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 have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.

Quote of the Day- "Shouted From the Rooftops"

"It's not just about median prices. Usually when it's a good time to buy in the county, it's a good time to buy everywhere. It's not usually hot and cold in the same county. We are having a market that appears to be split along geographic boundaries." - Richard Calhoun, broker of Creekside Realty in San Jose on March's new record-high median single family home prices in Silicon Valley ($830,000). Home sales are down and local experts say the jump is probably because of less first-time buyers, and more sales in affluent areas. (Realty Times, Apr. 12th)

Real Estate Sales and House Prices

• Realtors Predict Prices Will Fall (San Francisco Chronicle, Apr. 12th): "The National Association of Realtors [NAR] predicted Wednesday that the median price of existing U.S. homes is expected to fall 0.7% this year, the first time that has happened since records started in the late 1960s. The forecast was startling, coming from the normally upbeat industry group. Last year… the nationwide median price of an existing home rose a modest 1%… The NAR has also lowered its 2007 forecast for sales of new and existing homes… The national median new home sale price is expected to rise 0.4% this year, after a 1.8% gain in 2006."

• NAR Says 2007 Will Be First Home Price Drop Since Great Depression (Seeking Alpha, Apr. 12th): "Lenders current hyper-cautiousness means less eligible buyers, and a rise in foreclosures is adding to the inventory of houses in already over-stocked markets… The good news: "Inventories remain well below the levels experienced during the last housing downturn in the early 1990s, and supplies are close to balance in many areas." Separately, the Mortgage Bankers Association is allocating $5 million to combat "a torrent of unfair press" about subprime woes, saying, "Misleading information, often reinforced by vivid and frightening anecdotes, is raising the very real possibility of overzealous regulatory and legislative responses."

• It's a Buyer's Market (MCALL, Apr. 11th) Pennsylvania: "Lehigh Valley Association of Realtors: Lehigh Valley average prices for existing homes, or resales, fell about 1% to $213,000 last month, compared with the year before, and were down 4% compared with February… The number of properties listed for sale rose 31%, compared with February… In March, the number of homes sold fell for the 10th month in a row, declining 16%. The total number of homes for sale last month in the Valley was up 45%, compared with the same period in 2006."

• Central Oregon House Prices Soar (KOIN News, Apr. 11th): "Median prices for homes continued to climb in the first three months of this year throughout most of Central Oregon. First quarter figures from the Central Oregon Multiple Listing Service show the median price reached nearly $350,000 -- up more than 6% from Q1'06. But the figures also show the number of homes sold between Jan. 1 and March 31 dropped this year. In Redmond, the median price reached $256,000 while the median in Jefferson County was $176,000. Crook County hit $198,000 for the median."

• Median Price of Existing Homes Slips to 2006 Levels (Orlando Sentinel, Apr. 10th): "Orlando Regional Realtors Association: The median price of Orlando area existing homes sold in March slipped to 2006 levels, $240,000… Sales of homes and condos rose to 1,665 in March from 1,541 in February in the core Orlando market as the spring selling season kicked off. But that was down 42% from March 2006… The number of homes for sale by local Realtors rose to a record 23,547 from a revised 22,055 in February, up 1,492, a 14-month supply at the recent sales pace… The local Realtor group's affordability index rose to 93.6% in March from 87.1% in February."

Real Estate Investing and Sentiment

• S.F. Hedge Fund Considers Another Big Bet on Housing (San Francisco Business Times, Apr. 11th): "Farallon Capital Management, the nation's fifth-largest hedge fund, is in talks to acquire the manufactured housing communities of Affordable Residential Communities for about $1.84 billion. Farallon is one of ARC's largest institutional shareholders, holding about 4.5 million shares at the end of last year… The deal marked Farallon's second big investment tied to the housing sector in recent weeks. Farallon extended a $200 million rescue package to troubled subprime mortgage lender Accredited Home Lenders (LEND)… Farallon and Simon Property Group (SPG) closed April 6 on their $1.64b purchase of Mills Corp. (MLS). Mills owned 37 malls, including 17 entertainment-oriented mega-malls."

Mortgates and Real Estate Lending

• NovaStar on the Block (The Street, Apr. 11th): "NovaStar Financial (NFI) surged 15% in late trading after putting itself on the block… NFI said it has hired Deutsche Bank as its financial adviser to consider "a range of strategic alternatives, including without limitation a potential sale or other change of control transactions." NovaStar added that it got $100 million in financing from Wachovia Capital Markets… The deal provides for the parties to commence negotiation on a comprehensive financing facility which would replace and expand existing facilities… NovaStar also said in a SEC filing that its loan production fell 58% from a year ago in March."

Subprime Fallout and Foreclosure Impact

• Housing's Hype (NY Sun, Apr. 12th): "John Weicher, Director, Center for Housing and Financial Markets at the Hudson Institute: On February's Census... report of statistically insignificant... 3.9% declines in new home sales, the stock market dropped, ignoring... increases in both new home construction and existing home sales… Both subprime and "housing bubble" worries are overblown… Mortgage Bankers Association says subprime loans are… 14% of all home mortgages… and only…. 13% [of those are delinquent.] Less than half... are likely to default... They represent less than 1% of all borrowers… Borrowers with good credit… aren't likely to experience problems simply because borrowers with bad credit and risky loans do… House prices… are still rising nationally and in most markets… Where prices have declined… economies [are] based on [fundamentals like] automobiles and auto parts… not housing fundamentals."

• City Pairs with BHPC to Reduce Foreclosures (Examiner.com, Apr. 12th) Baltimore, Maryland: "Since last year, 50 families a week have lost their homes to foreclosure in Baltimore City — depressing real estate values by $900 million… Last year, lenders filed more than 3,200 foreclosure procedures in the city, according to the Baltimore Neighborhood Indicators Alliance. Of that number, 75% went to foreclosure. That translates to 2,500 homes lost in 2006."

• Today's MGIC Investment Earnings Report: Subprime Reckoning Day (Wall Street Mayhem in Seeking Alpha, Apr. 12th): "MGIC's (MTG) earnings report today will be the first earning announcement to come out of the mortgage insurance sector since the subprime meltdown began. Although some… think that the problems with subprime and Alt-A loans will not carry over into the mortgage insurance sector, the Q1 report from MGIC could give investors their first real look into the potential problems that the subprime mess could cause mortgage insurers… PMI's most recent 10-K [shows] significant exposure to Alt-A loans. Apparently, not all of these loans were securitized… In our opinion the mortgage insurance sector will continue to under perform."

• $1 Billion Pledged to Help Fend Off Foreclosures (Washington Post, Apr. 12th): "Neighborhood Assistance Corporation of America, a housing advocacy group, yesterday announced it would commit $1 billion to refinancing the loans of lower-income people at risk of losing their homes. The financing will come from CitiGroup and Bank of America, which have been lending money for years to borrowers screened by the nonprofit group. NACA, of Boston, said it had helped put 50,000 people in homes since its creation… A report released yesterday by Congress's Joint Economic Committee said that each home foreclosure imposes an average $78,000 in costs on homeowners, lenders and local communities."

• Subprime Revelation: Early Payment Default-ers Just Don't Care (Greg Harris in Seeking Alpha, Apr. 12th): "[On] the coming credit storm, I checked… credit cards… the first to thing people are going to let go of… Capital One (COF) has the lowest delinquency rate [since] 2002. Citigroup (C) and Bank of America (BAC): no upticks either. Q: So why would people who show no documented loans, borrowing the full equity amount of the house, skip on their mortgage payments before a few months are out? Early Payment Defaults... are a frequent reason behind subprime defaults.] Credit worthiness doesn't deteriorate that fast. A: Because they're houseflippers… with nothing on the line… Obviously a sign of a bubble, but [not] a real sign of massive credit deterioration. Real credit deterioration would come on top of resetting loans and should be felt in other sectors."

• Subprime Resets to Peak Through April 2008 (OC Register, Apr. 11th): "Peter DiMartino of RBS Greenwich Capital Markets, citing data from First American Corp.'s LoanPerformance unit: Rates on about 3.25% of subprime-loan balances are scheduled to start to adjust in September, October and in April 2008... A total of 32% of balances face rate adjustments over the next 12 months. Payment resets will range between 1% and 3% of outstanding subprime balances in the other months between this May and November 2008, and then fall below 1% in December 2008. Another 5% of subprime loans will hit reset dates after 2008."

• Subprime Mortgages Scrutinized (Hartford Courant, Apr. 11th): "Connecticut Gov. M. Jodi Rell said Tuesday she is forming a task force to study the issue after several high-profile subprime lenders, including one in Connecticut, filed for bankruptcy, costing thousands their jobs… It is estimated that $8.1 billion in subprime mortgages have been underwritten for properties in Connecticut, and about 10% of those are past due, leaving thousands of homeowners facing foreclosure, the banking department said."

• Housing Boom Tied To Sham Mortgages (Washington Post, Apr. 10th): "Phillip Hill, 50, was convicted last month in… one of the biggest mortgage-fraud cases in U.S. history. It involved 400 fraudulent loan applications; nearly $100 million in mortgages; and 120 closing attorneys, appraisers, mortgage brokers and others... In Atlanta, entire neighborhoods and condominium developments, especially in affluent areas, were hit by organized fraud rings. Initially, these schemes pumped up housing values for everyone as artificially high appraisals helped the swindlers get inflated loans. Legitimate home buyers rushed in to… what they thought was a soaring real estate market. Now as the fraud is… exposed, home values are taking a hit."

Global Alternatives To The Housing Slump

• Costa Rica - Second Homes and Real Estate Prices Soaring - Costa Vista Land Report (PR Web, Apr. 12th): "Evidence of benefits of investing in Costa Rica's real estate market in Costa Rica can be found in the local presence of corporate giants like Sony and IBM… Luxury condominiums are currently selling for upwards of $200,000... Hotel chains are eager to take advantage of the rise in ecotourism, real estate investment and the influx of foreigners. People from around the globe come here seeking low cost quality healthcare facilities, to purchase raw land, build second homes and/or relocate and retire."

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

• Fed Minutes: No Hint of Rate Cut, Upbeat on Housing (Seeking Alpha, Apr. 12th): "The Federal Reserve Wednesday released the minutes of its March policy meeting, revealing a lack of clarity over America's economic direction was a key factor in dropping the possibility of rate hikes from the wording of its post-meeting statement: "In the light of increased uncertainty about the outlook for both growth and inflation, the Committee also agreed that the statement should no longer cite only the possibility of further firming." There was no hint of a rate cut… Governors were upbeat on housing, noting "home-buying attitudes had improved and continuing job growth could be expected to support home sales."

• The Savviest Stock Picker in America (Kiplinger.com, May, 2007 Newsletter): "Ken Heebner, CGM Focus hedge fund manager, on subprime: Housing prices rising 100% in some markets between 2000 and 2005… was driven by people taking out mortgages they couldn't afford… and using the money to bid up the prices of houses. [The] correction under way… will intensify because of massive foreclosures… A lot of prime mortgages will become subprime… The housing market will stay weak for another year… Consumer spending will slow. But slower growth will extend the duration of the business cycle because the Fed won't have to raise interest rates. On balance, this is positive for the stock market."

• Patrick Industries to Acquire Adorn, LLC (PR Newswire, Apr. 11th): "Patrick Industries, Inc. (PATK) has agreed to acquire Adorn, LLC, a manufacturer and supplier of interior components to the recreational vehicle and manufactured housing industries. Patrick expects to close the acquisition within six to eight weeks and expects the acquisition to be accretive to earnings in 2007. Adorn… recorded approximately $240 million in revenue in 2006, manufactures and supplies laminated wall paneling, cabinet doors and other interior components primarily to the RV and MH industries… With Patrick Industries reporting 2006 revenue of $348m, the combined entities together account for approximately $588m in total revenue."

• Bed Bath & Beyond F4Q06 (Qtr End 3/3/07) Earnings Call Transcript (Seeking Alpha, Apr. 11th): "Warren Eisenberg, Co-CEO: "Although we are aware of the results being reported by other operators and of the current macro economic environment, we are confident as our consistent results attest that home goods continues to be an extremely attractive sector. Through the efforts of our over 35,000 associates in our decentralized environment, our strong financial condition and our competitive position in the marketplace, we are confident that fiscal 2007, which began about five weeks ago, will be our most profitable year ever and our 16th consecutive year of record earnings."

Homebuilders And Housing Stocks

• Why the Fed Must Allow Gold to Rise (Greg Silberman in Seeking Alpha, Apr. 12th): "A bursting Real Estate bubble has the potential to sink the economy. The Fed can… cut interest rates…[But] it will weaken the Dollar and cause long-term rates to rise (Bonds to fall) which will knock on an already collapsing housing market… The Fed will continue… trying to convince the market that the economy is strong. But manufacturing and services are slowing whilst Oil and Food prices are rising. When the Fed is finally forced to cut rates to prevent an all out housing collapse, Gold will soar as a combination of massive monetary creation collides with mounting price inflation."

• Jim Cramer's Wall Street Confidential Picks, April 10 (Miriam Metzinger in Seeking Alpha, Apr. 11th): "Cramer would not touch D.R. Horton (DHI), Pulte Homes (PHM), Lennar (LEN)… after reading a report by Ivy Zelman of Credit Suisse during which she discussed her downgrade of Pulte and Horton and upgrade of Centex. Cramer comments DHI… bought a gigantic amount of property in its quixotic delusion of "endless demand" and has the least written down on its property. Cramer would approve of shorting DHI and being long Centex (CTX)… Homebuilders' problem: While "the rigor of the writedowns is clearly there, all the price targets are still way too high…" Until more is written down on Horton and Pulte homes, he would not touch them on the long side."

Commercial Real Estate and REITs

• S.A. Real Estate is Hot Seller (My San Antonio, Apr. 12th): "Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University: Commercial property values are increasing rapidly, especially in Central and South Texas... Equity Office Properties Trust bought Austin's Frost Bank Tower last year for $188 million, setting a Texas real estate… record at $354 per sf. Blackstone Real Estate Advisors bought Equity last year for $39.2 billion. Now Blackstone is selling the tower to Thomas Properties Group, along with nine other office buildings, for $1.15b… Dotzour's remarks contradicted a Wednesday report from Moody's, ranking San Antonio among the worst markets for commercial real estate."

• Railroads: Why Not A REIT? (David Merkel in Seeking Alpha, Apr. 11th): "What if Buffett’s [latest] purchase, Burlington Northern (BNI)… took its extensive land holdings and spun them off into a REIT, where the railroad would pay the REIT a fee for renting the rails? This could be a very tax-effective means of running the business(es)… The operating company would pay a small dividend at best, while the REIT would pay a significant dividend… Which entity would be more valuable? I would guess that the REITs would be more valuable, given the scarcity of tracks. That said… the ability to use the track intelligently is worth more than the tracks, until things become more congested on the rails."

• Maguire To Sell $300M in Office Properties (Globe St., Apr. 11th): "Maguire Properties REIT… Sells two North San Diego County properties for $298 million… The properties are Pacific Center, a 438,960-sf office site in Mission Valley and Wateridge Plaza, 268,957 of trophy office space in Sorrento Mesa… Maguire announced last month that the two San Diego area sites would be among 11 of its office projects totaling 17 properties in Southern California that would go on the block… Part of a $2-billion disposition strategy for the REIT to reduce debt after its $3-billion purchase of 8.1 million sf of former Equity Office Properties portfolio space from Blackstone."

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