Real Estate Sales and House Prices
- 2007 Looks Good For Town Real Estate Market (Darien Times, Jan. 18th): "Local realtor: 2006 was the third best year for house sales in history, [and his] company’s second best year with December being a “very active” month for moving houses priced at $2.5 million and above… Currently, there are 135 houses on the market in Darien… The average listing price:$2.842 million… Median price: $1.895 million. In 2006, the average listing and median prices were $1.927 million and $1.215 million, respectively. Average sale price [ASP] — of the 263 houses sold — was $1.657 million, down nearly 4% from 2005 when ASP was $1.696 million for the 345 houses sold."
- SoCal Home Price Data: $300K = Low Income Housing (Tim Iacono in Seeking Alpha, Jan. 18th): "Data Quick Market Tracker: December's real estate sales data for Southern California [indicates] sales volume continues to plunge, prices continue to flatten out right around the half million dollar mark. A half million dollars for an average home... After a few years, it all seems so normal now - a $300,000 home is what poor people live in, to get something nice you have to spend at least twice that amount, and million dollar homes? Not really a big deal anymore… "almost all, if not all, of those gains are here to stay."
- Despite Building Boom, W. Valley Feels Cooldown (AZ Central, Jan. 17th) Arizona: "Despite last year's softening market, the northwest Valley's growth fueled success at master-planned communities in Surprise and Peoria, and multifamily projects in Glendale's sports and entertainment district. A slew of upscale condominium, townhouse and apartment communities broke ground around Glendale's University of Phoenix Stadium, Westgate and Zanjero... Master-planned communities in the West Valley also expanded in 2006. Sales remained strong at Vistancia, Peoria's largest master-planned community."
- Bermuda Average Home Price Hits $1.6 million, Or $11,400 Per Month Financed (Housing Panic, Jan. 17th): "House prices in Bermuda will continue to soar as long as the expanding economy brings more home-buyers to the Island… Stuart Hayward, former member of the Sustainable Development Round Table : The average price of a stand-alone home on the Island hit $1.6 million… The average 30-year mortgage would cost a new home-owner $11,400 a month at current interest rates. It’s out of the reach of even the wealthiest among the middle class… It’s a testament to one aspect of development in Bermuda that’s just not sustainable."
- Buyers Scarce, Many Condos Are for Rent (NYTimes, Jan. 16th): "Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed. Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling… Banks have significantly scaled back loans to condominium builders, some demanding that developers sell half or more of the units in a building before beginning construction. Hundreds of developers are looking to the strong market for apartments, while waiting for today’s condo surplus to shrink."
Mortgates and Real Estate Lending
- US Housing Crash Continues (Patrick.net, Jan. 18th): "82% of recent San Francisco Bay Area loans are adjustable, not fixed… Even if rates are stable, nationally, about $3,000,000,000, in adjustable mortgages will adjust upward from the low initial rate to the current rate… Home equity loans draining equity from existing mortgages. Just like ARM's, these loans do not have fixed interest rates... House prices don't even have to fall to cause big losses. The cost of selling a house is 6%. On a $600,000 house, that's $36,000 lost even if prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less."
- Banks Sending More Default Notices (OC Register, Jan. 17th): "Lenders increased their consumer warnings in the final months of 2006 to Orange County homeowners who fell behind on mortgage payments… rising 88% for all of 2006. They sent 688 notices of default in December, marking the fifth consecutive monthly increase in such notices… The total is well below 1996's peak of 19,883 notices… Banks foreclosed on 121 homes in December, up 18.6 % from November and 290 % from a year ago… Default and foreclosure monthly totals are approaching levels seen in 1992, near the beginning of the last major downturn in housing."
- Bank Results Show Signs Of Credit Deterioration (Marketwatch, Jan. 17th): "Q4 results from several banks suggest the benign credit environment of recent years is deteriorating and could restrain future earnings…IndyMac Bancorp (NDE) announced a Q4 earnings miss because of increased costs from loan losses and delinquencies… Marshall & Ilsley (NYSE:MI) reported a jump in non-performing assets in Q4, while Bank of the Ozarks (NASDAQ:OZRK) reported a 69% increase in problem loans. US Bancorp (NYSE:USB) predicted an increase in retail loan charge-offs and commercial loan losses in coming quarters, and Wells Fargo (NYSE:WFC) said it expects net credit losses from wholesale banking to "modestly" increase in 2007."
- Mortgage Industry Pegs 30-Year Rate At 6.5% By Year-End (Inman News, Jan. 17th): "The Mortgage Bankers Association: 30-year fixed-rate mortgage to jump from 6.2 % to 6.5 % by Q3'07… Existing-home price appreciation to slow "significantly" over the next three years… Total residential mortgage production in 2007 is projected to be $2.39 trillion, a 5% decline from $2.51 trillion in 2006… Total mortgage originations will decline an additional 4% to $2.29 trillion in 2008 and drop another 6% to $2.15 trillion in 2009… Residential refinance loans are projected to total $1.06 trillion in 2007 before declining to $957 billion in 2008 and hitting $800 billion in 2009."
- Foreclosure Rates Up Big In December (CNNMoney, Jan. 17th): "Realty Trac: December foreclosure rates above the 100,000 mark for the fifth straight month. The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 % from November but up 35 % from December 2005… Adjustable-rate mortgages continue to drive the spike in foreclosures: many of these loans are due to reset in 2007, and many loans written in 2006 are performing less well than in previous years…A sustained increase in the number of foreclosures could accentuate the decline in the housing market, taking longer to work the inventory down."
- Bad Loans Hit Housing Lenders (Businessweek, Jan. 17th): "On a good day for homebuilder issues, shares of mortgage lenders fell as investors worry that bad loans are hitting that sector… Standard & Poor's analyst Stuart Plesser downgraded Countrywide to sell from hold on Jan. 17, citing the fact that about 9% of the bank's mortgage production is from subprime loans targeted at higher-risk borrowers. About 44% of Countrywide's loans are option ARM loans. These loans have performed well until now, but they haven't been stress-tested, by design. "We see such testing occurring sometime in '07…We are concerned about CFC's credit exposure."
- Congress Weighs Lifting Limit On FHA-Backed Reverse Mortgages (Inman News, Jan. 14th): "The Federal Housing Administration would be allowed to surpass a ceiling on the number of reverse mortgages it can insure under legislation passed by the House of Representatives this week… A bill sponsored by Utah Democrat Jim Matheson, HR 391, would waive the approaching cap of 275,000 reverse annuity mortgages the FHA is currently allowed to insure. Matheson said he plans to introduce legislation that permanently eliminates the cap, so that seniors who wish to take equity out of their homes for health care, medicine, home repairs and other needs may continue to do so."
Housing Affordability Impact
- Building Curbs Lift Housing Cost Here (Boston.com, Jan. 18th): " Wharton School Study: Boston and suburbs ranked second, behind Providence, among major US metropolitan areas' severe land-use restrictions on residential construction. Heavy regulation of residential construction by municipal zoning departments and elected officials is a popular tool to control growth, or preserve open space and historic structures. But restrictions can drive up housing prices by making it more difficult for developers to build projects… A major issue in Massachusetts… Costs hamper growth, working-class families have been priced out of the housing market, and the state is losing younger professionals to parts of the country where housing is cheaper."
- Rising Expenses Vs. Rent Control (Inman News, Letters To The Editor, Jan. 18th) Pennsylvania: "Expenses for owners have skyrocketed. Minor utilities such as water, sewer and trash used to be negligible, now they are a major expense. In some areas sewer used to be free; now it's $210 a quarter. Insurance and taxes both have skyrocketed since 9/11… And rental inspection fees are creeping in at hundreds of dollars per year per unit. I've been an owner now going on four decades and profit margins now are less than before... For the go-go years of 2000-2004, many good tenants became homeowners."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Total Housing Starts Up, But Single-Family Starts Down In December (National Ass'n Of Homebuilders, Jan. 18th): "Commerce Dept.: A 4.5% boost in total housing starts …to a seasonally adjusted annual rate of 1.642 million units, including condominiums and apartments… Single-family housing starts decreased 4.1% to a seasonally adjusted annual rate of 1.230 million units, 24.7 % below the pace of '05 as builders reduced their inventories… Regionally: Construction of new homes and apartments rose 25.6 % in the Northeast, 1.8 % in the Midwest and 12.4 % in the West, and declined in the South by 2.0 % over the month. Three of the four regions reported a [substantially] lower y/o/y pace of construction."
- Surveyors Warn Housing Market Is Cooling Down (The Guardian, Jan. 16th): "Royal Institution of Chartered Surveyors: The housing market had begun to cool before last week's surprise interest rate rise to a five-and-a-half year high of 5.25%, and will be further squeezed by the Bank of England's latest move. The RICS monthly report says house prices rose in December, but at the slowest pace since August. In raising rates, the Bank mentioned the strength of credit growth as key - a reference to record levels of mortgage lending. The central bank is clearly concerned that annual house price inflation is back up at 10%."
- Massive Over-Supply Of Homes. Record Dropoff In Demand. Yet Builders Think They Won't Get Hurt. Yeah, Right. (Housing Panic, Jan. 15th): "The California Building Industry Association says it is a $70B dollar industry and it employs about half a million people in the state… The buying and selling frenzy in the California housing market is over, but the state's building industry says construction is still booming and just not in home building… With more homes on the market, there's less of a need for homebuilders. But they're finding their skills transfer easily to other construction jobs and predictions are builders could be very busy in the next year building office complexes and shopping centers."
Homebuilders And Housing Stocks
- A Long-Term Look At Market Sentiment: 2001 And On (Jeff Miller in Seeking Alpha, Jan. 18th): "Real estate seemed more attractive [since 2001] to the average investor because: 1. They knew property could not go to zero the way some of their stocks had done. 2. They heard stories of big success. 3. New financing alternatives made it easier to invest money -- even IRA money -- in real estate. Real estate became a new asset class to compete with stocks and bonds, largely because of perceived value and liquidity… The effect was to draw the average investor out of stocks and into a larger real estate commitment... Most of them have not returned."
Building Related Industries
- Abitibi: Ugly Paper Duckling Can Become a Swan (Vincent Di Carmine in Seeking Alpha, Jan. 18th): "ABY's paper mills have been suffering from anti-dumping duties (most of them refunded in December), a strong Canadian Dollar and from U.S. housing slump. In October, the company shut down 20% of their timber capacity and closed four sawmills, laying off 380 workers. Current EBITDA contribution will be improved when the housing industry recovers but we don't think that, contrary to their newsprint business, they have any special cost advantage."
- Housing Slump Spurs Building-Products Layoffs (Washington Post, Jan. 18th):
"This month, Black & Decker (BDK) said it was cutting 160 positions at two power tool plants in Tennessee… on top of 70 jobs cut last year by the maker of saws and drills used by homebuilders and contractors. Masco Corp (NYSE:MAS), a maker of paint, faucets and other building products, laid off workers in its retail cabinet division in January… Andersen Corp., a private supplier of wood windows and patio doors, released 440 workers on January 2… Window & Door Manufacturers Association: Housing is going to spring back… remodeling activity would help offset some of the decline in housing starts."
- Carlyle Boosts Bid For Roofing Company (Washington Business Journal, Jan. 17th): The Carlyle Group has boosted its offer for roofing company ElkCorp to more than $1 billion, topping a competing bit by Building Materials Corporation of America. ElkCorp's board has approved the amended offer from Carlyle, urging shareholders reject Building Materials' offer. Carlyle offered $38/share on Dec. 18 for ELK, topping a previous $35/share bid from Building Materials. On Jan. 8, Building Materials topped Carlyle with a $40 per share offer. Carlyle's amended bid would pay $40.50 per share for ElkCorp, valuing the company at about $1.05 billion, including debt assumption. ELK shares have gained 61% since November."
- Lumber Costs Fall; Other Building Materials Rise (Wichita Eagle, Jan. 16th) Kansas: "The price of lumber is down about 10 % from this time last year... Lumber has fallen since its high several years ago. "You have a certain number of lumber mills and capacity, and when you have high, high demand, it will put a lot of pressure on those mills," said Stan Longhofer, director of the Center for Real Estate at Wichita State University. "And as it cools, prices ease." … But it does mean a lessening of cost pressure on home builders."
- Building Costs Forecast To Stay High For A While (Builder Online, Jan. 16th): "Associated General Contractors of America: Materials costs are going to remain elevated... Copper prices have dropped 40 % from May's peak to about $5,800 per metric ton. Some steel products are lower because of lower costs for the energy used to make them… except stainless steel, which contains costly nickel. Expect price increases for stainless steel, and possibly shortages… Plastics have leveled out after hurricane-related shortages in 2005… Cement is more plentiful after a tax on imported Mexican cement was lowered last year to $3 from $26 per metric ton and China tripled its cement exports to the United States… Labor is expensive and in short supply."
Commercial Real Estate and REITs
- The Mills Saga Is Not Over (Shlomo Greenberg in Seeking Alpha, Jan. 19th): "Real estate trust fund Mills Corp. appears to be subject to a never-ending string of twists in plot. As of yesterday, I was certain that Israeli real estate company Gazit-Globe would finally wrap up its takeover of this veteran New Jersey company, with all its income-producing properties and projects in the pipeline, which would not have been an acquisition target were it not for its poor management team. But these are often a boon for future good management and this why the competition for Mills was intense."
- WCI Communities: Icahn Increases Stake To 14.57% (Seeking Alpha, Jan. 18th): "In a 13D filing last Friday on WCI Communities, (WCI), Carl Icahn disclosed a 14.57% stake (6.1 million shares) in the company. This is up from the 1.66 million shares Icahn disclosed in its latest quarterly filing. In the filing, Icahn said he intends to contact the Company with a view to having a series of discussions regarding the business and prospects of the Company and seeking the Company's views on how to unlock the inherent value of the Shares. Shares of WCI Communities were 8% to $22.72 in early action Tuesday… Mega hedge-fund SAC Capital recently disclosed a 6.5% stake in WCI."
- South Florida Commercial Real Estate Firm Launches Lodging & Hospitality Group (Hotel & Motel Management, Jan. 18th): "Colliers Abood Wood-Fay launched the Lodging & Hospitality Group specializing in hospitality real estate… “We identified hospitality real estate to be an under-serviced niche…" Colliers Abood Wood-Fay is a South Florida commercial real estate firm with more than $600 million in listings for sale, leasing and management of more than 4.5 million square feet, and 2005 transactions in excess of $1.4 billion. Colliers International is one of the top three commercial real estate firms in the world, with $1.55 billion in annual revenue; and more than 595 million square feet under management."
- Rivals Offer $38 Billion For A REIT (NYTimes, Jan. 18th): The battle for Equity Office pits some of the most powerful and colorful financiers against each other. Stephen A. Schwarzman controls Blackstone, one of the largest, private equity firms in the nation…The rival group includes Steven Roth of Vornado, once the king of New Jersey strip malls; Barry Sternlicht of Starwood Capital and Neil Bluhm, a Chicago real estate mogul who backed Barack Obama's successful Senate run…The rival bid for Equity is being financed in part by JPMorgan Chase, Lehman Brothers and UBS. JPMorgan’s involvement has raised some eyebrows on Wall Street because of its long ties with Blackstone."
- REIT Takeovers Rock On (Forbes, Jan. 18th): "Two high-velocity merger offers, worth a combined $46.5 billion, rocked the public real estate markets on Jan. 17… Canadian conglomerate Brookfield Asset Management (NYSE:BAM) agreed to buy troubled Mills Corp. (MLS) for $7.5 billion, including more than $6 billion in debt and preferred stock and $21 per share in cash, or $1.35 billion… Vornado Realty Trust (NYSE:VNO) and a consortium of private investors mounted a $52/share rival bid for Equity Office Properties (EOP) to the Blackstone Group's November $48.50/share bid. If VNO is successful, the outcome would have two significant implications for REIT investors: Keeping 50% of EOP's huge portfolio, including many trophy assets, in the public markets, and making VNO the largest office REIT in the country."
- Wells REIT Extends Cinemark HQ Lease in Suburban Dallas (Dallas Business News, Jan. 17th): "Wells Real Estate Investment Trust today announced that theatre operator Cinemark will add more than 9,000 square feet and extend its lease through July 2017. Cinemark currently occupies 66,000 Sq.ft. in Plano. Cinemark developed the midrise Class-A building as its headquarters and sold it to Wells REIT in 1999… Wells REIT is a public, nontraded REIT specializing in Class-A office properties… owns 85 buildings in 24 states totaling approximately $4.5 billion and covering more than 21 million square feet. Collectively, these programs own more than $8 billion in assets totaling approximately 39 million square feet of space."
- Vornado Realty Trust Offers To Buy Equity Office Properties Trust For $52 Per Share In Cash And Stock (Trading Markets, Jan. 17th): "In December, brokerage Lehman Brothers reiterated its Neutral sector view on REITs. In a modest return environment in 2007, analyst David Harris believes REITs will provide returns that are competitive with general equities. That said, the analyst believes investor enthusiasm for property will remain positive and believes the companies' earnings growth could exceed the overall market. Segment-wise, the brokerage presented a positive view of offices and named Vornado among its favorite office companies. Conclusively, however, Lehman Brothers remains cautious about the valuation/risks of apartment companies and overseas industrial developers."
- Delaware Investments to Offer New Global Real Estate Securities Portfolio (Yahoo Finance, Jan. 17th): "Delaware Investments has launched the Delaware Pooled Trust (DPT) Global Real Estate Securities Portfolio (MUTF:DGROX). With a $1 million aggregate minimum initial investment required, the portfolio was created specifically for institutional investors and high-net-worth individuals seeking to diversify their equity holdings by adding exposure to real estate related securities and foreign markets. DGROX will seek to capitalize on opportunities brought about by the globalization of real estate investing, including increased real estate securitization, recent real estate investment trust (REIT) legislation in foreign countries, and greater transparency of these securities to investors."
- Fitch Rates ING Clarion Global Real Estate Income Fund Pfd Shares 'AAA' (Business Wire, Jan. 17th): "Fitch Rates ING Clarion Global Real Estate Income Fund's (NYSE:IGR) 4,000 auction market preferred shares (NYSEARCA:AMPS) Series TH and 4,000 AMPS Series F 'AAA'. The ratings are based on asset coverage and preferred share basic maintenance amount tests, as well as the quality and experience of the asset manager… The additional issuance of series TH and Series F results in total AMPS of $910,000,000, increasing the funds leverage to approximately 28.3% from 23.6%... ING Clarion Global Real Estate Income Fund is a closed-end management investment company investing primarily in a portfolio of income-producing real estate securities, including REITs."
|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.