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- "From the House's Mouth"

"The inventory has to clear up before the market can go up. At this point, if we build one house a month, I'd be happy." - Alex Mourtakos, president of homebuilder Southern Image Homes, which is building or planning projects across the Tampa Bay area. (St. Petersburg Times, Apr. 16th)

Real Estate Sales and House Prices

• Median Home Price Dips Again (San Luis Obispo.com, Apr. 14th) Southern California: "DataQuick Information Systems: A total of 405 homes were sold last month, down from 409 sold in March 2006. In February, 220 new and resale single-family detached homes and condominiums sold in the county. The median price of a home… declined to $506,000 in March, a 10.4% decrease from the previous year, when the median reached $565,000. A median of $525,000 was recorded in February."

• Early Buyers Feel Condo Conversion Sting (News10, Jan. 14th) Sacramento, California: "Property records show sales started strong at Rollingwood with 76 units sold in October, November and December of 2005. But sales dropped off in 2006, with just 45 condominiums sold the entire year. The last condo sold was in January, the only sale at Rollingwood in 2007… Now more than half of the 272 units are unsold and most appear to be vacant… The homeowners association has begun foreclosure proceedings to try to collect the more than $600,000 in unpaid dues and penalties."

• Median Price of Homes Drops in Ada (Idaho Statesman, Apr. 14th): "Treasure Valley, Idaho: "Intermountain MLS: The median Ada County home price was $226,800 in March, a 1.3% drop from $230,000 in March 2006… [After] nine consecutive months of lagging home sales… Canyon County's $158,000 median, [is] a 2% increase from a year ago… Inventory: 4,292 homes were for sale in the Ada County last month, plus 2,322 listings in Canyon County. The total of 6,614 is 55% higher than the supply in March 2004… Housing sales remained sluggish last month, with 1,050 transactions in the two counties, 30% below March 2006."

• Maui Home Sales Up, Prices Down (Honolulu Star Bulletin, Apr. 13th): "Maui: March’s median single family home price dropped to $665,000 from the year-ago $725,000 but picked up from February’s $648,000. The median price paid for a condominium in March declined to $460,000, a drop from the $557,000 median in February 2006 and from the year-earlier $527,625… 138 single family homes changed hands in March 2007, versus 107 in March 2006. But the number of condominium transactions fell to 83 in March of 2007 from 144 in March of 2006."

Real Estate Investing and Sentiment

• Selling Virginia's Natural Wonder (Roanoke.com, Apr. 16th): "Few people might have known that Natural Bridge, the famed 215-foot-high limestone rock formation in Rockbridge County, was even privately owned. But whoever has pockets deep enough to buy the rock bridge and accompanying amenities -- asking price $32.5 million -- ought to preserve as much of the landmark's natural integrity as possible. One way would be for the state to purchase at least part of the 1,600-acre property to assure that development would not impact the natural attraction and or make it inaccessible to the public."

Mortgates and Real Estate Lending

• Bill Gross on the Housing Market and Subprime Lending (PIMCO bond manager Bill Gross in Seeking Alpha, Apr. 12th): "Write-offs, CDO price drops, and even corporate bankruptcies of subprime originators and servicers will not help an already faltering U.S. economy. But foreclosure losses as a percentage of existing loans will be small and the majority of homeowners have substantial amounts of equity in their homes… Analysts and pundits now claim we’re out of the woods: the subprime crisis is or has been isolated and identified for what it is – a small part of the U.S. economy. It will not be loan losses that threaten future economic growth, however, but the tightening of credit conditions that are in part a result of those losses."

• The Fannie Tax (Wall St. Journal, Apr. 12th): "Last month, the House Financial Services Committee passed a bill giv[ing] a government overseer the power to limit Fannie Mae and Freddie Mac's $1.4 trillion in mortgage-backed securities… to reduce the risk to taxpayers, and to the larger financial system, from the implicit federal subsidy… [For] "affordable housing," the bill would tax Fannie and Freddie to the tune of 1.2 basis points of their total… business -- or just over 1/100th of 1% of all the mortgages Fannie and Freddie have bought and packaged to sell to investors: More than $500 million a year, with potential to grow."

Subprime Fallout and Foreclosure Impact

• Subprime Mess Produces Unqualified Victims: Michael Lewis (Bloomberg, Apr. 16th): "New Century's 10th-largest creditor -- according to the Times -- was another subprime lender, Countrywide Financial Corp. (Barclays Plc, out $1 billion, was a mere 15th on the list, which gives you an idea of the sums involved.) Given this, you just know that it's a matter of time before we learn of some hedge fund that's on the verge of collapse as a result of its investments in subprime mortgages."

• Borrowers are Caught in Backlash Over Loan Defaults (Sign On San Diego, Apr. 15th): "Kevin Stein, of the California Reinvestment Coalition, a lending watchdog group: There have been a lot of questionable loans sold in San Diego, a lot of nontraditional option-ARM, interest-only loans…" DataQuick Information Systems: San Diego County homeowners are defaulting on loans at a rising pace. In the first two months of this year there were four times as many default notices issued as were issued during the same period of 2006. Foreclosures here tripled over that period... Even so, defaults still represent a small fraction of the market."

• Creative Mortgages Contributed to Rise in Region's Foreclosures (Hampton Roads, Apr. 15th) Virginia: "RealtyTrac: During January and February, 181 of the region's homeowners were in some stage of foreclosure, almost double the 100 for Jan.-Feb., 2006. That jump came on top of increases of 45% or more for foreclosures in Virginia Beach, Norfolk and Chesapeake last year… John Allen, senior housing counselor at the social services agency Child and Family Services of Eastern Virginia in Norfolk, said that during Q1'07 he began working with 15 clients who sought to avoid foreclosure. That was more than all of his clients seeking similar help last year."

• Many Landlords Skip on Bills (Plain Dealer, Apr. 15th) Cleveland: "County treasurer's office and public-housing records show foreclosures are pending against nearly 500 houses and apartments where the federal government helps tenants pay the rent. Landlords for 80 of the properties also collectively owe more than $120,000 in back property taxes... Hundreds of other landlords in the rent program have failed to pay their property taxes on time... The Department of Housing and Urban Development [aid]… typically ensures that low-income tenants spend no more than 30% of their monthly income for rent. The monthly checks, sent directly to the landlords, are for as much as $1,000."

• Subprime Bailout? $120 Billion (CNN Money, Apr. 13th): "Christopher Cagan, director of research at First American CoreLogic, says rising mortgage payments on adjustable rate loans will force 1.1 million homeowners into foreclosure over the next 6 years. He estimates the cost of paying off the debt for those borrowers would be $120 billion."

• Foreclosure Wave Said to Hit Latinos Hard (Voice of San Diego, Apr. 13th): "In San Diego, the communities hit hardest by foreclosure have larger-than-average Latino populations and tend to be closer to the U.S.-Mexico border…. This decade, a national push to increase homeownership among Latinos coincided with one of the longest, most dramatic periods of appreciation for home values. Latino mortgage and real estate professionals put forth aggressive outreach campaigns in the community, while lenders reached out to huge, untapped sections of the market by loosening qualifying standards… Of the 84,000-some such loans made to the state's Latinos in 2005, the center predicts nearly 17,000 will foreclose -- nearly one in five."

• Moody's Concerned About Lending Standards Slide (Mark McQueen in Seeking Alpha, Apr. 12th): "You have to admit that the idea of “laying off risk” sounds so appealing, but eventually someone, somewhere winds up owning the underlying paper… If anyone thought that the sub prime-inspired credit mess was really over, Moody’s has decided to tackle the commercial mortgage market before they get blamed should things start to go south there. Which begs the question: how long before the senior risk managers at the commercial banks decide that they need to tighten their own credit books just a titch?"

Global Alternatives To The Housing Slump

• ING Real Estate Acquires Industrial Building in Kowloon Bay, Hong Kong (PR Newswire, Apr. 16th): "ING Real Estate… has purchased an industrial building in Kowloon Bay for USD28 million. The Chuan Hing Industrial Building will be purchased on a yield of 3.8% and an average rental of HK$7 per sf compared with HK$8-10 for industrial buildings with similar building age in the same district… Kowloon Bay is currently undergoing a major facelift with the construction of new Grade-A office buildings and two large-scale shopping malls expected to start in mid-2007… ING RE has a total business portfolio of USD120 billion and offices in 21 markets in Europe, North America, Asia and Australia."

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

• News Analysis: Subprime Lending Crash Felt In Sector's Ad Spend (Brandweek, Apr. 16th): "Nielsen Monitor-Plus: Ameriquest, one of the nation's largest [subprime] mortgage lenders… spent a total of $576,000 on measured media [in] Jan.-Feb., 2007… 92% less than Jan.-Feb., 2006… Mortgage company Ditech spent $14.2 million on advertising in Jan.-Feb., 2007, a 20% drop from the year before. Online firms E-Loan and LendingTree both cut spending by nearly 40%... Countrywide Financial, the biggest U.S. mortgage lender, increased ad spending by 84% to $6.3 million in Jan.-Feb., 2007. LowerMyBills.com, which sells leads to mortgage companies, went from spending $14 million on ads for that period in 2006 to $26 million in 2007."

• Steelworkers Say Lumber Industry on ‘Fragile Bubble’ (Quesnel- Cariboo Observer, Apr. 15th): "Terry Tate, financial secretary for United Steelworkers Union Branch 1-425: "Americans are claiming the surge mechanism in the agreement, designed to increase the border tax paid by Canadian lumber exporters, is not working. The [surge] mechanism was designed to increase the border tax on Canadian lumber entering the U.S. from 15% tax at the border to 22% when market conditions reached a critical juncture…American politicians are taking the heat from [American] lumber producers… being forced to shut down because of the drop in the number of housing starts and drop in the price of lumber."

• General Electric Q1 2007 Earnings Call Transcript (Seeking Alpha, Apr. 13th): "Keith Sherin, CFO: Retail appliances is mixed. You know, the retail appliances revenues were up 5%; the contract channel… is down 6%. It is impacted, obviously, by housing. Lighting had a very strong quarter, up 10%. The business continues to drive price and productivity… I think the one wildcard is housing; and I guess we don't see housing in its totality. The appliances tends to see completions. But we are not building in our forecast any kind of a big snapback in the second half. We are thinking the economy stays at the level it is at right now."

• Slowdown Seen for U.S. Plastics, Manufacturing in 2007 (Modplas.com, Apr. 13th): "Bob Shrouds, corporate economist for DuPont, sees industry lagging behind the economy at large, dipping from 4.7% in real terms in 2006, to 1.5% in 2007... U.S. production of plastic products fell to 1% in 2006 [from 5% in 2006], but is expected to rebound somewhat in 2007 to 2.3%. Much of the slowdown in plastics will be linked to housing and automotive, with housing starts down from 2.3 million in January 2006 to 1.4 million in January 2007... “We think we’re at the bottom of the housing slowdown, we just don’t think it will recover much.”

Homebuilders And Housing Stocks

• Market Slump Comes Home (St. Petersburg Times, Apr. 16th) Florida: "Real Estate firm Home Discovery: This time last year in Pasco, there were 5,011 homes waiting to move off the shelf. Today, there are 7,796… Two years ago, one in two homes sold in any given month. Today, the same period would see one in 20 sell…Permit figures represent a new low for Pasco. Last year, the county issued 531 permits in January, 548 in February and 791 in March."

• For CEOs, Modesty May be the Best Policy (Chron.com, Apr. 15th): "A new study makes the case that there is a strong correlation between executives' home-buying behavior and stock performance. The bigger the CEO's home, the worse the company's stock fares, according to two academic researchers. They also found that companies with CEOs living in more modest abodes often see their shares outperform. Arizona State University's Crocker Liu and New York University's David Yermack, who teach finance at their respective schools, contend that a super-sized home purchase shows entrenchment. A CEO might feel secure in his position and therefore isn't concerned that he is going to have to leave anytime soon."

• Dominion Homes: Large Las Vegas Home Builder Discloses 7% Stake (Lon Juricic in Seeking Alpha, Apr. 15th): "In a 13D filing after the close, James Michael Rhodes disclosed a 7.06% stake (594K shares) in Dominion Homes Inc. (DHOM). James M. Rhodes is CEO of Sagebrush Enterprises, which is in the principal business of developing residential communities and homebuilding in southern Nevada and Arizona. Sagebrush Enterprises is affiliated with Rhodes Homes. According to Rhodes Homes' website, Rhodes Homes has established itself as the largest independent homebuilders in Las Vegas and Nevada.Dominion Homes builds a variety of new homes and condominiums in Columbus, Ohio and Louisville and Lexington, Kentucky."

• U.S. Homebuilders Face Bankruptcy Risk in '08, Lawyers Say (Bloomberg, Apr. 14th): "Ronald Greenspan, a lawyer and financial adviser to the creditors of four bankrupt subprime mortgage lenders: Homebuilders issued $3.6 billion in public debt in 2005 and 2006… $600 million of that comes due this year… The value of shareholder's equity for some [homebuilders] equals or exceeds the value of the undeveloped land the companies have under contract… The perceived risk of owning [homebuilder] bonds… has increased… Credit default swaps have more than doubled in price since Feb. 1 for… D.R. Horton… Pulte Homes… and Toll Brothers. CMA Datavision: The cost of swaps on $10 million worth of Toll Brothers debt… jumped to $136,750 Friday from $58,500 on Feb. 1."

• Housing Double Dips Offer Short Opportunities (Markos Kaminis in Seeking Alpha, Apr. 12th): "If I had to own a [homebuilder], I would buy TOL on days the industry slides as a group or after it next reports a weak quarter… [More] short opportunities... especially within the subprime or better mortgage lenders, whose business portends to continue to suffer, despite their still solvent status. Some of the more traditional savings & loans or players within the Alt-A space might offer more opportunity for downside surprise, but the subprime space should also get uglier as more loan payments reset."

Commercial Real Estate and REITs

• Investing in Real Estate: REITs and Your Home (Geoff Considine in Seeking Alpha, Apr. 16th): "In light of the tax benefits of home ownership: 1) Buying more house rather than fully taking advantage of tax-deferred retirement accounts is likely to be an expensive choice in the long-term. 2) It may make more sense to invest in REITs than to accelerate the pay-off on your mortgage… to invest in real estate. 3) Investing in real estate via REITs is likely to generate higher returns over the long-haul than buying a more expensive home. 4) Real estate… abides by the long-term balance in risk and return that capital markets provide. 5) The historical rate of return on residential real estate is substantially less than has been achieved by stocks over long historical periods."

• Hypo Real Estate Group Closes $520 Million Loan for Related WestPac to Acquire and Develop Base Village in Snowmass Village, Colorado (Earthtimes.org, Apr. 12th): "Hypo Real Estate Capital Corporation (HRECC), a member of Hypo Real Estate Group, today announced it closed a $520 million 4-year mortgage loan for the acquisition and development of the new Snowmass Base Village located at Snowmass Village near Aspen, Colorado. This transaction, which closed on March 1, marks the first time DekaBank and Hypo Real Estate Capital Corporation, acted as Co- Agents. DekaBank has previously acted as a syndicate on prior deals with Hypo Real Estate Capital Corporation."

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.

Comments

[Quaker:]

The one thing that nobody seems to factor in is a rise in interest rates. The tacit assumption is that the fed will cut rates before they allow the housing market to hurt the economy. The only problem is, there's scant proof that the fed a tit for tat effect on interest rates.

The fed raised rates 4.25% and Mortgage rates went up less than half that. What makes anybody believe they can have a greater effect on the downside.

Gold i$ 695 an ounce and the dollar is falling faster than Paris Hiltons nickers. looks like at least foreigners think our inflation rate is headed up.

2007 Apr 16 07:59 PM