Housing Bubble and Real Estate Market Tracker

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

• How Good Are Zillow's Estimates? (Wall St. Journal, Feb. 14th): "Zillow Inc. operates a Web site that offers free estimates and other online tools for real-estate buyers and sellers, and has made millions of Americans familiar with computer-generated estimates of home values… But just how accurate is it? A Wall Street Journal analysis of 1,000 recent home sales shows that Zillow's "Zestimates" often are very good, frequently within a few percentage points of the actual price paid. But when Zillow is bad, it can be terrible -- off the mark by more than 25% on one in 10 homes. In one case it was off by $2 million."

• Zillow Releases Its Year End Real Estate Report (Stockerblog in Seeking Alpha, Feb. 13th): "Zillow.com, the free online home valuation web site covering houses across the United States, has released its latest quarterly report on real estate. The y/o/y value for homes declined by about 0.5%, the first decline since 1997. Values were down 4.7% quarter over quarter. The city with the highest appreciation: Lakeland-Winter Haven, FL up 25.88%.The city with the biggest drop in values: Panama City, FL down 11.84%."

• Price Declines Predicted for ‘07 (NJ Real Estate Report, Feb. 12th): "In North Jersey, house prices are expected to be flat or down slightly — around 3% or less — in 2007. But even with the downturn in prices and sales volume, 2007 is likely to be a historically solid year — just not as over-the-top... Although the NAR has not yet produced its final price data for 2006, [local realtors] say prices in the Bergen County area dropped about 5% in 2006… Another drop of 3% or so is possible in ‘07. Inventory is still very high, and inventory puts a whammy on prices."

• Statewide Home Sales, Prices Dipped in '06 (Buffalo Business First, Feb. 12th): "New York State Realtors Ass'n: Sales were off 6.3% in 2006 from 2005. Transactions declined to 101,131 compared with 107,909 in 2005… The median sale price throughout New York State dropped 2.8% to $248,500 last year from $255,675 in 2005. In Erie County, home sales fell 1.8%, dropping from 7,359 to 7,223 while in Niagara County, sales dropped 1%, going from 1,964 in 2005 to 1,944 last year. The median sale price in Erie County was up 3.8% to $109,000 from $105,000. Niagara County… prices remained virtually flat at $85,000."

• South Carolina Home Sales Fall 12.4% (Inman News, Feb. 12th): "South Carolina Realtor's Ass'n: 5,065 home sales in December, down 12.4% from Dec. 2005 (5,780)… Sales for all of 2006 were down 5.4% from 2005 to 68,900.The Charleston Trident region saw a 31% decline in sales from Dec. 2005 to Dec. 2006, followed by the Coastal Carolinas region… [down] 21.7% during the period. The overall median price for single-family, condo and villa homes in Dec. was $157,900, up 5.5% from $149,700 in Dec. 2005. The Coastal Carolinas… median price gained 25% from $176,000 in Dec. 2005 to $220,000 in Dec. 2006…. In the Charleston area, the median home price edged up 3.6% in Dec. to $200,000."

• City's Home Sales Still Strong (Huntsville Times, Feb. 11th): "University of Alabama real estate research: Huntsville home sales remain strong… In December, 866 homes were sold in the Huntsville market, up from 728 in November and 778 in December 2005… For 2006, 10,788 homes were sold, nearly 17% [more] than 2005… Statewide, December sales were down from Dec. 2005, to 4,457 from 4,715, but up from November's 4,234 homes sold. The average 2006 selling price in 2006 was $156,370, up from $148,184 in 2005. Average 2006 Huntsville selling price… was $160,764, compared with $151,450 in 2005, a 6% increase."

Real Estate Investing and Sentiment

• Michael Metz's Investment Report: Second Pervasive Exuberance (Philadelphia Bulletin, Feb. 12th): "Michael Metz, Oppenheimer Chief Investment Strategist: The consensus strengthens that a soft landing in the economy will not be aborted by the housing sector. Assuming such optimism is justified, the issue centers on whether profit margins can continue to expand, or will flatten and cause earnings growth to revert to a more normal pattern of only paralleling nominal GDP. On a macro basis, valuations receive support from relatively underleveraged balance sheets and the increasingly positive implications for profitability of what seems to be a growing trend toward oligopolies."

• "Buyers Emboldened By Housing Market Glut" (Housing Bubble Blog, Feb. 12th): "The Journal Sentinel reports from Wisconsin: "One good month doesn’t spell recovery, industry representatives said. But so far, February is looking good. The big draw: better deals this year than in 2006. 'A property might be going at 98% of asking price, but that’s 98% of the last list price, not original price,' Milwaukee MLS industry spokeswoman Tammy Maddente said. 'That property might have been on and off the market two or three times.'"

Mortgates and Real Estate Lending

• It's Their Default Position (LA Times, Feb. 13th): "Local realtor: A house had two mortgages totaling $460,000… [One] buyer would pay $415,000, enough to cover the first loan but not the second. The first lender agreed to the sale. The second wouldn't respond… [Because they] didn't actually hold the second mortgage…. It was a middleman, collecting the mortgage payments for a fee. The loans had been sold to Wall Street investors as mortgage-backed securities… [So the house] went to auction, fetching $375,000… Pushing down values for everyone… The owner of the second loan… was out $85,000. "Banks don't have enough bad loans on their books to [care]. Within six months, that will change."

• New Century Financial: Risk/Reward More Favorable Following Big Selloff (Notable Calls in Seeking Alpha, Feb. 13th): "Stifel is upgrading New Century Financial (NEW) to Hold from Sell after NEW… announced under-reserving for losses on early-payment defaults, a reacceleration in EPDs, and sharply lower 2007 origination guidance (from flat to down 20% y/y as underwriting tightens further to stem the EPD issue)… NEW shares are off 43% since… [and] now trading at 65% of firm's estimate of tangible book value. [Despite] the accounting issues and expected 4Q06 operating loss, they believe the continued sell-off indicates rising investor concerns over liquidity risk. NEW ended 4Q06 with $360mm in cash and has 15 credit lines with over $17B in borrowing capacity that were only about 50% utilized at 3Q06-end."

• ECC Capital Closes Sale of Mortgage Banking Biz to Bear Stearns (The Asian Banker, Feb. 13th): "ECC Capital Corporation (ECR) has announced the sale of its mortgage banking business to Bear Stearns. Bear Stearns acquired certain assets comprising ECC Capital's subprime wholesale mortgage origination business for $26 million. As a result of this transaction, ECC Capital has effectively exited the wholesale mortgage banking business. Its remaining operations will consist primarily of managing its residual interests in its securitizations… ECC Capital retained other obligations arising from its subprime wholesale mortgage banking division, including, but not limited to, loan repurchase obligations arising from loan sales prior to October 10, 2007."

• Credit Suisse to Buy U.S. Subprime Lender ResMae for $19.1 Million (Int'l Herald Tribune, Feb. 13th): "Credit Suisse Group has agreed to acquire bankrupt subprime mortgage lender ResMae Mortgage Corp. for $19.1 million… ResMae is seeking fast-track approval of a sale to maintain the value of its business… ResMae, which makes mortgage loans to home buyers with bad credit or a limited credit history, said it was forced to file for bankruptcy after lender Merrill Lynch & Co. demanded the company repurchase $308m in questionable loans… Merrill was the largest buyer of the Brea, California-based lender's mortgages last year, purchasing more than $3.5 billion in ResMae loans."

• Latest Count of Major US Mortgage Lenders That Have Croaked Since about Dec 2006: 21(Mortgage Lender's Implode-o-Meter, Feb. 13th): "1) Wells Fargo 2) HSBC Household Finance [rumored to be up for sale] 3) New Century [restating '06 earnings downwards; major shareholder lawsuits] 4) Countrywide [reportedly in talks with Bank of America (may not be credible)] 5)Fremont 6) Option One [H&R Block; up for sale] 7) Ameriquest [owned by ACC; shut most offices, settled with 30 states over predatory lending] 8) WMC [subsidiary of GE Money] 9) Washington Mutual [closed 80 branches in late 2006] 10) CitiFinancial 11) First Franklin [acquired by Merrill Lynch from National City for $1.3bln] 12) GMAC [Major layoffs in ResCap] 13) Accredited Home 14) BNC [Lehman bros. subsidiary] 15) ChaseHome Finance 16) Novastar 17) OwnIt, 2006-12-07 [partially-owned by Merrill and BofA] 18) Aegis [recently closed two subprime operations centers]19) MLN, 2006-12-29 [reportedly bought out by Lehman] 20) EMC 21) ResMAE,2007-02-13 [in bankruptcy; being funded by Credit Suisse] 22) FirstNLC 22) Decision One [owned by HSBC; rumored to be up for sale] 23) Encore [being acquired by Bear-Stearns] 24) Fieldstone [closing 7 of 16 ops centers, debt renegotiated through 2007-01-31]"

Global Alternatives To The Housing Slump

• KB Home Q4 2006 Earnings Call Transcript (Seeking Alpha Conference Call Transcripts, Feb. 13th): "[We are] more liquid than lot of the other big caps… We've been the largest buyback company over the last few years... We want to wait and see how the business shapes up for the year, [to] have a firm… cash projections... We [could] acquire assets… we could take our debt down or we can go buyback more stock. We do have 4 million authorized on our buyback…We are the second largest builder in France… A great year projected for France in '07. [It's] very profitable, very tenured… could be a low risk… opportunity. "

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

• America Counts on China's Enduring Love of its Bonds (The Australian, Feb. 13th): "The economic effects of higher long-term interest rates - if bond prices do remain weaker due to changed perceptions of the economic fundamentals or any associated shift in investor asset preferences - are substantial over time… Access to abundant quantities of capital at low interest rates played a part in each of the three major boom markets of the past decade - the technology-led bubble market in equities of the late 1990s, the run-up in consumer debt and housing prices of the period since 2000, and the explosion which is currently under way in leveraged ownership of income-generating assets… The last of the three… is the most dependent on cheap money, and the most exposed if real rates do rise."

• Housing Industry Downturn Impacting Remodeling Expenditures (Builder Online, Feb. 11th): "Harvard University's Joint Center for Housing Studies researchers: Fewer existing home sales in 2007 compared with 2006, and sales of older homes help fuel remodeling projects… Equity in existing houses is falling, so "owners are holding off on major projects…" [But] emodeling will remain robust because of an aging housing stock, rising energy prices, underinvestment in rental housing, and a changing mix of homeowners. About one third of homes are at least 45 years old, and are in increasing need of remodeling and repair… Homeowners also will be upgrading… energy efficiency."

Homebuilders And Housing Stocks

• KB Home Reports Quarterly Loss; Warns of Challenges Ahead (Seeking Alpha, Feb. 14th): "KB Home Reports Quarterly Loss; Warns of Challenges Ahead (Seeking Alpha, Feb. 14th): "U.S. homebuilder K.B. Home (KBH) reported a Q4 net loss [from] a pretax charge of $343.3 million for abandoning land option contracts and writing down inventory… … "The next two quarters are also likely to be challenging." KBH posted a net loss of $49.6m ($0.64/share) for fiscal Q4 versus net income of $304.4m ($3.44/share) a year earlier… Revenue rose 13% to $3.55 billion but net orders fell 38%. The company posted a 48% cancellation rate in the quarter, up from 31% a year ago but down from 53% in Q3."

Commercial Real Estate and REITs

• Sabey Corp Buying 1M-SF Associated Grocers HQ (Globe St., Feb. 13th): "Locally-based Sabey Corp. has emerged as the buyer of Associated grocers 55-acre, 1.05 million-sf headquarters… [possibly for] over $100 million… The property is one of the largest commercial property offerings within Seattle city limits in decades… Associated Grocers'... property contains 975,000 Sq.ft. of warehouse-distribution buildings and 75,000 sf of office space… AG officials have said the property’s value has appreciated to the point that it is time to look at relocating to more cost-effective facilities."

• Investment Firm Building $49M Hilton Hotel (Globe St., Feb. 13th): "Minnesota: W.P. Carey is financing a 255-room Hilton hotel here for $49 million, through a real estate fund titled Corporate Property Associates 16-Global Inc., which will own the hotel upon completion. Mortenson Development Inc. is the developer, and Milwaukee-based Marcus Hotels and Resorts has been selected as the operator of the property. W.P. Carey: "In our mind this market is in prime need of a new, modern business hotel. The competitors in the area are older."

• Great Lakes Bancorp Q4'06 Results: Aggressive Branch Development and Significant Loan Growth Continues (PR Newswire, Feb. 13th): "Great Lakes Bancorp, Inc. (GLK) today announced a net loss of $753,000 or $0.07/share for Q4 and a net loss of $896,000 or $0.10/share for the year ended December 31, 2006. The Bank recognized a net loss of $1.6 million or $0.38/share for Q4'05 and a net loss of $468 thousand or $0.11/share for 2005… "On the lending side we focused on growing our commercial portfolios for better yield and diversification. The average balances in our commercial real estate and commercial and industrial portfolios grew by 88% and 107%, respectively, in 2006."

• Washington Real Estate Investment Trust Acquires 270 Technology Park Portfolio for $26.5 Million (Business Wire, Feb. 12th): "Washington Real Estate Investment Trust (WRE) has acquired a portfolio of five single-story flex buildings within 270 Technology Park in Frederick, Maryland for $26.5 million. The portfolio consists of 157,000 rentable Sq.ft, 595 parking spaces… currently 97% occupied by 17 tenants. WRIT expects to achieve a first-year, unleveraged yield of 6.8% on a cash basis and 7.1% on a GAAP basis. The acquisition will be funded with cash from WRIT’s recent convertible debt offering… WRIT is an equity REIT investing in income-producing properties in the greater Washington/Baltimore metropolitan region."

Tracking the Housing Market and Homebuilder Stocks You can track developments in the housing market and homebuilder stocks by bookmarking our Housing coverage or subscribing to our free email service. 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.