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

• New-Home Sales in U.S. Plunge 16.6%, Most Since 1994 (Bloomberg, Feb. 28th): "Commerce Dept.: New-home sales in the U.S. fell 16.6% last month… to an annual rate of 937,000. The slowest pace since February 2003. A measure of housing inventory rose to the highest in three months… Sales fell in all regions: 37.4% in the West to an annual rate of 166,000, the lowest since March 1995; 18.7% in the Northeast to an annual rate of 61,000; 9.7% in the South to 529,000; and 8.1% in the Midwest to 181,000… New-home sales are considered a more timely barometer of the housing market because they are recorded when a contract is signed."

• Home Prices, Sales Continue Fall in Broward, Palm Beach Counties (Sun Sentinel, Feb. 27th): "Broward had 458 sales, down 17% from 552 last January. The median price was $364,500, off 2% from $370,500 a year ago. Prices… seem to be leveling in Palm Beach County, with the median of $388,000 down just 1% from $393,700 last January. The county ended 2006 with three consecutive months of double-digit price declines. Palm Beach County sales fell 15%, to 496 from 586 a year ago. Broward's median existing condo price was $199,200, off 6% from $211,500 a year ago. Palm Beach County's median condo price was $213,100, up 2% from $209,100 last January."

• Home Sales, Median Prices Drop in January (Jacksonville Business Journal, Feb. 27th): "Florida Association of Realtors: The Florida housing market continued its decline in January, and the Jacksonville area was hit as hard as the rest of the state. Sales of existing single-family homes fell 17% in Jacksonville and the median price fell 5% to $185,000… One of the few bright spots was a livelier market in existing condominiums. While sales of condos fell 30% across the state, sales in Northeast Florida rose 10%. But the median price fell 13% to $147,600. The statewide median price of condos dropped 1% to $209,000."

• C.A.R. Reports Sales Decrease 12.6% in January, Median Price of a Home in California at $559,640, up 1.9% from Year Ago (Business Wire, Feb. 27th): "California Realtors Ass'n: After holding steady in the range of 450,000 units on a seasonally adjusted annual basis since July of last year, home sales activity was slightly lower in January… On a regional basis, sales fell an average of 13%, while median prices declined in all areas except Los Angeles, the San Francisco Bay Area, and Riverside/San Bernardino… “The unsold inventory of existing homes jumped to 9.1 months in January, after hovering around the long-run average of 7 months since mid-2006.”

• US Home Prices Fell in December - S&P/Case-Shiller (Reuters, Feb. 27th): "The prices of existing U.S. single-family houses extended their slide in most regions in December, trimming annual price gains… The composite month-over-month Standard & Poor's/Case-Shiller Home Price Index of 10 metropolitan areas declined 0.8% to 222.01, unchanged year-over-year, S&P said on its Web site. The composite month-over-month Standard & Poor's/Case-Shiller Home Price Index of 20 metro areas showed a 0.7% drop in December, a 203.07 reading, and a 0.5% year-over-year gain. U.S. home prices rose 0.4% in Q4'06 versus Q4'06… U.S. home prices were down 0.7% in Q4 versus Q3."

• Area Housing Market 'Good, Solid, Steady' (Great Falls Tribune, Feb. 25th): "Single-family home prices increased 13.2% from September 2005 to September 2006, well above the national average of 7.7% and beating that state's average of 12.9%. Missoula County — a Montana hot spot — saw home prices increase by 11.3% during the same time, better than the 10.1 increase during the same time from 2004 to 2005, but cooler than the 13.7% increase from September 2003 to September 2004. Cascade County, on the other hand, saw 5% growth in housing prices during the year beginning in September 2003 and 8.1% growth the year beginning September 2004."

Real Estate Investing and Sentiment

• Subprime Mortgage Perceived Risk Decreases After Eight Days (Bloomberg, Feb. 28th): "The perceived risk of owning low- rated subprime mortgage bonds lessened for the first time in nine days, derivatives suggest, after Fed Chairman Ben Bernanke said the overall home loan market is healthy. An index of credit-default swaps on 20 securities rated BBB- and created in Q3-4'06 rose 1.2% today to 63, according to Deutsche Bank AG. The ABX-HE-BBB- 07-1 index, which fell earlier in the day, had dropped by more than a third since trading started Jan. 18."

• Mortgage Securities: Slow MBS Market Hikes Fraud Risk (Bank Technology News, March Newsletter): "Financial Insights: Additional secondary fraud monitoring is a reaction to the lending practices that increasingly transferred more risk to the securities market, such as relaxing mortgage insurance requirements. "The largest [lenders] are willing to take more risk with mortgage lending, because they really don't have that risk on their balance sheets anymore." Another factor is the realization that fraud risk can't be lowered with more credit risk profiling… But higher scores in non-prime loans have double the fraud rate-since crooks aren't going to create shaky, edge-of-bankruptcy profiles to get these loans."

Mortgates and Real Estate Lending

• Freddie Won't Buy Some Subprime Loans (Wall St. Journal, Feb. 28th): "In another sign of turmoil in the industry, subprime lender Fremont General Corp. said late yesterday that it will postpone the release of its fourth-quarter results, originally due today. The Santa Monica, Calif., company offered no explanation, but said it would explain the delay in a filing with the Securities and Exchange Commission… Fremont was the seventh-largest subprime mortgage lender last year, with a market share of about 5%, according to Inside Mortgage Finance, a trade publication."

• House Panel to Examine Predatory Lending in Subprime Market (Market Watch, Feb. 28th): "Reacting to increased foreclosures of mortgages in the subprime market, a subcommittee of the House Financial Services Committee will hold a hearing next Tuesday to examine possible predatory lending practices, Rep. Carolyn Maloney, D-N.Y., announced Wednesday. "The trend of increased foreclosures is certainly troubling, and it is important to understand the potential root causes… Clearly, not all subprime or exotic lending is destructive, but abusive practices do exist and congressional oversight is needed."

• RealtyTrac Integrates Microsoft Virtual Earth Technology Into Online Foreclosure Marketplace (Earth Times, Feb. 28th): "RealtyTrac, the leading online marketplace for foreclosure properties, today announced an… interactive 3-D mapping tool that integrates Microsoft Virtual Earth mapping technology into its nationwide database of more than 1.2 million properties… RealtyTrac publishes the largest and most comprehensive national database of pre-foreclosure and foreclosure properties, with over 850,000 properties from nearly 2,500 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal's Real Estate Journal."

• Fear Not the Hedge Funds, it's Subprime That'll Get Ya (FT Alphaville, Feb. 28th): "RiskCenter.com: Several subprime mortgage lenders have either lowered their company’s financial activity, or completely closed down… and the sector has come under increasing scrutiny. Last week, shares in NovaStar Financial, a subprime lender, sank 42% after it said it might generate no taxable income over the next five years. NABE president Carl Tannenbaum said he did not anticipate widespread financial stress despite the sector’s current poor performance. "The outlook for consumer spending, which is the one that might be hit the highest by mortgage delinquencies and defaults, was actually revised upward."

• Rough Times May be Ahead for Stock Markets (SanLuisObispo.com, Feb. 27th): "The Mortgage Bankers Association recently reported that 3.8% of all adjustable-rate sub-prime mortgages are in foreclosure proceedings, up from about 3% in 2005, but well below the 9% rate following the 2001 recession. Sub-prime adjustable-rate mortgages make up less than 7% of all mortgages. Across all types of mortgages - fixed, adjustable, prime and sub-prime - about 4.67% of loans are in foreclosure proceedings, up slightly from a few years ago but not alarming."

Global/U.S. Commercial Investment

• $500M US in CPP Assets Placed in U.S. Real Estate (CBC, Feb. 27th) Canada: "The CPP Investment Board (CPPIB) is investing $500 million US in partnership with TIAA-CREF Asset Management — a huge U.S. retirement fund that has extensive U.S. real estate holdings. The board said it's joining with the U.S. fund to place $300 million in a portfolio of U.S. office properties. "The investment focus is on strategic acquisitions of partially leased office properties in stable or recovering metropolitan areas with at least 500,000 residents," a CPPIB statement said. Another $200 million US is going into a partnership that invests in institutional-quality U.S. real estate assets."

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

• A Recession That Arrived on Cats’ Paws (NY Times, Feb. 27th): "The manufacturing downturn stems from a couple of larger economic problems. One, of course, is the housing slump, which has caused a big drop in new construction and much less demand for doors, windows, countertops and a lot of other things that kept factories busy in recent years. In recent weeks, the troubles in housing have spilled into the financial sector. Big lenders like NovaStar Financial are paying the price for extending credit to people who couldn’t actually afford the homes they bought… Lenders are making it tougher to get loans. That’s a sensible, and overdue, move. But it will hurt economic growth in the months ahead."

• Ahead of the Bell: Sherwin-Williams (Business Week, Feb. 27th): "The market overreacted when it batted down Sherwin-Williams Co.'s stock Monday after a judge's ruling made it more likely the paint maker would have to pay to clean up lead paint in Rhode Island… Lawyers for the state estimated the cleanup could cost more than $1 billion. But KeyBanc Capital Markets analyst Saul H. Ludwig said… there's a process called lead safe, which means managing the lead contamination rather than removing the paint entirely. The lead safe process would cost less than $20 million to implement in Rhode Island… Sherwin-Williams… booked $7.81 billion sales last year."

Homebuilders And Housing Stocks

• Merrill Cuts Investment-Bank Ratings on Earnings View (Bloomberg, Feb. 28th): "Merrill Lynch & Co. analysts cut their ratings on five U.S. and European investment banks, saying earnings will probably decline after Q1 because investors are becoming more cautious."We remain highly optimistic on long-term growth prospects for the group as a whole… Goldman is "better positioned for the current setting than most, given less- significant exposure to mortgage businesses''... The perceived risk of owning low-rated subprime mortgage bonds jumped to a record for an eighth straight day yesterday, as rising interest rates and falling house prices make it difficult for some of the least creditworthy U.S. borrowers to repay loans." [Editors Note: See above.

• Fund Shareholder to Withhold Votes to Protest Toll Bros. CEO Pay (Forbes, Feb. 27th): "A 67% drop in Q1 profits for Toll Brothers and the company lowered its earnings outlook for 2007… [But] Robert Toll made much more last year than the median of CEOs at peer companies - $21.8 million, including a $17.5 million bonus. Institutional investor LongView expressed concern about stock dilution at Toll Brothers. Toll was given 250,000 stock options last year and owns 17.9% of the common shares. At the end of 2006, Toll's unexercised in-the-money options - stock options that would be profitable to the holder once exercised - was worth $187.4 million."

• This Just In: Upgrades & Downgrades (Motley Fool, Feb. 27th): "McGraw-Hill's Standard & Poor's (S&P) subsidiary and Moody's make a lot of money by analyzing how much money other companies make (and how much debt they can safely carry). Credit Suisse argues that both S&P and Moody's have benefited mightily from the U.S. housing boom (bubble?), the mortgages issued to finance it, and their ability to sell ratings services on the "collateralized-debt obligations" (CDOs) into which housing mortgages are packaged."

• Hovnanian Enterprises: One to Hold For the Housing Sector Rebound (Hilary Kramer in Seeking Alpha, Feb. 27th): "HOV… has a large number of orders in the pipeline and land options that decrease its risk and capital costs. It has been acquiring a lot of companies to give it better economies of scale. My guess is it won't be hit as hard by real estate woes as its competitors will be. But the market is clearly going to take a while to come out of its funk, and with interest rates remaining high because of a strong economy, it doesn't look like we'll see any growth driven by falling mortgage costs. But keep your eye on this one; it's a great company if you can grab it at a discount."

Commercial Real Estate and REITs

• PREIT Reaps Rewards from Redevelopment (Globe St., Feb. 28th): "Pennsylvania Real Estate Investment Trust reported net operating income of $84.9 million for Q4'06, up 7.5% from Q4'05. Full-year 2006 NOI rose to $305.7 million, up 6.1% from $288.1 million in 2005.“We’re at the tipping point in the transition of our portfolio,” said Joseph Coradino, EVP… Of the eight properties at which redevelopment was completed in 2006… NOI was already up 3.2%, sales per sf averaged $373 per sf, which is above the portfolio’s overall average of $354 per sf, and in-line occupancy at those centers is at 92%."

• Australia's Centro to Buy Nex Plan Excel Realty for $3.4B (Seeking Alpha, Feb. 28th): "Australia's Centro Properties Group announced a plan to buy New Plan Excel Realty Trust for $3.4 billion in cash, $33.15/share -- a 13% premium over Tuesday's $29.34 close. This is Centro's third U.S. REIT purchase including last year's Kramont and Heritage acquisitions, and will make it the fifth largest manager of U.S. shopping centers. Centro said the deal will add 10% growth in 2007/2008 and 7% annually onward. Analysts expect another 10% rise on the stock… Centro says more than 70% of New Plan's shopping centers were part of a major supermarket, a Wal-Mart or a Kroger's, buffering Centro from fluctuating consumer spending."

• Healthcare REIT Plans $400M Sale of Senior Living Portfolio (Commercial Property News, Feb. 27th): "Healthcare Realty spokesperson: We think it's a good time to sell our senior living assets. The rates in the market are the highest they have ever been." The portfolio includes 62 assisted living, skilled nursing and independent living facilities accounting for 5,817 beds, and 16 mortgage investments. The Nashville-based REIT expects to see a gain of approximately $57 million from the portfolio disposition, and plans to use proceeds to repay debt on its revolving credit facility and to make a onetime payment of a special dividend to shareholders at $4.75 per share."

Quote of the Day: Shouted From the Rooftops

"There's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy."-- Ben Bernanke, Federal Reserve Chairman testifying before Congress today.

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.