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
- Analyst Sees '07 Hurt By Housing (Winston Salem Journal, Jan. 24th): "Senior economist for Wachovia: "The Winston-Salem and state economies will grow in 2007, but a cooling housing market and moderating consumer spending are going to slow the pace… The U.S. housing market is about halfway through a price correction… to be completed this year. He expects that some housing developers, including potentially in North Carolina, could have to discount some of their properties to clear inventory… Housing markets in the Triad and North Carolina should not feel a major pinch from the correction because prices didn't jump as high as in some major urban areas."
- Massachusetts Housing Prices Drop For First Time In 13 Years (Eagle Tribune, Jan. 23rd): "Boston-based Warren Group real estate date tracker: "Massachusetts' housing market had its worst year in more than a decade, with sales and the median price for single-family homes dropping to levels not seen since the mid-1990s… The median price - the point where half of homes sell for more and half sell for less - dropped 5.8%, from $345,000 in 2005 to $325,000 last year. That price had grown 12 straight years, beginning in 1994."
- Housing Market A Bust Despite Boom Conditions (Journal News, Jan. 22nd): "Building permits for new single-family homes down 9 % across Butler County cities. Through September, the number of permits issued was down by a third in the townships… Maronda Homes Cincinnati VP: "I've never seen a market like this, we've still got interest rates in the fives, unemployment is low and inflation is in check. Everything is in place for a boom market, but it's not." Inventory levels have started to go down, but… the overage slowed building and sales and caused prices to drop… Sale prices were down about half a % through November compared to 2005."
- An Oversupply Of Units Has Held Down Prices Locally (Sacramento Bee, Jan. 19th): "RealFacts, an apartment industry tracker: Sacramento-area rents rose by only 2.3 % in 2006, compared with much larger hikes across the rest of California… Renters of 77,500 apartments in El Dorado, Placer, Sacramento and Yolo counties paid average rents ranging from $700 for a studio to $1,355 for a three-bedroom two-bath unit in 2006… Capital-area rents have increased just 9 % over the past four years… Analysts say rents have been held down by continuing oversupply of rental units after years of new apartment construction. Add to it the growing number of unsold single-family homes now available to rent."
Real Estate Investing and Sentiment
- No Shortage Of Home Buyers In Niche Vero Beach Market (TC Palm Local, Jan. 24th) Florida: "The Treasure Coast's housing market has suffered from a slump lately, but backers of a $14 million oceanfront home are gambling it sells fast... Watermark Commercial: "We're marketing this property to big-time stock brokers in New York who just got a $30 million bonus. This type of affluent demographic is more insulated to local market trends… Celebrities are looking to the Treasure Coast for second homes because of increased crime and traffic in other Florida hotspots such as Miami and West Palm Beach… These properties sell, but they only appeal to one-tenth of 1% of the population."
- Real Estate Investors.TV Opens to Public (Yahoo! Finance, Jan. 23rd): "More Than $2 Billion Is Spent Annually In The U.S. On Real Estate Investment Education... House Buyer Network's Real Estate Investors TV was launched in North America. REI.TV is based on principle [of] making top-tier real estate investment education available anywhere, anytime at a very affordable price… [Offers information] on investment basics to more advanced topics like 1031 exchanges, asset protection and wholesaling… Among the experts already providing educational material are RealtyTrac, the nation's third largest real estate site, and the Georgia Real Estate Investors Association."
- New Money Magazine Story Slamming Realtors Raises Questions (Yahoo Real Estate, Jan. 22nd): "With the government, third-parties, consumer groups and the financial press conspiring together to push real estate commission fees downward, there's an unintended consequence that these groups hadn't counted on. With many areas declaring a buyer's market, homes are harder to sell, and when that happens, sellers are willing to pay more in commission incentives. However, the financial press is wasting no time in making higher incentives to buyer's agents look disreputable."
- When Housing Up 4.5% Is Really Down 4.1% (Goldseek, Jan. 21st): "The demand for housing is falling and sub-prime mortgages are harder to get. But people have to live somewhere. The population is growing and the demand for a place to live will rise… The demand will be in rental units… Rising prices? Increased demand? Money is cheap and willing to take lower returns? There are a lot of construction firms that I bet are willing to put in lower bids as new home construction is down. There is a need to keep your employees working. That sounds like a recipe for a lot of people to decide to start building apartments."
Mortgates, Lending And The Impact On Banking
- Wachovia's Annual Income Up 17% (Jacksonville Business Journal, Jan. 23rd): "Most of the asset growth in the quarter came from the purchase of Golden West... Some analysts are concerned that the deal could make Wachovia more vulnerable to a slowing housing market and loan losses because Golden West is heavily focused on adjustable-rate mortgages. CEO Thompson said that the bank is comfortable with the integration of the option adjustable-rate mortgage product from Golden West into Wachovia's mortgage offerings… and a trend toward tightening disclosure regulations regarding option ARMs should benefit Wachovia in the long term."
- A Costly Foreclosure At HomeBanc (Michelle Leder in Seeking Alpha, Jan. 23rd): "Struggling mortgage lender HomeBanc (HMB) finally evicted long-time CEO Pat Flood last week. HomeBanc suffering from falling originations and liquidity issues arising from its REIT status, has seen its stock fall over 50% from its July IPO price… According to its 8-K filing, Flood will receive… a cash severance payment [worth] a total of $4.5 million for essentially chewing up half of HomeBanc’s total capital in just two and a half years. Ironically… Fortune had just written: "When lender HomeBanc had to lay off 60 people, annual bonuses to top execs were the first thing to go."
- Central Pacific Financial Corp. Reports Fourth Quarter Net Income Of $18.8 Million (PR Newswire, Jan. 23rd): "…Other operating income totaled $9.5 million for Q4'06, compared to $11.5 million in Q4'05 and $10.5 million in Q3'06. The decrease from the prior periods was primarily due to the $1.5 million loss recognized on the previously announced investment portfolio repositioning in Q4'06. The comparison to Q4'05 also reflects declines in residential loan sale activity. Mortgage origination activity for Q4'06 increased by 23% compared to Q3'06 but reflected a 37% decline from Q4'05."
- Does Capital One Deserve Valuation Multiple of Bigger Banks? (Christopher Whalen in Seeking Alpha, Jan. 23rd): "Archie MacAllaster recommended Capital One Financial in Barron's this week: "It deserves the 12 P/E of banks." But Scott Black [also in Barron's] called COF "an accident waiting to happen" because of the high proportion of subprime loans… We side with Black, not just because the subprime real estate market's melting down, but because the subprime loan business does not deserve the same multiple as other banks, in any economic environment. If you are going to peer COF with larger bank holding companies, the best choices… would be C and HBC, both [with] large subprime lending portfolios and, as a result, lower PE multiples than less risky franchises like BAC or WB."
- Revolutionary Mortgage Products And Services Are Changing The Real Estate Financing Market In Mexico (Prime Newswire, Jan. 23rd): "Carefree Mortgage and Real Estate Title have formed a partnership using software systems to make financing [easier] in Mexico… Ray Desmond of Carefree Mortgage: "So borrowers can have the same experience in Mexico as… in the U.S…" Carefree offers loan programs never before available in the Mexican market. With a loan to value maximum of 80%, borrowers are able to refinance with no out of pocket closing costs, because Carefree rolls closing costs into the financing. Carefree is also able to offer loan programs including a 3, 5, 7 and 10-Year ARM and a 30-Year Fixed."
- HMN Financial, Inc. Announces Fourth Quarter Results (American Digital Networks, Jan. 23rd): "Net income of $2.7 million, down $807,000, or 23.2%, from Q4'05… Provisions for loan losses up $6.2 million, or 232.0%, over 2005. The provision for loan losses was $1.4 million for Q4'06, an increase of $1.2 million, or 658.1%, from $179,000 for Q4'05. The provision for loan losses increased primarily because an $825,000 specific loan loss reserve was established on a home equity loan that was classified as nonperforming in Q4'06. The reserved amount was based on an updated appraisal of the value of the property securing the loan and subsequently the Bank foreclosed on the property."
- Kentucky Rates High In Foreclosures (Lexington Herald, Jan. 22nd): "Kentucky's mortgage foreclosure rate is the fifth highest in the nation… Kentucky Mortgage Banker's Association: "The state's economy is "the true driving force" behind the delinquency rate, but there are other factors like aggressive lending practices in Kentucky, involving so-called sub-prime loans… We have seen numerous sub-prime companies literally close -- companies that were buying loans from brokers and banks. They shut their doors because they had gotten a little bit too broad on what they were allowing to come in the door, and their delinquency rates are hitting them."
- Lawmakers To Tackle Foreclosures (Denver Daily News, Jan. 21st): "With Colorado leading the nation in foreclosures, state lawmakers want to do more to prevent people from losing their homes, and to crack down on those defrauding lenders by borrowing money based on trumped-up property values. They’re also considering everything from educating consumers about loans and passing guidelines for nontraditional mortgages to going after misleading advertisements and requiring mortgage brokers to be licensed… Members of the House and Senate business committees plan to meet with mortgage lenders, banks, Colorado Attorney General John Suthers and an FBI agent to discuss the problems."
Global Investing And The Housing Slump
- Mitsui Fudosan America, Inc. Enters Joint Venture With Developer Akridge On Downtown D.C. Project (PR Newswire, Jan. 22nd): "Mitsui Fudosan America (NYSE:MFA), the U.S. subsidiary of Japan's largest real estate company, Mitsui Fudosan, today announced the formation of a joint venture with Akridge, a comprehensive real estate services firm… Under the terms of the agreement, MFA will acquire a substantial stake in the planned 12-story, 300,000 square foot office building to be constructed at 700 Sixth Street in downtown Washington, D.C... The Akridge Office Fund will also be an equity investor in the development."
- Cemex Extends $11.7 Billion Takeover Bid For Rinker (Bloomberg, Jan. 23rd): "Cemex SA, the world's third-largest cement maker, extended its $11.7 billion hostile takeover bid for Australia's building materials Rinker Group by two months while it waits for U.S. regulatory approval. Cemex wants to buy Rinker because of its business in the U.S., which is focused on Florida, Arizona and Nevada, the fastest-growing states. Cemex Chairman Lorenzo Zambrano: The offer is "compelling''. Rinker: It's 36 % too low… Goldman Sachs: "The longer the process drags out, the more it plays into Rinker's hands in that the worst of the downturn in the Florida housing market may be in the past."
- Industry Players Join to Launch New India Company (Black Enterprise.com, Jan. 23rd): "Beekman Helix India Partners provides advisory and real estate investment management services to Indian developers and global institutions. Started in mid-2006 and capitalized by US investors, it has so far deployed $52 million in capital in multiple transactions through its balance sheet and a program relationship with institutional investors advised by Prudential Real Estate Investors."
- Touchstone Plans Spec Argentina Office Project (Globe St. Jan. 22nd)Buenos Aires: "Touchstone Investments will break ground for a 377,000 Sqf. Downtown office tower here later this year. Touchstone plans to accumulate class A office properties in this rapidly recovering market, where operational costs are on par with China and India... The 12 million Sqf. of class A space in this 30-million Sqf. office market is more than 97% leased… There are more than two million Sqf. of requirements in the market--from companies like IBM, Chevron, EDS and several European companies--looking for quality space and, at least for the next couple of years, no place for them to go."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Wolseley Cuts 2,000 US Jobs After Slump In Housing Market (The Independent, Jan. 23rd): "Wolseley, a building materials and plumbing products group, will cut 1,500 jobs at its US building materials division Stock. The total number of cuts at the unit in recent months is 3,500. Wolseley has also cut 500 jobs at its American plumbing unit Ferguson… The company derives 50% of its sales in the US and has suffered from the slowdown in the housing market and a substantial decline in the price of lumber. The company employs around 50,000 workers around Reading, including a large number of contractors. It hopes to slice up to $50m from its cost base as a result of the cuts."
- CSX Predicts Double-Digit Growth In 2007 (Star Telegram, Jan. 23rd): "Railroad operator CSX Corp. says it's expecting a double-digit increase in earnings this year after reporting Q4 profits rose 46 %... CEO Michael Ward: "We remain confident in our previous guidance of double-digit growth in operating income, earnings and free cash flow." The Jacksonville-based company said Monday that its strength in coal and agriculture-related freight offset weakness in housing and automotive shipments. The company also reported an 8 % yield improvement."
- Impact Of Housing Market Downturn Visible Beyond Housing Marker Per Se (FXStreet.com, Jan. 23rd): "The reduction in construction employment reflects the direct impact of the housing market weakness. Payrolls of residential specialty contractors have shrunk by 100,000 during the past year and employment hiring under the category residential construction employment has posted declines for three straight months. The ripple effects are less well known and less visible than the employment effect. The industrial production report contains information about a few of these ripple effects. Production of appliances, furniture and carpeting has dropped for five straight quarters. Construction supplies dropped at an annual rate of 9.3% in the fourth quarter of 2006 vs. a 14.4% increase a year ago. Employment and consumer spending taking hits from the second and third round effects of the setback in the housing market."
- Housing Market Downsizes (Lawrence Journal World, Jan. 22nd): "Douglas County Appraiser: Existing home values in the county likely will grow by only 2.5 % in 2007…Far short of the historical Douglas County averages of 5 % to 7 % per year, and well below the double-digit increases that have been common in many neighborhoods. It all adds up to likely belt-tightening news for elected leaders who rely on property taxes to fund city, county and school district budgets… Estimating the total taxable value of real estate and personal property in the county will grow by 2.5 % to 3.5 % in 2007, vs. 5.6% in 2006."
Homebuilders And Housing Stocks
- Goldman Sachs Upgrades Three Homebuilders, Downgrades Four (Ticker Sense in Seeking Alpha, Jan. 23rd): "Goldman upgraded four homebuilder stocks this morning and downgraded three. Looking at the BARR ratings which rank analysts' performance based on their recommendations over the past year, Goldman has done pretty well on the stocks they changed ratings on today. They rank first for The Ryland Group (NYSE:RYL), which they upgraded from sell to neutral, and second for D.R. Horton (NYSE:DHI) (upgraded to buy) and M/I Homes (NYSE:MHO) (downgraded to sell)."
- Citigroup Acquires ABN Amro Mortgage Group For Undisclosed Sum (Seeking Alpha, Jan. 22nd): "The Citigroup ABN Amro's Mortgage Group deal will give CitiMortgage Inc. another 1.5 million customers while adding another 2,500 wholesale brokers to its operations making it the fourth largest U.S. mortgage loan services company, as well as the third largest originator of loans. Keefe Bruyette and Woods estimated ABN Amro will record a gain of around $200 million. UBS estimates Citigroup is paying $3 billion for the unit and "that with the housing bottom possibly in place, ABN risks, after years of refusing to sell this business, having sold this business at the bottom."
Commercial Real Estate and REITs
- Golub, Whitehall Funds Joint Venture (PR Newswire, Jan. 22nd): "Golub & Company and the Whitehall Street Real Estate Funds have purchased the commercial components of the 100-story, mixed-use John Hancock Center in Chicago. The seller is San Francisco-based Shorenstein Properties. The price was not disclosed. The purchase includes the building's 880,000 Sqf. of office space, 153,000 Sqf. of retail space, a 710-stall parking garage, an observatory that's a top Chicago tourist attraction, rooftop broadcast antennas, and a large public plaza. About 700 residential condominiums are not part of the acquisition. John Hancock Center is Chicago's third-tallest building and currently the world's 16th tallest."
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