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

• Slowdown in New-Home Sales (The Street, Mar. 1st): "Phillip Neuhart, an economic analyst with Wachovia, cited the buildup of completed homes in inventory as a troubling sign for the housing market. "There are more homes in the inventory that are actually completed, not under construction anywhere, that are empty… During January, 32% of the new homes for sale at the end of the month had already been constructed, up from a low-20% range during the housing boom, Neuhart says."

• January New Home Sales Plummet 16.6% (Seeking Alpha, Mar. 1st): "While economists argue whether January sales are a trend or an anomaly, clearly more price cuts will be needed to move inventory, which rose 19.3% from January 2006. It takes about 6.8 months to sell each new house on the market now. Inventory of completed but unsold homes rose 47% from last year. Builders are cutting down on production, from 336,000 to 277,000 currently under construction, but the lack of building activity hurts the general economy, reflected in Home Depot's lower earnings and sales forecast yesterday."

• Housing Market Area: Savannah, Georgia (HUD User, Feb. 28th): "The rental market in the HMA is relatively soft but improving. During the past 12 months, conversions of approximately 400 apartments to condominiums contributed to a decline in the overall rental vacancy rate to an estimated 9%. The pace of conversions is expected to slow and renter household growth should increase during the forecast period. Demand is expected for 2,100 rental units during the next 3 years, a portion of which will be met by the estimated 650 units currently under construction."

• More Housing Data Confirms Trend (Boston.com, Feb. 27th): "Massachusetts Association of Realtors: Single-family home sales rose 12.6% in January, the first y/o/y increase since March. In January, the number of detached single family homes sold rose to 2,744, up from 2,437 in January 2006. The median sales price for a single family home in January was $340,000, down 2.4% from $348,500 in January 2006… Condominium sales in January rose 5.3% with 1,271 condos sold, versus 1,207 condos sold in January 2006; the median selling price for a Massachusetts condo in January was $268,000, down 0.7% from $270,000 in January 2006."

Real Estate Investing and Sentiment

• Time for a Hard Look at Cement (Motley Fool, Mar. 1st): "During the past few decades… domestic demand for cement has been buoyed by a series of federal highway bills… resulting in the spending of about $285 billion over the next half-dozen years on highways across the nation... After Rinker… The other two companies that I believe deserve attention are: Eagle Materials (EXP) and Texas Industries (TXI). Eagle once was part of homebuilder Centex's (CTX) repertoire, and operates four cement plants in places like Buda, Texas and LaSalle, Illinois. It also is a producer of gypsum wallboard."

• "Stats, Lies and Real Estate" (Inman News, Feb. 27th): "Real estate research reports: Studies of a local real estate market by most respected universities tend to be valid. So do local-area studies done by (companies) in the data-gathering business, especially when they quote their study methodology. The National Association of Realtors and its counterpart state and local Realtor groups are a major source of real estate statistics, as the trade groups have access to a wealth of property information collected… through associated multiple listing services. NAR's stats are used by the Federal Reserve, the U.S. Housing and Urban Development Department, Chicago Board of Options Exchange, and many economists. NAR: "Our data are remarkably accurate and we work hard to make them so.". Miller-Samuel Appraisers: A potential problem with sources of real estate statistics is the accompanying analysis."

Mortgates and Real Estate Lending

• The Damage Isn't Spreading (Minyanville, Mar. 1st): "Fed Governor Bies noted that subprime ARMs represent only about 7-8% of all outstanding mortgages and that the delinquencies are largely concentrated among those mortgages issued last year. In other words, the Fed sees the problem as an underwriter's issue, rather than as a housing collapse issue."

• Subprime Finance Turbulence is Spreading (Michael Panzner in Seeking Alpha, Mar. 1st): "Rating agency Fitch hints at the possibility that increasing turbulence in the subprime finance sector --which caters to borrowers with less-than-pristine credit histories -- may not be limited to housing-related lending. Subprime delinquencies for US auto loans rose 4.1% in January versus December 2006, while the annualized net loss [ANL] index spiked 31.4%, according to Fitch Rating's 'In the Auto ABS Driver's Seat' newsletter."

• Fremont Results Delay Sparks Subprime Concern (Market Watch, Mar. 1st): "Fremont General shares slumped 24% on Wednesday [after announcing] late Tuesday it will postpone the release of its Q4, full-year 2006 results and 10-K from March 1. No reason was given… Roughly half of Fremont's business is subprime mortgages, with the remainder focused on commercial real estate lending, so the company is thought to be less exposed to subprime problems... However, Tuesday's results delay heightened concerns… Fitch downgraded several of its ratings on Fremont late Wednesday, including the holding company's long-term issuer default rating, which fell to B+ from BB-, and its long-term senior debt rating, which dropped to "B" from "B+." Further downgrades could follow, Fitch noted."

• Subprime Mortgage Perceived Risk Tumbles on Home Price Data (Bloomberg, Mar. 1st): "The perceived risk of owning low- rated subprime mortgage bonds plunged today as a government report suggested that U.S. home-price appreciation is stable. An index of credit-default swaps on 20 securities rated BBB-and created in the second half of 2006 rose 8.6% today to 70, according to Deutsche Bank. The ABX-HE-BBB- 07-1 index dropped 30% last month amid concerns about rising delinquencies and losses among subprime lenders including NovaStar Financial Inc. and Accredited Home Lenders Holding Co."

• Investors Fear 'Shock' from Subprime Meltdown (CoStar, Feb. 28th): "About 70% of subprime loans have prepayment penalties that can make it too expensive for homeowners to refinance to conventional fixed-rate loans with lower interest rates. Because home prices are flat or falling in poorer neighborhoods where subprime loans are most common, even those owners who can handle the prepayment penalties may find it impossible to get new loans large enough to cover their balances on the old ones… S&P Ratings downgraded 400 residential mortgage backed securities classes in 2006, [beating a] record of 292 set in 1990. Subprime mortgage collateral accounted for 229 (56%) of those downgrades, jumping from only 56 (37%) in 2005."

• Economy Reaches a Turning Point (AZCentral, Feb. 28th): "Will trouble for subprime lenders spread to the holders of the collateralized debt? And will more creditworthy borrowers start to default, too, creating a cascade effect for the debt-holders? It's not comforting that the reserves that banks put aside to cover bad loans are at their lowest level since 1990, a fact first reported by the Wall Street Journal. Reserves cut into profits. They also are an essential safety net. Bad downturns almost always involve banking crises."

• Homeowners Pinched By Adjustable Mortgages (KCRA, Feb. 28th): "Real estate records in Sacramento County show more than 7,000 foreclosures in 2006 alone. Local realtor: "Out of about 310 active homes for sale in Antelope, there are 57 homeowners that have their properties listed as short sales. A short sale means homeowners can no longer afford their loans. They owe more than their houses are actually worth… People are borrowing from retirement accounts and exhausting every last penny they have to try and keep this mortgage current… Eventually they're going to… have no money. And then they're forced to sell their home."

Global Alternatives To The Housing Slump

• Deutsche Telekom Posts Loss After Customers Defect (Bloomberg, Mar. 1st): "Deutsche Telekom AG, Europe's largest telephone company, posted its first loss in more than two years after half a million German customers defected and costs to cut jobs soared… The net loss was €898 million euros ($1.2 billion) in Q4, after a profit of €991 million a year earlier… Deutsche Telekom will review the possible sale of assets including the T-Systems Media and Broadcasting unit, its Web units in France and Spain, radio towers in Germany and the U.S., the DeTe Immobilien real estate unit and the remaining shares in Sireo."

• US Real Estate Firm Buys Second Dublin Data Centre (Silicon Republic, Mar. 1st): "The data centre firm responsible for Amazon.com’s hosting in Ireland has bought its second data centre in west Dublin for €28.2m and is in the process of building a third 120,000 sq ft data centre on a site in north Dublin, siliconrepublic.com has learned. In May last year, siliconrepublic.com revealed that Digital Realty Trust, a New York Stock Exchange-listed company, acquired the former 360 Networks data centre in Clonshaugh for an undisclosed sum."

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

• U.S. Manufacturing Expands, Reversing January Contraction (Wall St. Journal, Mar.1st): "Commerce Dept.: U.S. construction spending fell much more than expected in January… by 0.8% at a seasonally adjusted annual rate of $1.180 trillion. Spending climbed 0.6% in December… Residential construction spending plunged by 1.7% to $584.9 billion. Spending fell 1.0% in December; it was originally seen down 1.6%. Nonresidential construction spending increased by 0.2% in January... Private-sector construction spending decreased 1.2% to $894.3 billion. Spending inched 0.1% higher in December… Public, or government, construction spending increased 0.6% to $286.0 billion. December outlays surged by 2.4%; originally, spending that month was seen rising 0.6%. Federal government construction outlays rose by 9.7%, while state and local spending -- much larger than federal spending in dollars -- dipped 0.1% to $263.5 billion."

• The First American Corporation Reports Financial Results for the Fourth Quarter and Full Year 2006 (MSN Money, Mar. 1st): "First American Corporation (FAF) America's largest provider of business information, today announced financial results for Q4 and full year ended Dec. 31, 2006. Revenues for Q4'06 were $2.2 billion, representing a decline of 2% from Q4'05. Net income was $104.0 million in Q4'06, compared with $116.6m in Q4'05, a decline of 11%. Diluted EPS were $1.06 in Q4'06, versus $1.17 in Q4'05. CEO Parker S. Kennedy: "This year was marked by a number of challenges for our company, including a general decline in real estate activity, home price depreciation and increased industry regulation."

• Bad News Bearers (USA Today, March 1): "Greenspan's a private citizen now, and he was only saying what a lot of economists think: The powerhouse U.S. economy is getting a little shaky. The manufacturing sector is technically in recession; unexpectedly bad factory numbers were a factor in Tuesday's market plunge. And the housing market continues to be weak; reports from Merrill Lynch suggest that the real estate downturn is only half done. At the same time, unemployment is low, corporate profits are robust, and the services sector is healthy."

• How Alan Helped Ben (Business Week, Mar. 1st): "In 1996, Greenspan fretted about "irrational exuberance" in the stock market, but [with] little impact. Stocks soared into record territory until crashing in 2000. Greenspan was criticized for not hiking interest rates to burst the bubble… [Now] investor enthusiasm for assets is global, and… risks are being systematically underestimated… Bernanke is in a tight spot. If he hikes interest rates, he risks turning an implosion in the subprime mortgage market into a housing market collapse. The economy wouldn't be far behind… Better for a legend well-schooled in the risks of bubbles to sound the alarm."

• How Now Low Dow? (Slate, Feb. 28th): "When housing is doing well, it stimulates a great deal of economic activity, creates jobs, and makes people feel wealthier—and hence more likely to spend. When housing is doing poorly, the opposite holds… Prices and home values are down marginally, but when assets are encumbered with huge amounts of debt—as houses are—it doesn't take much of a decline to make an impact. (If you put 10% down on a house, and it declines 10% in value, you've lost your entire investment.)"

• Economy Grew at Slower Pace in Last Quarter of 2006; New Home Sales Plunge (Foster's Online, Feb. 28th): "The new reading on gross domestic product showed the economy grew at a 2.2% pace _ a considerably weaker rate than the government first estimated (3.5%). The principal reason for the new, significantly lower estimate: Businesses tightened their belts amid fallout from the troubled housing and automative sectors… Investment in home building in Q4 was slashed by 19.1% on an annualized basis, the steepest decline in 15 years… Companies also ended up cutting back on other spending and investment in Q4, including equipment and software, new plants and other commercial buildings."

• Bernanke - Flat House Prices May Encourage Savings (Reuters, Feb. 28th): "Federal Reserve Chairman Ben Bernanke: Flat U.S. house prices might discourage homeowners from counting their properties as savings tools and so develop other savings plans… Homeowners have lately seen their homes as investments and that is partly why "current savings out of current income is low… Appreciating home values and stock gains are "not counted as part of the national savings rate… As home values flatten, many homeowners will be less able to extract wealth from their homes and so current income may rise a bit over the next couple of years."

Homebuilders And Housing Stocks

• Lennar Gets $700 Mln From Stake Sale in Joint Venture (Reuters, Feb. 28th): "Homebuilder Lennar Corp. (LEN) said it completed a sale of a major stake in a $2.6 billion California venture to MW Housing Partners for about $700 million in cash. The transaction is part of a sale of stake in the LandSource joint venture by Lennar and Cerberus's LNR Property Corp. The joint venture owns 15,000 acres in southern California. Lennar said the deal will contribute about $170 million to Q1 earnings and an additional $400 million to profits in the future. In addition, Lennar will receive fees in connection with the management of LandSource."

Commercial Real Estate and REITs

• Former Kmarts, Cordova Shopping Center Have New Options With New Plan (Memphis Daily News, March 1st): "Sears had closed the stores in 2005, citing their under-performance. Since then, Sears' partner in its development venture, New York REIT New Plan Excel Realty-- with assets of about $3.5 billion -- recently signed leases with at least two new tenants at the old Kmart site in Cordova. An 80,000 Sq.ft. Burlington Coat Factory opened at the former Southaven Kmart in September. And… New Plan executives also sunk about $42 million into The Commons, a Memphis shopping center across the street from Wolfchase Galleria that the company bought in December."

• 12 Shopping Centers Have a New Owner (News & Observer, Mar. 1st): "Developers Diversified, an Ohio real estate investment company, bought 12 Triangle-area shopping centers as part of a $6.2 billion deal to acquire Inland Retail Real Estate Trust. Developers… agreed to pay $14 a share for Inland and assume about $2.3b in debt. The deal… includes a 307-property portfolio… [of which are] 200 shopping centers in Georgia, Florida, Virginia and the Carolinas, where populations are expected to grow faster than the U.S. average… Investors spent $211 million on Triangle retail real estate in 2006 – 11% above the 10-year annual average, according to CB Richard Ellis data."

• American Financial Realty Trust Announces 2006 Fourth Quarter Results (PR Newswire, Feb. 28th): "In this quarter [our objective was] to rationalize the Company's liability structure by reducing leverage (the ratio of our net debt to total book value assets) to between 60-65% and improve net cash flow by repaying debt with high interest rates or debt service constants. "During Q4 we repaid or extinguished approximately $861.3 million of debt.... At year end, we made significant progress towards our de-leveraging objective, which resulted in the reduction of our net debt to total book value asset ratio from 71.6% to 66.6%."

Web Site of the Day

One of the few cities with home price values still appreciating is New York City. Either because of outrageous Wall Street bonuses, or simply because it's the Big Apple, it's a place where people want to be. So, if you're one of them, you'll need the Manhattan Rental Market Report.

The Report has a database of about 3,000 rental properties and offers comparisons and stats to compute average rental prices. First launched in January, it features 14 different neighborhoods in Manhattan, and provides as much data as possible on them. From a neighborhood guide, good movers to median rental prices in a particular neighborhood, and comparisons of the same type of rental in another area, or to another type.

The graphs are phenomenal—studios on the Upper West Side, 1 BR's in SoHo, 2 BR's price trends in Tribeca, uptown, downtown: It's got everything the up-and-coming Wall Street exec will need to know.

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