Housing Bubble and Real Estate Market Tracker

by: Judy Weil

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

  • America's Best & Worst Housing Markets (Forbes, Jan. 25th): "Parts of the country are basking in robust residential sales. NAR: Third-quarter median home prices last year climbed 14.6% in Seattle, Wash.; 14.3% in El Paso, Texas; and 12.3% in Portland, Ore, 5% in Houston, Texas; Los Angeles, Calif.; Austin, Texas; Jacksonville, Fla.; and Charlotte, N.C., over the year before… Prices also jumped along the Gulf Coast, 15.5% in Gulfport-Biloxi, Miss.; 14.1% in Baton Rouge, La.; and 7.6% in New Orleans, La… New York’s Finance Department says the five boroughs grew at 19% in 2006--twice the 2005 figure--with prices in Brooklyn and the Bronx swelling 27.6% from the previous year."
  • Existing Home Sales are Fantastic, According To The National Association Of Realtors Anyway (Barry Ritholtz in Seeking Alpha, Jan. 25th): "Existing-home sales in the U.S. fell in December, capping a soft year that saw demand make its sharpest drop in 24 years... Sales for all of 2006 dropped by 8.4% to 6.48 million from a record 7.08 million in 2005. The drop was the sharpest since 17.7% in 1982... We’ve heard of trying to sugarcoat things, but this is ridiculous: The National Ass'n of Realtors' chief economist David Lereah said in response: “Despite all the doom and gloom stories and dire predictions over the last year, 2006 was the third-strongest year on record for existing home sales.”

Real Estate Investing and Sentiment

  • US House Prices 'Set To Fall' (MSN Money, Jan. 25th): "The fall in home sales was sharper than expected and underlines the fragile state of the housing sector, but industry economists continued to predict a stabilisation of the market this year following a protracted slowdown… Tom Kunz CEO of Century 21: "Sellers have finally figured out that this is a buyers' market. For too long they were hung up on the couple down the street that put their house on the market at $300,000 and got $350,000. But that is not going to happen anymore."
  • Californians Still Sunny On Housing (Tim Iacono in Seeking Alpha, Jan. 24th): "About one in 70 Californians is now a licensed Realtor. DRE License Issuer: As of December there were more than 521,000 licensed Realtors in California… In the last real estate boom in the early 1990s, there were 375,000 licensed agents in California… In the past year, after the market turned south, more than 50,000 people earned their licenses… Contrast the previous report with this story in yesterday's LA Times: Default notices jumped 145% in the last three months of 2006… What should be extremely alarming is that during Q4'06, there was a 595% increase in the number of homes that actually went into foreclosure versus a year ago."
  • Make Money In Real Estate In 2007: 5 Insider Secrets Investors Need to Know (eMedia.com, Jan. 24th): "Evaluate your market : Are you in a market with high or low appreciation? A growing population area, or decreasing? Then, what strategy to apply to each market? People lose money every day in real estate by investing money and applying the wrong strategy to the wrong market they are in … An educated investor smiles whether the market is going up or down--because they know how to use the right strategy at the right time. Once you determine your strategy and your market, use the media to know when to pull the trigger on investment decision."
  • AFIRE Survey: International Real Estate Investors Up U.S. Risk Factor (PR Web, Jan. 24th): "Global real estate investors say their US real estate investment strategies for 2007 and beyond will include properties traditionally considered to have higher risk… The surveyed members of the association collectively own $601 billion of real estate globally, including $184 billion in the US… "The findings reflect investors' desire to invest in US real estate despite macro uncertainties and competition from US institutional investors… While the USA remains the preferred global country for foreign investors' real estate dollars, only 23% of respondents say it has the best potential for capital appreciation, down from 44.4% in 2005 and 53.8% in 2004."
  • NY Venture Capital Up 18% in 2006: Report (NY Business.com, Jan. 24th): "Venture capitalists invested $2 billion in 249 companies in the New York area last year, up 18% from the prior year and marking the highest level of VC funding since 2001, according to a new quarterly industry survey. In the New York metro area, Edison, N.J.'s Home Décor Products Inc. got the single largest investment of $65 million."

Mortgates and Real Estate Lending

  • WSFS Announces Increased 4Q '06 EPS of $1.10, And Full Year EPS Of $4.41, An Increase Of 13% From 2005 (MSN Money, Jan. 25th): "Wilmington Savings Fund Society earnings report: "Net loans were $2.0 billion at December, 2006, an increase of $244.0 million, or 14%, over December, 2005 and an increase of $31.8 million, or 2%, over September, 2006. This is the first quarter in which WSFS reported net loans in excess of $2 billion. Continuing the trend experienced in recent years, commercial and commercial real estate loans increased $210.1 million, or 19%, over December, 2005 and $40.7 million, or 3%, over September, 2006 and drove overall portfolio growth."
  • California Mortgage Defaults At 8-Year High (Los Angeles Business, Jan. 24th): "Lending institutions sent homeowners 37,273 default notices during the October-to-December period… the highest foreclosure activity since 1998. Data Quick: "The numbers last year and the year before were very low because of strong sales and appreciation…Loan defaults occur 1-2 years after origination so we're in a period where the loan pool is at risk… Then there are [the riskier] inventive loans made in the last few years…We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not." [Of] most of the loans that went into default last quarter… the median age was 15 months."
  • National City Still Holds $7.3 Billion In Subprime Loans (Inman News, Jan. 24th): "National City Corp. reported a $622 million after-tax gain on the sale of its First Franklin subsidiary, but is still trying to unload $7.3 billion in loans made by the subprime lender before the sale… The First Franklin "run-off" portfolio cost NCC $172 million in Q4 and $197 million for 2006, as the bank realized losses on the sale of loans or wrote down the value of those it still held. At $1.1 billion, loan losses represented 1.18% of NCC's portfolio… NCC Q4 profits of $842 million, up 116% from $398 million in 2005. 2006 profits were $2.3 billion, up from $2 billion in 2005."
  • Citigroup Q4 2006 Earnings Call Transcript (Conference Call Transcripts in Seeking Alpha, Jan. 19th): "In the U.S. we have a broadly stable credit; we do see some slight weakness in autos and second mortgages, but the word slight is the way we would characterize it at this point… the results are still very good portfolio by portfolio."

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

  • Brunswick Fourth-Quarter Core Results Lift Shares (Reuters.com, Jan. 25th): "Brunswick Corp. (NYSE:BC) the world's largest maker of recreational boats, posted a quarterly loss on Thursday as economic headwinds kept consumers out of showrooms and restructuring costs took a bite out of its bottom line. But stripping out the effects of discontinued operations and $18.9 million in pretax charges to pay for job cuts, factory shutdowns and other restructuring efforts, Brunswick said it earned a better-than-expected 47 cents a share for the quarter… Sales fell 1% to $1.37 billion as rising interest rates, a stagnant real-estate market and other economic uncertainties discouraged consumers from buying boats."
  • Dow Ends Down 119 On Lower Home Sales (Houston Chronicle, Jan. 25th): "Stocks pulled back sharply Thursday, sending the Dow Jones industrials down more than 100 points as a disappointing bond auction and a lackluster report on sales of existing homes halted the market's two-day rally.The market drifted lower for much of the session after the National Association of Realtors said sales of U.S. existing homes fell 0.8 % in December to a seasonally adjusted annual rate of 6.22 million."
  • Economist Won't Back Down From Recession Forecast (Colorado Springs Gazette, Jan. 25th): "Tucker Hart Adams: The U.S. Bank economist predicted a recession for the second half of 2007… Correctly predicting the economic slump that took hold in 2001… Adams said higher long-term borrowing rates and energy costs are among the reasons consumers might slash their spending, which would help push the nation into a recession. "[People] will have to cut back on spending, so there will be less business at the retail stores because people are making their mortgage payments or paying for something they bought last year on their credit cards.”
  • Building Site Thefts Increase (Builder Online, Jan. 23nd): "A string of construction site thefts in Lawrence has left home builders missing thousands of dollars in equipment and furniture… The burglaries are the most recent in a series of reported home construction thefts in the last few months, with valued items such as copper wire and building supplies disappearing from work sites across the city."

Global Impact Of The Housing Slump

  • Experts Ponder Impact of U.S. Slowdown (Chron.com, Jan. 24th) World Economic Forum at Davos: "With growth in the U.S., Europe and Japan still expanding, and with China and India in a position to continue their own quick economic development, the 'Goldilocks' proponents predict a soft landing for the U.S. economy… The global economy would not be harmed... Economist Nouriel Roubini was pessimistic, noting that signs of U.S. weakening _ a higher deficit, a wider trade imbalance, the beginning of a "credit crunch" in the money market, the worsening housing recession and the "verge of recession" in manufacturing and the auto industry _ were acting like the three bears in the classic fairy tale."

Homebuilders And Housing Stocks

  • A Fresh Boost for Homebuilders (Builder Online, Jan. 24th): "In yet another positive signal for the group, Goldman Sachs analysts Chris Hussey and Michael Molnar upgraded the homebuilding sector to neutral from sell on Jan. 23… They're waiting for at least the next 6-8 weeks before making any aggressive bets about the direction of the market. The rate of decline in the housing market may be decelerating, but the housing market is now in a very difficult state… The recent housing slowdown has lasted about 1.5 years, while a typical housing downturn takes two to five years… The odds of a turnaround are likely to increase after the 2007 selling season."
  • Palm Harbor Joins Manufactured Housing Peers With Weak Quarterly Report (Steve Ferris in Seeking Alpha, Jan. 24th): "Palm Harbor CEO Larry Keener: Keener: "Company officials are confident they can continue to… keep building market share, even though these are knotty times for the industry. One segment of the company that may help them is their modular business, which saw revenue increase by about 45 % for the first nine months of fiscal 2007… A few weeks ago, manufactured housing company Skyline Corp. reported its quarterly sales were $95 million, compared to $136 million a year earlier and an operating earnings loss of $470 thousand in the second quarter, compared to a gain of $6 million a year ago."

Commercial Real Estate and REITs

  • Third Company Makes Offer For Equity Office (Sacramento Business Journal, Jan. 25th): "A bidding war… Blackstone has increased its offer to buy REIT Equity Office Properties to $54 a share in response to a competing bid from a third entity. The new offer is 11% higher than Blackstone's original bid of $48.50 and nearly 4 % more than the $52-a-share offer that came last week from Dove Parent, a joint venture… The new Blackstone deal is valued at $38.3 billion… The original $36 billion offer was already said to be the largest real estate transaction in history… Equity is leaving the door open for Dove Parent to make another offer."
  • NAHB's Multifamily Stock Index Dips In December (National Association of Homebuilders, Jan. 25th): "The National Association of Home Builders’ (NAHB) Multifamily Stock Index (MFSI) dropped 111 points—about 3%—from the November MFSI to an index value of 3521 in December… The MFSI tracks the stocks of 23 publicly traded firms, including 20 Real Estate Investment Trusts (REITs), principally involved in owning, developing and managing multifamily housing… Despite the drop, the MFSI is still 35 points higher than it was a year ago, indicating that investor confidence is still quite strong in the multifamily housing market. The rental sector, in particular, seems to be gaining strength across the country."
  • A Commercial Landlord’s Biggest Sale May Be Itself (NYTimes, Jan. 24th): "Vornado CEO on the Equity Office frenzy: That many private companies have paid large premiums for publicly traded real estate companies is an "epidemic"… Public market trading prices are cheap to private values.” An Equity Office deal would give [Vornado] the chance to acquire quality buildings in desirable markets where his company is not currently represented while avoiding the rich prices that individual buildings are commanding. Last month, Vornado paid $542 million, or about $1,009 a square foot, for 350 Park Avenue, a 30-story office building between 51st Street and 52nd Street in Manhattan."
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