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.

Quote of the Day- "From the House's Mouth"

"When will the market rebound? Who knows? The Shadow knows. I have no idea. I would've thought that it would've rebounded by now and I would've been dead wrong, and I was"- Homebuilder Toll Brothers CEO Robert Toll. (Bloomberg, Mar. 15th)

Real Estate Sales and House Prices

• Southland Home Sales Slowest in a Decade; New Price Peak (DataQuick News, Mar. 14th): "DataQuick: A total of 17,680 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in February. That was down 2.55% from 18,128 in January, and down 19.8% from 22,046 in February last year... Since 1988 February sales have averaged 18,631. A decline in transactions from January to February is not unusual… The median price paid for a Southern California home was a record $495,000 last month, up 2.15% from $485,000 in January and up 5.3% from $470,000 in February last year."

• Homebuyers Still in Driver's Seat (OC Register, Mar. 13th): "DataQuick Information Systems: Orange County's 122-month streak of rising home prices is over. The decade-long run – which saw y/o/y appreciation hit 32% at one point – ended last month when the median price of an Orange County home fell to $620,000, a decline of $2,250 from the median in February 2006… Overall sales were down as well: A total of 2,449 homes changed hands in February, down 16.4% from February 2006. It was the 17th consecutive month in which sales declined from the year before, a slump that began in October 2005."

• Warren Group: Connecticut Home Prices Inch Up in January After Six-Month Lull; Sales Up for First Time in 15 Months (Business Wire, Mar. 13th): "The Warren Group's Commercial Record: Home sales in Connecticut rebounded and prices rose slightly in January… Sales of single-family homes rose 4.6% in January compared to year-before numbers, and the median price went up 1% to $272,725 in January 2007, vs. $270,000 in January 2006. Warren Group CEO: This is encouraging news for Connecticut’s housing market, although we will have to wait and see what the following months bring before we can call it a trend… We are seeing similar increases in sales across New England."

• February Home Sales Fall (Charleston.net, Mar. 13th): "Charleston Trident Association of Realtors: Homes sales in the Charleston region fell by almost 11% last month, while the inventory of residential listings climbed by 72% compared to February 2006... Year to date, transaction volume is off 17% to 1,734 sales… The median home price, meanwhile, has risen slightly through last month, up about 4% to $209,009. That's despite the fact that there were 7,381 existing residences listed for sale as of Feb. 28, or nearly 3,100 more than in February 2006."

• Median Home Price up; so are Foreclosures (Santa Cruz Sentinel, Mar. 13th): "The local housing market is showing signs of revival after a cool winter. Shaking off a three-month decline, the February median home price in Santa Cruz County took a turn upward to $724,500 from $702,250. Sales rebounded to 128 single-family homes, up from 107 a year ago, but down from 137 two years ago. There were 885 listings, about the same as a year ago but double the number from two years ago."

Real Estate Investing and Sentiment

• Top Investor Sees U.S. Property Crash (Reuters, Mar. 14th): "Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets... "You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York. "It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia."

• U.S. Homeowners Expect Steady House Prices – survey (Reuters.com, Mar. 14th): "Reuters/University of Michigan survey conducted in January and February: The majority of U.S. homeowners expect no change in the value of their homes in the year ahead.... Some 55% of American homeowners expect no change in the value of their home… while just 7% expect the value of their home to decrease, with the remainder expecting an increase. Overall, homeowners expect a median price increase of just 0.1%... Representing a slowing in expected price appreciation from double-digit increases in the recent past, likely leading the typical homeowner to hold back from borrowing against their home equity."

Mortgates and Real Estate Lending

• Hot Property (Business Week, Mar. 14th): "Mortgage Bankers Association: "The market is working, culling over-capacity from the industry, as price signals from the capital markets lead to changes in product mix from originators, and directly and immediately impact the rates that mortgage lenders can offer to borrowers. Far from being a problem, these clear and effective market signals and actions will help the market to more efficiently regain its equilibrium. We would continue to caution policymakers to avoid any regulatory or legislative actions that would impede the ability of the market to respond to changes in underlying economic conditions."

• Option One's Warehouse Lenders can Terminate Obligations Next Month (Inman News, Mar. 14th): "Subprime lender Option One Mortgage Corp.'s eight warehouse lenders will have the legal right to terminate their obligations to fund future loans at the end of April, and take away Option One's right to service existing loans… Parent company H&R Block's SEC filing: Option One is not expected to return to profitability before the waivers expire, but it should be able to obtain new agreements "from a sufficient number of warehouse providers to allow Option One to continue its off-balance-sheet financing activities…Option One's warehouse lenders were providing $16 billion in off-balance-sheet loan capacity as of Jan. 31, about $14.5 billion of which was committed."

• Late Mortgage Payments Reach High (Yahoo! Finance, Mar. 13th): "The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.955 in the October-to-December quarter. That marked a sharp rise from the third-quarter's delinquency rate of 4.67% and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97%. The association's survey covers 43.5 million loans."

• Accredited Stock Collapses; Home Lender Considers Sale (North County Times, Mar. 13th): "Accredited Home Lenders announced Tuesday it was considering putting itself up for sale… and had paid $190 million since Jan. 1 in margin calls to creditors. Margin calls occur when the value of loan collateral decreases. The borrower is required to put up more cash to compensate for the decrease… Shares of Accredited plummeted after the announcement, falling 655 Tuesday, or $7.43, to close at $3.97 -- the biggest percentage loser on all the national stock exchanges…Over the last year, Accredited has lost more than 90% of its stock value."

Subprime Market Fallout

• Greenspan Warns Subprime Woes Could Spread (KPLCTV, Mar. 15th): "Former Federal Reserve Chairman Alan Greenspan said on Thursday there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors. Speaking to the Futures Industry Association, Greenspan conceded it was "hard to find any such evidence" about spillover from housing yet, but added: "You can't take 10% out of mortgage originations without some impact."

• Will Subprime Fallout Lead to a Depression? (Roger Nusbaum in Seeking Alpha, Mar. 14th): "[On] Bill Cara's 'Is America Headed for a Depression'… If 50% of every loan written last year was subprime, and half of those sub prime loans default, how many people are impacted? If 1000 loans were made, and 250 of them default, who cares? Obviously more than 1000 loans were written, but does this issue effect even 1% of homeowners? The number of people facing default is either significant or it is not… We don't know the number… He cited that 20% of 2006 originations were subprime, but again, how many people is that? To me, the bigger threat is subprime as one small-ish piece of global liquidity constraint."

• 2 Stock Picks For the Subprime Mortgage Crisis (Brian Harper in Seeking Alpha, Mar. 14th): "In the current [subprime] situation… [some] conservative plays: H&R Block (HRB), at $19.70, is presently being deeply discounted as they [try to sell] Option One… Block has said the business will likely fetch more than its $1.3 billion book value. We think Block is worth at least $28 based on a sum-of-the-parts… Delta Financial (DFC) is one of the more conservative of the pure-play sub-prime names. The company's… portfolio of loans is much higher quality than the industry average. At $7.60, DFC is selling at 5.6X estimated 2007 earnings. In Q4 they saw only a modest rise [in defaults]. "

• Mapping California's Subprime Lending Bust (Tim Iacono in Seeking Alpha, Mar. 13th): "First American Loan Performance: With house prices falling, consumers who got no-money-down mortgages… have little to lose by walking away from their homes and debts... Ethan Harris of Lehman Brothers: [Subprime] Foreclosures… could bring an additional 15,000 to 20,000 homes on to the U.S. market every month starting next year. The pain could be particularly acute in frothy markets such as California and Florida, and in depressed places such as parts of Ohio and the auto-producing areas of Michigan. In some areas in and around Detroit, Cleveland and Atlanta, subprime loans make up more than half of all mortgage loans outstanding."

Globalization and the Housing Slump

• US home Loan Woes Hit KLCI, Asian Stocks (Business Times, Mar. 15th): "Malaysian stocks took a beating yesterday… after weak housing market data in the US indicated that the world's biggest economy was slowing down… All stock markets in the region fell, too, with the biggest losses in Singapore (down 3.35% to 3,053.21), Japan (down 2.9% to 16,676.89) and Hong Kong (down 2.57% to 18,836.93)… The news sparked worries again as to the extent the US economy might slow down this year. Banks like BNP Paribas and UBS, however, remain confident that the US, a major trading partner of Asian countries, is likely to have a soft landing."

• Banks Lead Europe Steeply Lower (123 Jump Mar. 14th): "European stocks finished sharply lower on Wednesday, led by declines for banking stocks as U.S. worries about subprime-mortgage losses spread through the sector… Among firms in focus, European banks involved in warehousing considerably dropped. Shares in Deutsche Bank dropped 5.1%, Credit Suisse lost 4.3% and UBS shed 4.3%. European banks with a U.S. lending business also deeclined. Shares of Royal Bank of Scotland Group slipped 4.5% and BNP Paribas gave up 3.5%. Insurers and fund managers were also notable losers."

• GE Real Estate Contributes Seven Properties to Japanese REIT via JV Agreement (Commercial Property News, Mar. 14th): "GE Real Estate has agreed to sell a portfolio of two office buildings and five multi-family properties in the Tokyo area in a $309 million deal. The transaction will be conducted under a joint venture agreement between GE Real Estate and LCP REIT Advisors Ltd., the asset manager for LCP Investment Corp., a Japanese REIT."

• $900 Billion Invested in Global Real Estate during 2006 (PR Inside, Mar. 13th): "Tony Horrell, CEO Jones Lang LaSalle's International Capital Group: There is currently a large overhang of investment targeting [global real estate markets] with $4 of money chasing every $1 of product"… Steve Collins, Managing Director of Jones Lang LaSalle's International Capital Group: "With the favorable exchange rates for foreign investors, we expect U.S. properties throughout the major markets, and specifically in Manhattan, D.C., Boston, Los Angeles and Chicago, to attract strong international investor interest in 2007 with little end in sight."

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

• La-Z-Boy Gets Busy (Motley Fool, Mar. 15th): "La-Z-Boy (LZB), announced a further round of restructuring aimed at aligning its production capacity with the tastes of the American consumer… I see a few trends worth noting here. First and most obviously is the continued string of U.S. furniture makers closing and consolidating domestic shops, and switching to imports to satisfy consumers' furnishing needs. La-Z-Boy is far from the only company caught up in the downsizing-slash-offshoring trend. Furniture Brands (FBN), Hooker Furniture (HOFT), and Stanley Furniture (STLY) have all been cutting back U.S. production in recent months."

• Think Pink: The Owens Corning Panther is Ready to Pounce (Todd Sullivan in Seeking Alpha, Mar. 15th): "I think we are at the housing trough and things are due to begin to climb… My firefighter friend… has been really busy at work lately… [because of] "fire alarm inspections." When a property is bought or sold, a fire alarm inspection certificate is required on the property (both residential and commercial). The more work my friend does, the more properties are changing hands. He said the past three to four weeks have been unusually busy… If this gauge is accurate it may not show up for another month or so since the housing data since inspections are done before the closing on the property."

• ZipRealty Posts Q4 Loss For 2007 (Reuters.com, Mar. 14th): "ZipRealty, the real estate services company expects to post a loss of $0.45 to $0.60/share and a pro forma loss per share of $0.25 to $0.40. ZipRealty expects revenue of $105 million to $110 million for 2007. According to Reuters Estimates, analysts on average expect the company to post a loss of $0.17/share, excluding items, on revenue of $105.6 million."

• Motley Fool (The Courier, Mar. 13th): "The nationwide housing slump has cooled Whirlpool's (WHR) domestic sales, but it's seeing strong growth in regions such as Brazil and India… Management [aims for] savings of… $400 million in 2008 from its Maytag acquisition. Whirlpool… pension and health-care plans were underfunded by more than $1 billion before it bought Maytag, and these drains on funds that could be used to benefit shareholders are worth watching… The stock looks promising, even after a recent run-up. Overall, its seasoned operating model, reasonable valuation, cost-cutting opportunities and international growth prospects outweigh concerns about slow domestic growth and housing woes."

Homebuilders And Housing Stocks

• Toll Says Spring Was 'A Bust,' Can't Predict Recovery (Bloomberg, Mar. 15th): "Toll Brothers Inc. Chief Executive Officer Robert Toll: "You saw no jump in all the other markets and the spring selling season, or the prime selling season, was pretty much a bust on a per community basis.'' Toll said one of the reasons business is slow is because additional homes keep hitting the market as customers continue to cancel. "I think the cancellations are abating now," said Toll."

• Realogy Buyout: Scoop Up Some Spare Change (Brian Harper in Seeking Alpha, Mar. 14th): "The vote on Realogy's (H) buyout by Apollo Management, LP is scheduled for March 30, and assuming shareholders approve it, the deal is expected to close in early to mid-April. Given the current softness in the market, particularly anything associated with residential real estate, it's very likely that the deal will go through. We think a private equity buyer is less likely to get skittish than if Realogy were being purchased by a peer. Realogy shares, however, were off 2% yesterday… it looks like there is an opportunity to scoop up some spare change."

• Efficient Market Hypothesis: The Home Builders (Barry Ritholtz in Seeking Alpha, Mar. 14th): "Homebuilders ramped up from 2003-2005…due to ultra cheap mortgage rates, utterly rampant real estate speculation, and extremely lax lending rules… hitting their highs… in Summer 2005… Given that the market is supposedly a discounting mechanism - and the stocks were cheap on a P/E basis - some people took this to mean that… there was no Housing slowdown coming… [Homebuilders] got cut in half over the next year… Then came the lows over the Summer 2006. As Housing stocks rallied off of these deeply depressed levels, we (once again) heard the same types of faulty reasoning… Last came the rally off of these lows… Now… many have revisited their prior "bottoms," and a few even made fresh lows."

• 7 Growth Stocks on Sale (Motley Fool, Mar. 14th): "Eagle Materials, a Texas-based gypsum and cement producer, is… expected to grow earnings at an annualized rate of 35% for the next five years, the stock trades for less than half of that growth rate… Investors are wary about the housing market's short-term outlook… In the latest quarter, double-digit growth in Eagle's cement and concrete segments helped dampen the blow of a relatively weak gypsum and paperboard market. Although the residential housing market is having a rough go of it, national demand for cement -- especially in construction of roads and commercial buildings -- remains at record highs."

• Sector Snap: Homebuilders Rise (MSN Money, Mar. 14th): "Homebuilers have struggled lately amid concerns that a meltdown in the subprime market meltdown will further delay a turnaround in the struggling housing sector. JPMorgan analyst Michael Rehaut said the housing market is showing signs of improvement, even though the subprime sector has deteriorated, and recommended that investors take advantage of a pullback in the shares. "The industry's key leading indicators -- inventories, can rates, and order trends -- should continue to show signs of stability and even modest improvement." Rehaut said affordability has improved in many key markets, and he expects more improvement as interest rates remain relatively low."

• Housing Bust Taking Its Toll On Homebuilders ETF (Tom Lydon in Seeking Alpha, Mar. 14th): "Expect a downward trend for homebuilder ETFs… D.R. Horton (DHI) President Donald Tomnitz… predicted that new-home prices will continue to decline due to the inventory still on the market. Joanne Von Alroth for Investor's Business Daily reports that Horton's own production is down 35% in 2007 from last year, from 40,000 houses to 26,000. DHI makes up nearly 5% of the SPDR S&P Homebuilders (XHB). XHB is down 9% for the year… The good news is a rebound should build up over the next few years. "

Commercial Real Estate and REITs

• Highland Hospitality Buys Hotel for $34M (Globe St., Mar. 13th): "Highland Hospitality Corp., a real estate investment trust focused on hotels, has purchased the Crowne Plaza Chicago-Silversmith Hotel from S & F Realty for $34.5 million, or approximately $241,000 per key, plus closing costs. The cap rate was not disclosed. “The Chicago market has some good growth prospects for the foreseeable future,” says Sean Dell’Orto, vice president and treasurer of Highland Hospitality. “We think this hotel is well positioned and has some good opportunities that we can take advantage of to let us outperform the market.”

• Commercial Real Estate: A Deeper Shade of Green (Mercury News, Mar. 13th): "In the new headquarters for David Kaneda's electrical-engineering and lighting-design company... no gas will be used to heat, light or cool the building; instead, all the energy for the 7,000 Sq.ft. facility will come from photovoltaic panels installed on the roof… It's not cheap… It costs about $10 to be able to generate one watt of electricity from a solar panel. The state rebates 25%, a federal tax credit offsets 30% and accelerated depreciation handles 30% over five years. Kaneda: "80% of the cost is taken care of… Then, we don't pay for electricity. So that's a payback in two to three years. That's compelling."

• Spaces and Places: Investors More Enamored with Silicon Valley Real Estate (Mercury News, Mar. 13th): "Erik Doyle of CB Richard Ellis: Much of the sizzle in the South Bay can be credited to venture capitalists who invest more than a third of their money in companies within 30 miles of Palo Alto. "That coupled with strong demand for space ... makes the valley very much in demand among institutional buyers… Another sign that the valley is one of the up-and-comers in commercial real estate is the Blackstone Group's apparent decision to hold onto the South Bay buildings just acquired in its $39.2 billion buyout of Equity Office Properties."

• Shopping Center in Coveted Atlanta Submarket Snapped Up for $68M (Community Property News, Mar. 12th): "Buckhead Station, a nearly 234,000-square-foot shopping center in the tony Atlanta submarket of Buckhead, has come under new ownership. Equity One Inc. purchased [it for] approximately $68 million from Buckhead Station Partners… Equity One already has a substantial presence in the Atlanta area with 24 properties; the company acquired another Buckhead shopping center, the 152,000-square-foot Piedmont Peachtree Crossing, for $48 million just last year. All told, the Equity One REIT portfolio includes full or partial ownership of 166 retail properties with 17.9 million square feet of space, seven non-retail properties and six developable parcels."

• The New Real Estate (Harvard Business School Newsletter, Mar. 12th): "The press and Wall Street are focused on the 24 countries which now have REITs and the 28 countries which are expected to have REITs over the next 18 months. But the new, new thing in the world of real estate capital markets is the world of property derivatives. Derivatives help investors deal with the cumbersome, expensive, and timely nature of buying and selling real estate. Through synthetic derivative instruments, investors can rebalance portfolios and transport "alpha" from one portfolio to another to optimize diversification and reduce risk."

Web Site of the Day

Subprime lender news is all the rage these days, but we're all late to the party. Some websites have been tracking and predicting this "implosion" for some time. One such website keeping close tabs on the subprime lenders is the aptly-named Mortgage Lender Implode-O-Meter, which lists 38 subprime lenders who've gone under in recent months. Two were added on yesterday!

Here's the top 25 on the list, click on the chart to see how they've fared:
Wells Fargo (WFC) • HSBC • New Century (NEW) • Countrywide (CFC) • Fremont General (FMT) • Option One (HRB) • Ameriquest • (WMC) • Washington Mutual • CITI Financial (C) • First Franklin • GMAC • Accredited Home Lenders (LEND) • BNC • Chase Home Finance • Novastar Financial (NFI) • Ownit • Aegis • MLN • EMC • ResMae • First NLC • Decision One • ECC Encore • Fieldstone (FICC)

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