital increased for the year to 28.6%. London house prices rose at the fastest annual pace in at least four years last month, pushing the average asking price to 355,097 pounds… London is the most expensive city in the world for prime real estate. Prices in neighborhoods such as Chelsea and Hampstead averaged $2,244 a square foot in Q2. Manhattan homes on Fifth Avenue, Park Avenue and Madison Avenue near Central Park -- cost about $1,870 a square foot."
- Bank Of England Kicks The UK Housing Ladder; Massive UK Housing Ponzi Scheme Will Now Begin To Collapse (Housing Panic, Jan. 13th): "Here in London, where a (my) one bedroom flat goes for over $1,000,000 (worthless US dollars), yet you can rent for a fraction of ownership cost, the massive speculation (aka "housing ladder") will now be coming to an end as interest rates rise yet again. Meanwhile, real people in real parts of England are going to now head for the foreclosure and bankruptcy lines, as home loans here are of the adjustable type, so everyone had their mortgage payments go up yet again."
- Real Estate Bubbles: How Worried Should We Be? (International Herald Tribune, Jan. 12th): "Overheated markets have prompted warnings of property price bubbles in areas as far-flung as Australia and Spain, Hong Kong and Ireland, as well as the United States, which is still the engine of global growth… Loose credit terms has encouraged consumers to buy bigger properties than they can afford, in London, or in newly hot second-home markets like Spain or Croatia, where resale values are fragile. Property markets have already begun to cool sharply in parts of Ireland [and] Australia. "Weaker U.S. growth due to a deteriorating housing market leads to worsening prospects for Europe as well."
Homebuilders And Housing Stocks
- Home Builders Say Orders Hurt By Buyer Cancellations (Housing Zone.com, Jan. 15th): "D.R. Horton's sales orders declined 23% from Q1'06. The drop comes as home builders, facing higher buyer cancellations offer more inducements to sell houses. Meritage Homes Corp. said quarterly net sales orders fell 42%. Cancellations rose to a record 48%. JMP Securities downgraded shares of Brookfield Homes Corp. (BHS) to sell from market perform. JMP: "While some might interpret this increase in orders to indicate a market rebound, in our view, it is more reflective of the company's aggressive discounting to close standing inventory and an easy comparison from a year ago."
- Aversion To U.S. Stocks Among Mutual Fund Investors Seen Ending (Lower Hudson Journal News, Jan. 14th): "U.S. investors last year put the least money into domestic stock funds in a rising market since 1989…BB&T Asset Management: "That's an encouraging sign. Investors' reticence to dive into equities implies there's plenty of cash available to fuel gains. The typical retail investor has largely sat out this bull market… A U.S. real estate slump may persuade investors to return to equities as property values erode. Funds that invest in U.S. equities were on a pace to attract $14.7 billion of new cash for 2006."
- Bankrupt Kara Homes Seeks to Borrow $5 Million To Finish Construction Projects (Builder Online, Jan. 11th): "Bankrupt builder Kara Homes Inc. wants to borrow $5 million from a hedge fund, Plainfield Special Situations Master, to stay afloat and finish the construction of homes that are close to completion… East Brunswick-based Kara filed for Chapter 11 in October, saying the real estate market downturn prevented it from paying its debts. Kara reported $350 million in assets and $227 million in liabilities. If approved, the loan will be the second that Kara Homes has received since it filed for bankruptcy. In early December, Kara took a $2.6 million loan from investment bank Bear Stearns."
Commercial Real Estate and REITs
- GE Real Estate Completes $2.2B Acquisition Of 147 Assets From Crow Holdings (PR Newswire, Jan. 15th): "GE Real Estate [GE] announced today the completion of its acquisition of a portfolio comprising 147 assets from Crow Holdings' third real estate fund, Crow Holdings Realty Partners III, L.P. for $2.2 Billion. The diversified portfolio is comprised of 112 industrial buildings, 19 retail centers, 8 multi-family properties, 6 hotels and 2 office buildings. The properties are geographically dispersed across the US. As previously announced, Kimco Realty Corporation (NYSE:KIM) purchased the 19 retail centers in connection with this transaction for approximately $920 million."
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