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"

"I want to stress the importance of the investments we have made to diversify... The benefits of this diversification become especially evident in quarters such as this one, where a clear dislocation in an individual market, the subprime mortgage space in the U.S., did not impede the overall momentum of our franchise. As we have seen in other quarters in past years, it is not at all uncommon -- and in fact it is a virtual certainty -- that different markets will experience different periods of both strength and weakness at different times."- CFO Jeffrey N. Edwards (Merrill Lynch Q1 2007 Earnings Call Transcript in Seeking Alpha, Apr. 19th)

Real Estate Sales and House Prices

• Eights Tips for Finding Deals in a Tight Apartment Market (Yahoo Finance, Apr. 23rd): "Apartments have been good deals in the recent past, and will continue to be, said Greg Willett, vice president of research and analysis for M/PF Yieldstar, a real-estate research firm. "This year is the first time since 2000 that rent increases have kept pace with general consumer price inflation. Furthermore, since home prices have climbed so astoundingly in the past few years, the savings between the cost to rent an apartment versus buy a house is tremendously greater than it was a the start of the decade."

• A Makeover in Progress, and Modern Art, Too (NY Times, Apr. 22nd): "Beacon, NY, has been growing… In addition to the 300,000-sf Nabisco carton manufacturing factory that became Dia:Beacon, there may also ultimately be a waterfront conference center and park called Long Dock Beacon… Mid Hudson Multiple Listing Service: Through Q1'07, there were 59 houses listed for sale and 28 sold… By comparison, in all of 2002, 82 homes sold… The median sold price for a single-family house as of the end of April was $272,000. For [2007], the median was $300,000. And five years ago, it was $177,500."

• California Home Prices to Weaken Further: Goldman (Market Watch, Apr. 20th): "Goldman Sachs: Mortgage delinquencies jumped 46% in California last year, vs. a 5% increase nationally… Delinquencies on prime and subprime adjustable-rate mortgages in California soared by 78% and 60% respectively, vs. 33% and 24% across the U.S… "Many metros in California have home prices that are not justified by the underlying fundamentals [rather] driven by the availability of subprime… credit."… Almost half of the company's $71.8 billion mortgage portfolio and more than a quarter of its home loan servicing business is from California… About 46% of the principal from Countrywide's mortgage portfolio is from option ARMs, and many of these loans were probably originated in California,"

• Subprime Borrowers Causing Upside Surprise: What's Happening Here? (Robert Craig Stephenson in Seeking Alpha, Apr. 20th): "To afford a 200k loan…$2800 a month… is the minimum… 1. Subprime loans made in 2005 and 2006 are gone. This or that hedge funds paying pennies on the dollar will not see their pennies. 2. The biggest player in 2005 and 2006 was Countrywide. My advice to you: They have issues. 3. House prices will do the one of the two: Drop 20-30% in real prices, just so people can afford them with real income. The second option: Drop 50%, so that people can afford them with real income and some savings of their own."

Real Estate Investing and Sentiment

• Treasure Coast a Business Hot Spot, Study Says (TC Palm, Apr. 23rd): "The Port St. Lucie-Fort Pierce metropolitan statistical area, which includes Stuart, was ranked the eighth small city and 12th overall for the best places to do business, according to the May issue of Inc. magazine, a business publication… The region's ranking could possibly be reflecting a slowdown in housing sales. The market dropped two spots on the small-city list from sixth place in 2006… The West Palm Beach-Boca Raton metro area was ranked the sixth hottest large region in which to do business and the 40th hottest overall in the nation."

• Rail Line Drives Utah Development (NYTimes, Apr. 22nd): "The 30-acre $140 million Birkhill development by Hamlet Homes, one of this region’s largest builders, will have 420 units of housing and 200,000-sf of retail and office space… The idea is to give homeowners easier access to their jobs or to stores. Murray City and Hamlet Homes are taking advantage of growing buyer interest in living and working near the regional TRAX light rail system, which has operated in the Salt Lake Valley since 1999. The Murray North station, one of three TRAX stops in Murray City — population 50,000 — serves as the centerpiece of Birkhill at Fireclay."

Mortgates and Real Estate Lending

• Won't Fight Cramer on MGIC Investment and PMI Group (Wall Street Mayhem in Seeking Alpha, Apr. 21st): "Last week MGIC Investment (MTG) reported Q1 earnings... missing estimates by a mile. The average analyst estimate was $1.71 per share, MGIC earned $1.12 a share. What we did not expect was the stock to rally after such a horrendous quarter… Although we still think the mortgage insurance group is headed for trouble, we are throwing in the towel today as Cramer is out this morning hyping MTG as a short squeeze candidate. We ended up roughly break even on these trades due to the previous half position cover for a profit. It is tempting to wait for a drop in MTG and PMI, but we are worried that Cramer will announce his short squeeze theory on Mad Money tonight which would really send the shares flying."

• Appraiser: Local Fraud Rampant (The Bakersfield Californian, Apr. 20th): "A local home appraiser is alleging widespread mortgage fraud in Bakersfield’s housing market, accusing local real estate professionals of artificially inflating prices ... Appraiser Gary Crabtree said Friday he has alerted federal, state and local authorities to “suspicious” home sales in the Bakersfield area... After documenting 22 suspect cases in the last year, Crabtree said he has referred six of the strongest instances to the FBI, California Department of Real Estate and California Office of Real Estate Appraisers, and three to the Bakersfield Association of Realtors. He also has attempted to notify the lenders involved in each of the 22 cases."

Subprime Fallout and Foreclosure Impact

• H&R Block Sells Subprime Unit (Smart Pros, Apr. 23rd): "Cerberus Capital Management LP's newly formed subsidiary, OOMB Acquisition Corp., will buy H&R Block's Option One for the value of Option One's net assets minus $300 million… Investors pushed H&R Block shares up as much as 8.2% to $23.62 before profit-taking took over Friday… H&R Block [expects] a full-year loss because of a one-time, $290m- $320m charge reflecting the diminished value of Option One. H&R Block… will also shutter a mortgage unit that sells loans to retail customers, taking a pretax charge of $25m for severance and closing costs and an additional $16 million for impairments."

• Ohio Tries to Fend off Foreclosures on Home Loans (Stateline, Apr.23rd): "[Ohio] launched a first-in-the-nation program April 2 to help homeowners with [adjustable mortgages.] The Ohio agency has a network of 185 lending partners in the state that will work to offer 30- or 20-year loans with “fixed” rates that won’t change… The Conference of State Bank Supervisors… is working with American Association of Residential Mortgage Regulators on a national licensing system and database for the mortgage industry that would enable states to track whether a broker got into trouble with regulators in another state. Thirty states have agreed to participate when the project kicks off next year."

• Luxury Homes on the Block (Yahoo! Finance, Apr. 20th): "National Auctioneers Association: Pre-foreclosures-- homeowners' desire to rapidly liquidate real estate holdings, has made real estate auctions the fastest growing auction category… [But] second home buyers worried about the bottoming out of the market may be better served to refinance and wait it out. In March mortgage rates came down, with the 30-year rate dipping to 6.16% from a February high of 6.34%... Both Fannie Mae and Freddie Mac report good market liquidity in the prime lending market, and their share of new ARM mortgages is expected to fall by 13% in 2007, according to the Federal Housing Finance Board."

• 'Upside Down' Home Sellers Owe More Than They Get (Washington Post, Apr. 20th): "The Mortgage Bankers Association does not keep track of the number of short sales, but real estate agents, settlement attorneys and some lenders said they are happening more frequently, especially in areas where prices appreciated rapidly, such as the Virginia exurbs. "We're closing probably three or four a month like that," said Sherry Wilson, a real estate agent with Re/Max Leaders in Purcellville. The people most vulnerable are those who bought their homes within the past two or three years and now want to sell, either because of a life change or a financial problem."

• Home Foreclosures Rise Fourfold in Hub (Boston.com, Apr. 20th): "Department of Neighborhood Development: Lenders seized 261 residential properties last year from Boston homeowners who fell behind on their monthly payments, up from 60 in 2005… This year is on pace to exceed 2006 numbers: by April 13, there were already 114 foreclosures. The numbers are still much lower than the 1,700 foreclosures in Boston in 1992, when the technology-based economy ran aground and some property values were cut in half."

• Foreclosures in N.C. up 56 Percent Nationwide, Banks Posted 149,000 Foreclosure Filings, up 47 Percent Over Last Year (Charlotte Observer, Apr. 19th): "RealtyTrac: Banks began foreclosure proceedings against 56% more North Carolina homeowners last month compared with a year ago, according to a new report. Owners of one out of every 1,086 homes across the state received foreclosure notices in March as falling housing prices made it more difficult for borrowers to refinance mortgages. "Foreclosure activity shifted into a higher gear in the first two months of 2007, and March's numbers continued that trend." North Carolina ranked 17th nationally, with 3,241 filings.

• Global Gains Drive Merrill (The Street, Apr. 19th): "Squashing any fears of a subprime slipup, CFO Jeff Edwards said that Merrill's diversified platform more than offset its limited exposure in loans provided to borrowers with shaky credit quality. The brokerage's fixed income generated net revenue growth of 36% to $2.8 billion."

• ForeclosuresNH.com: New Hampshire Foreclosures Up 95% (DS News, Apr. 19th): "ForeclosuresNH.com: The state of New Hampshire experienced a 95% increase in foreclosures between Q1'06 and Q1'07... “Based on our numbers (average increase of 7% per month), we believe that there will be a continued increase in foreclosures through the end of the year with insiders seeing the biggest increase during the summer,” said James Kenney, president of ForeclosuresNH.com. “As a result of the imminent housing situation, we predict that there will be an increase in apartment rentals, condo sales, and mobile home sales in the state.”

• GMAC, GE Will Cut 1,400 Job Cuts on Subprime Decline (Bloomberg, Apr. 19th): "GMAC LLC's Residential Capital home- lending unit and General Electric Co.'s WMC Mortgage division announced more than 1,400 job reductions as losses mount in the U.S. subprime loan industry. WMC Mortgage, part of the GE Money consumer-finance unit, today slashed 771 jobs and closed three centers. WMC, based in Burbank, California, has cut more than half its workforce this year. Between 600 and 700 workers at GMAC's Minneapolis-based Residential Capital, known as ResCap, will lose their jobs by midyear, and at least 300 vacant positions won't be filled. … Commercial rents could fall in some areas where subprime lenders are cutting jobs."

Homebuilders And Housing Stocks

• D.R. Horton Posts 85% Plunge in Q2 Earnings; Misses Street (Seeking Alpha, Apr. 20th): "U.S. homebuilder D. R. Horton reported an 85% drop in profits… a 25% reduction of its workforce… This, after warning earlier that orders were down 37%. Net Q1'07 income dropped to $51.7 million ($0.16/share) from $352.8 million ($1.11) a year ago, including $81.2 million ($0.16/share) for impairments and land option writedowns, 80% of which were in California. Analysts were expecting EPS of $0.27 excluding charges. Homebuilding revenue fell 26%, to $2.62 billion from $3.53 billion, missing Street forecasts of $2.79 billion. The company's backlog of homes under contract has shrunk to 16,885 homes worth $4.8 billion from 24,017 homes worth $7.1 billion a year ago."

• Chieftain's Glenn Greenberg: Buys, Sells, Portfolio (Seeking Alpha, Apr. 20th): "Glenn Greenberg co-founded Chieftain Capital Management in 1984. Greenberg runs a concentrated portfolio and invests personally, alongside his clients, in the same portfolio. Greenberg looks for companies with zero or few competitors and maintains that industries with gradual (rather than steep) growth attract less competition. His emphasis on return on invested capital [ROIC], as well as profit margins, have allowed the initial fund to grow from $40 million to $4 billion… [In] Chieftain's Capital Management Portfolio as of 12/31/2006: American Standard Companies (ASD): 5.9 million shares; 6.8% of overall stock holdings."

Commercial Real Estate and REITs

• Accredited Mortgage Loan REIT Trust Receives NYSE Notice (Digital 50, Apr. 21st): "Accredited Mortgage Loan REIT Trust (AHH.PrA), an indirect subsidiary of Accredited Home Lenders Holding Co… was notified by… the NYSE on April 18, 2007 that [it] will monitor the REIT's… 10-K… for a six-month period... As the result of REIT's failure to file its annual report for the year ended December 31, 2006 with the SEC on a timely basis… If REIT fails to file its annual report within six months… of March 16, 2007, REIT intends to submit an official request to the NYSE to allow the Preferred Shares to trade for up to an additional six months."

• Webster Reports 2007 First Quarter Earnings (PR Inside, Apr. 19th): "Commercial loans, including commercial real estate loans, and consumer loans, were $8.6 billion at March 31, 2007, up 11% from March 31, 2006. Commercial and consumer loans represent 70% of total loans at March 31, 2007 compared to 61% a year ago. "Webster continues to show consistent growth in these core lines of business," stated Webster CEO William T. Bromage. "As the results show, our plan has been to reduce our percentage of residential loans to total loans and to continue to focus on growth in commercial and consumer loans."

• Candy Assets for Beverly Hills (Slatin Report, Apr. 19th): "The eight-acre site of 9900 Wilshire… is the last large-scale development site in Beverly Hills... Sold by New Pacific to developer brother Christian and Nicholas Candy for $500 million… New Pacific… bought the site for just $33 million in 2002. The firm… has spent the past few years teeing up to build its super-luxury residential development, but permits from this notoriously tough community are still at least two to three years away – meaning completion of the project could take as many as five years… Hyland & Hyland brokers: The transaction shows the buyer’s confidence in the Beverly Hills market."

• U.S. Market (Report on Business, Apr. 18th): "Small Toronto REIT Deal Opens Door to U.S. Market A small two-shopping-centre deal in Oregon could be the first step toward international expansion, say the leaders of Calloway REIT. The Toronto-based REIT announced a $10-million (U.S.) deal earlier this week that will give the retail landlord a toehold in the U.S. market. When development of the two centres is complete, Calloway said its total investment will be $35-million.The two shopping centres, which are under development and should be completed by 2010, are being sold to Calloway by SmartCentres, a private company owned by… the REIT's largest shareholder, Mitchell Goldhar."

• SL Green Shopping 2 Madison Ave. Assets, Eyeing West Side Property in NY (CoStar Group, Apr. 17th): "SL Green Realty Corp. (SLG) is keeping busy following its $6 billion buyout of Reckson Associates Realty Group late last year… Investment sales brokers: The REIT is shopping… the Clock Tower portion of the property at 1 Madison Ave. in Midtown South, and the building at 292 Madison Ave., while kicking the tires at another office building on the West Side -- Citigroup's tower at 333 W 34th St. SL Green acquired the landmark Clock Tower property in 2005… from MetLife Inc. The venture paid $918 million or $780/sf for the two contiguous buildings."

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