Real Estate Sales and House Prices
- Valley Homes End '06 On High Note (Record Net, Jan. 31st): "Calif. Ass'n of Realtors: December sales were up 2.8% from November, and the median sales price of $342,160 was up 0.5% for the month. Century 21 broker: "We all sort of sense it's near the bottom… No more than a couple of people would show up at any given open house a month ago… Last weekend, open houses attracted… as many as 15 people or couples. We're not getting sales yet… A lot of lookers now." Statewide, home sales were down for the month by a slight 0.1%, though the median sales price jumped 2.2% to $567,690."
- Finally, Westchester Home Prices Drop (Business Week, Jan. 30th): "Westchester County-Putnam MLS: The median selling price of a house in Q4'06 was $630,000, down 3% from a year earlier… The first decline since 1994. As the national market cooled, prices were still going up slightly in Westchester… The record price of $716,125 was reached in Q3'06. In Putnam County, median price was $420,000, up 2%... [In] Rockland County, median price was $475,000, down 7%... Westchester's price decline could be blamed on buyer resistance to the long-climbing prices… And sellers' reluctance to realize that circumstances have changed. The [MLS] report predicted that prices would continue to fall in… 2007, then stabilize."
- The Inequality of Home Prices (Business Week, Jan. 30th): "The Miami-Miami Beach-Kendall (Fla.) area has the biggest ratio of the 99th percentile to the median— the "inequality index." The 99th percentile house costs 6.5 times as much as the median house… In costly Silicon Valley, the ratio between top and median is only 3.4… [Though] San Jose's 99th percentile house is $2.5 million, even higher than Miami's $2.2 million… its inequality ratio is lower because San Jose's median price is so high: $745,000. Don't assume that a big spread is bad and a narrow spread is good… Silicon Valley Middle-income families aren't happy with sky-high median prices."
- Housing Dream Deferred - Over Uncertainty (Nevada Appeal, Jan. 29th): "Last year, Carson City's housing market saw the fewest amount of homes sold in 18 years, at the largest average sale price ever recorded by the city Assessor's Office, which has tracked all home sales since 1988… Carson City's housing market peaked in 2002, with the sale of 1,181 single-family homes, the most ever recorded by the city, at an average cost of $199,000... From 2003 to 2004, the average housing price increased 24 %, from $227,935 to $283,165. Average prices increased another 20% from 2004 to 2005, $283,165 to $339,800."
- Local Home Sales Down, but Prices Up (RisMedia, Jan. 29th): "Eastern Connecticut Realtors Ass'n: Single-family home prices edged upward by 2% in 2006, from a median price of $255,000 to $260,000. An appreciation rate of 3% to 5% is considered good. Condominium sales were up about 1.5%, with slightly higher inventory and a shorter number of days on the market compared to single-family homes… because they're more affordable. Prices were also up for condominiums, land, multifamily and commercial properties… Sales decreased by 31% for land, nearly 34% for multifamily dwellings and more than 24% for commercial properties. The housing market as a whole dropped overall 9% compared to 2005."
Real Estate Investing and Sentiment
- NAR's David Lereah: His Own Words on Housing (Barry Ritholtz in Seeking Alpha, Jan. 30th): "What David Lereah [National Realtor's Ass'n economist] was saying throughout 2006 and into 2007, and what the market was doing: January 2006: Lereah's forecast: "The market is in the process of normalization." Actual sales: Q4 sales fell at an annual rate of 12.6% to 6.94 million annualized. Lereah's post-mortem: "The level of home sales activity… is likely to pick up a bit in the months ahead." January 2007: Lereah's forecast: "The steady improvement in sales will support price appreciation moving forward." Actual sales: Q4 sales fell at an annual rate of 2.3% to 6.24 million. Lereah's post-mortem: "It appears we have established a bottom."
- Economic Report Summary: Mixed Housing Stats (Tim Iacono in Seeking Alpha, Jan. 28th): "Despite claims of "bottoming out" by the National Association of Realtors and many economists, it is far too early to predict a rebound ahead, the implied outcome that is surely intended to spur purchases by fence-sitting potential home buyers... Not much should be made of any of the housing news this week, save for the desperate tone of the NAR's chief economist… The warm start to the winter and other seasonal factors make the spring months ahead much more significant in assessing the health of the housing market."
Mortgates and Real Estate Lending
- Predatory-Lending Rule Blamed For Lender Exits (Providence Journal, Jan. 30th): "Last year, Option One originated more than 3,200 sub-prime loans in Rhode Island, about 5% of the state’s sub-prime market… On Jan. 9, Option One… temporarily suspended the origination and purchase of all owner-occupied loan transactions for property located in Rhode Island, "due to state regulators’ emergency rules…" New Century Lenders: "The time frame was just too short … to get into compliance." Other out-of-state mortgage companies that stopped lending in Rhode Island [due to] the new regulations… are Argent Mortgage Co., Provident Funding Group and Flex Point Funding Corp."
- Foreclosures Double: Hub’s Hit 1,007 In ’06 (Boston Herald, Jan. 30th): "Banks auctioned off nearly twice as many Boston homes for mortgage nonpayment during 2006 as they did in 2005. The Warren Group: Lenders advertised 1,007 foreclosure auctions in 2006 for Suffolk County, (primarily Boston). That’s up from just 521 auctions in 2005… Advertised foreclosure auctions also rose sharply in other Eastern Massachusetts locales during 2006: Middlesex County (up 58.2%), Bristol County (54.3%), Worcester County (53.8 %) and Essex County (52.2%). Norfolk County fared slightly better, with auctions there rising a less-extreme 21.3%. Statewide, advertised auctions increased 45.7%, to 6,729 in 2006, from 4,620 a year earlier."
- Did We Go Too Far? (New Jersey Real Estate Report, Jan. 29th): "Metropolitan Indianapolis in third place nationally in foreclosure rates last year... Lenders took back 48,000 homes, up nearly 36% over 2005… Who's at fault? Joel Epstein, president, Greater Indianapolis Mortgage Bankers Association, cites a nationwide push “to create a culture of homeownership” which has led to excess as well as success. “Did we as a lending industry and a real estate industry, in trying to get people into houses, maybe go too far in some cases? I would say yes. Were some people given the wrong kinds of loans? Yes. Were some people not ready to be in homes? Yes."
- Report: BofA In Merger Talks With Countrywide (Jacksonville Business Journal, Jan. 29th): "Bank of America is in talks with Countrywide Financial Corp. that could lead to a merger, according to the Financial Times Website. The companies have held discussions about an alliance that would be the nation's biggest mortgage lender, citing people close to the matter. Those talks could lead to BofA's purchase of Countrywide or a joint venture under which BofA (NYSE:BAC) would use its branch network to sell home mortgages originated by Countrywide… BofA has a 32.8% market share in Northeast Florida, with $9.1 billion in area deposits as of June 30."
- Defaults Cause Fremont To End Ties To 8,000 Brokers (Reuters.com, Jan. 29th): "Moves to improve loan quality have helped trim the number of early defaults on Fremont mortgages to a 3% rate from almost 6% in mid-2006… Fremont was the fifth-biggest originator of subprime loans last year… about $33 billion of loans issued… The loans, most destined for the $575 billion home-equity, asset-backed bond market, are being returned by investors at an alarming pace, hurting profits… Fremont General's (FMT) soaring loan repurchases led to a $16.4 million loss on the sale of its mortgages in the first nine months of 2006, compared with a $316.4 million gain for the same period of 2005."
- Don't Rush Decision To Use Builder's Lender (New York House, Jan. 29th): "It is a mistake for a buyer to commit to a builder with an in-house lender without knowing the financial part of the purchase. The true price of the house when using the builder's lender is P + O - C, where P is the posted house price, O is the overcharge on the loan, and C is the value to the buyer of the builder's concessions. This is the price that should be used in comparing houses offered by different builders."
- Mandalay Mortgage LLC Closes Subprime Lending Unit (Default Servicing News, Jan. 29th): "California-based Mandalay Mortgage LLC has closed its non-prime wholesale loan business Mandalay Mortgage… Mandalay Mortgage said that “loans that have loan documents either out for signing or already signed will continue to be processed and funded, and all other loan applications will be returned.” Mandalay Mortgage isn't the only servicer pulling out of the subprime space. Wachovia Corp. recently announced the closing of its subsidiary Equibanc Mortgage, a subprime lender based in Georgia."
Global Alternatives To The Housing Slump
- NYC Firm Acquires Stake In Israeli Firm (Globe St., Jan. 29th): "Private NYC real estate investment firm Northern Group has acquired a 50% stake in Acad Building and Investments Israel. Acad Israel’s principal asset is a 90% stake in U.Dori Engineering, a local, publicly-traded builder and developer. NGI has invesments in Detroit (First National, Penobscot and Cadillac Tower office buildings in Downtown and the 400-unit Alden Park Towers riverfront residences), Louisville, Los Angeles, Pittsburgh, Philadelphia and Memphis. U.Dori is an Israeli development and construction company with 2,000 employees… [Is building] the largest private power plant in Israel and also is active in Great Britain, Poland, Holland, Bulgaria and Nigeria."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Home Depot Adding 400 Jobs In Austin (Statesman.com, Jan. 30th): "Home Depot is building up its Austin work force, adding 400 employees before the busy spring season. Most of the jobs are permanent, with about two-thirds full time... Daniel Kah, Angelou Economics economist: "Those jobs point to the growing retail economy in Central Texas… While the housing market has cooled across the country, Central Texas has retained a strong housing market, which also fuels a strong home renovation market…" Home Depot will hire about 15,000 new employees throughout the United States in 2007."
- Housing: That Was Then, This Is Now (David Andrew Taylor in Seeking Alpha, Jan. 30th): "Certainly there may be areas around the nation that bubbled up... The rest of the nation appears to be on normal footing… Man does not live on real estate alone. Nor does our economy… When we saw the large increase in the mortgage refinancing here in the States, specifically during 2003, there was a coincidental move higher in the personal consumptions expenditures. Americans don't save money. When they refinanced their homes, the saving from the lowered interest rates helped the economy along. Any other increased funds drawn out of the refinancing was also spent. Again, helping the economy along."
- Despite Record Job Growth, Some Companies Are Downsizing (Contra Costa Times, Jan. 29th): "Owens Corning HomExperts has decided to eliminate 166 jobs in Livermore as the company exits its home services business... The reductions, while painful for the workers involved, are being undertaken at a time when the East Bay has reached an all-time record number of jobs… The Association of Bay Area Governments predicted that employment growth would continue at a steady pace in the East Bay in 2007, and that employment expansion would also occur in the South Bay and San Francisco area."
- USG Warns Housing Slump Will Hurt 2007 (Chron.com, Jan. 29th): "Building supplies company USG Corp. said an expected drop in new housing construction will dampen 2007 earnings. USG, which supplies homebuilders with gypsum wallboard, [said] demand has eroded... the housing market [has] a glut of unsold inventory. Homebuilders have curbed their building as they try to move already-developed properties. "The drop in housing starts will further reduce wallboard demand from the near-record levels achieved in 2006. It is too early to determine where demand levels will find a firm foundation or how our competitors will respond to the current imbalance between supply and demand."
Homebuilders And Housing Stocks
- Finding Value in Hammered Housing Stocks: Eye on Orleans Homebuilders (Paul Tracy in Seeking Alpha, Jan. 31st): "The long-term demographic trend in the U.S. is for retirees from the Northeast to move to sunnier locales such as Florida… The massive Baby Boomer generation [is] nearing retirement age… Florida [is] seeing extreme weakness in the near-term… Primarily the result of excess speculation… Orleans Homebuilders was among the first builders to offer incentives and focus on clearing their speculative inventories in Florida. This leaves them well prepared to weather the current downturn… North Carolina remains one of the strongest markets in the U.S. OHB's strong position in this market is another advantage."
Commercial Real Estate and REITs
- Highwoods To Embark On $22.6M Office Development In Hometown (Memphis Business Journal, Jan. 30th): "Highwoods Properties announced construction of GlenLake Six, a $22.6 million, 122,000-square-foot Class A office property in Raleigh, N.C.. Highwoods' new Raleigh development at GlenLake Office Park will be the third of seven buildings planned for the campus. GlenLake One is 100% leased and GlenLake Four is 70% leased. Highwoods CEO: "GlenLake continues to be a high demand location for upscale professional businesses in Raleigh..." The announcement of the GlenLake Six project grows Highwoods' current development pipeline to 2.7 million square feet and an investment of $446 million. Highwoods Properties is a self-administered REIT."
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