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 real estate bubble has not burst. It is the inflated valuations of some real estate companies that has been pricked. The sector was trading at a 20% premium to its net asset value. This was not sustainable." - Natalia Aguirre, head analyst at Renta 4, a Spanish broker, on suppositions that the hot Spanish real estate market is a bursting bubble because of price rise slowdowns. (Euro2day, Apr. 24th)

Real Estate Sales and House Prices

• U.S. Home Resales Fall in March to Lowest Since 2003 (Bloomberg, Apr. 24th): "National Association of Realtors: Sales of previously owned homes in the U.S. declined more than forecast in March to the lowest level in almost four years… Purchases dropped 8.4% last month to an annual rate of 6.12 million, from 6.68 million in February... Sales fell 11.3% compared with a year earlier… The supply of homes for sale decreased 1.6% to 3.745 million last month… represent[ing] a 7.3 months' supply, the highest since October, compared with 6.8 months' worth at the end of February. The median existing home price fell 0.3% last month from a year ago to $217,000."

• S&P/Case-Shiller Home Price Index Fell 1% in Year (Bloomberg, Apr. 24th): "S&P/Case- Shiller home-price index: Values fell 1% from February 2006 after dropping 0.1% in the year ended January... January's decrease was the first since… 2001. S&P/Case-Shiller's 10-city composite, which has a longer history, dropped 1.5% in the 12 months ended February, the most since October 1993. Compared with a month earlier, home prices fell 0.5% following a 0.6% January decline…The index is a composite of transactions in 20 metropolitan areas. Thirteen cities showed a y/o/y decline in prices, led by a 7.8% drop in Detroit and a 5% decline in San Diego. The area showing the biggest y/o/y gain was Seattle with an 11% increase.

• C.A.R. Reports Sales Decrease 20.8 Percent in March, Median Price of a Home in California at $580,090, up 3.2 Percent from Year Ago (Business Wire, Apr. 24th): "California Ass'n of Realtors (C.A.R.): Home sales decreased 20.8% in March in California compared with March, 2006, while the median price of an existing, single-family detached home increased 3.2% to $580,090… [Up from] the revised $562,130 median for March 2006… Closed escrow sales of existing, single-family detached homes in California totaled 427,110 in March at a seasonally adjusted annualized rate... The median number of days it took to sell a single-family home was 56.2 days in March 2007, compared with 44.5 days (revised) for the same period a year ago."

• Home Prices Firm up as Buyers Emerge (Boston Globe, Apr. 24th): "Massachusetts house prices held steady in March, putting an end to the monthly price declines that have plagued sellers since last April… The median price for a single-family house was $344,000 last month -- 0.1% more than year-ago prices. Massachusetts Association of Realtors: Condominium prices increased by 3%, to $279,000… A separate Warren Group report: Median prices fell -- 1.6% for houses and 2.7% for condos. Those declines were also smaller than the price drops in prior months, which Warren Group said indicated "signs of stability" in the housing market."

• Hamptons, New York Home Prices Rise at Slowest Pace in 4 Years (Bloomberg, Apr. 24th): "Home prices in the Hamptons, New York's beachside playground for the rich and famous, rose in Q1 at the slowest pace in four years. The median price of a single-family home jumped 8% to $690,000, according to Suffolk Research Service, a real estate data company. In East Hampton, where Martha Stewart has a house, prices rose 14% to $970,000, the fastest in the area… the rise in Q1 shows even the most robust markets are tempering. The number of sales fell 13% to 709… The total value of sales for single-family homes gained 4% to $982 million."

• Study: Higher Income Groups Moving into Valley (Poughkeepsie Journal, Apr. 22nd) New York State: Prices have slid across the board recently. With only three exceptions, the 22 counties checked showed median home price drops from Q3 to Q4'06. The drops range from 1.68% in Columbia County to a whopping 12.73% in highest-priced Westchester, where the median fell from $699,000 to $610,000, according to data from the New York State Association of Realtors. Dutchess fell 7.35% to $333,552 for all single-family home types."

Real Estate Investing and Sentiment

• In Las Vegas, Too Many Hotels Are Never Enough (NY Times, Apr. 24th): "At $4.4 billion, Echelon Place would rank as the most expensive development in Las Vegas history — if not for the $7 billion the MGM Mirage is spending on CityCenter… Far more than the previous record, set when Mr. Wynn and his financial backers spent $2.7 billion building the 2,700-room Wynn, which opened in 2005… The current construction craze is driven by a 95% weekend occupancy rate — and rates that approach 100% at the city’s newer properties. Last year, even the weekday rate fell just shy of 90%, partly because of the city’s success in positioning itself as an attractive convention destination."

Mortgates and Real Estate Lending

• Countrywide Sees Healthy Market by 2009 (Reuters, Apr. 24th): "Lender Countrywide Financial CEO Angelo Mozilo has long maintained… that Countrywide would survive an industry shakeout.: "By 2009, we're going to have a very healthy market from Countrywide's point of view. There will be very little competition in 2009 and 2010." In its annual report, Countrywide said delinquencies, or late payments, rose to 19% of non-prime loans it services from 16.9% in Q3, and 15.2% at the end of 2005. "Of the 19%, maybe 5%, will go into foreclosure, maybe." He later clarified that "5, 6%, somewhere in there" of delinquent loans may go into foreclosure. "That means 94% won't."

• Fitch Affirms Wachovia Bank CRE CDO 2006-1 (Business Wire, Apr. 24th): "Fitch Ratings: Wachovia CRE CDO is a revolving commercial real estate cash flow collateralized debt obligation (CDO)… incorporated on July 11, 2006 to issue $1,300,000,000 of floating-rate notes and preferred shares. Since close, 38 loans have been added to the pool and 18 have paid off, resulting in a net increase of 20 loans totaling $173.58 million or a 13.3% increase to the CDO par balance (including related future funding obligations). [As of] March 16, 2007… the CDO was invested in a portfolio of commercial mortgage whole loans and A-notes (80.3%), B-notes (6.3%), mezzanine loans (2.6%), and cash (10.8%)."

Subprime Fallout and Foreclosure Impact

• Subprime Bondholders May Lose $75 Billion From Slump (Bloomberg, Apr. 24th): "Bond Investors will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world's biggest bond fund. Merrill Lynch": Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37%... BlackRock Inc., AllianceBernstein Holding LP and Franklin Templeton Investments are vulnerable because investors have replaced banks and thrifts as the primary source of money for U.S. mortgages. More than $6 trillion of mortgage bonds are outstanding, dwarfing the amount of U.S. government debt by about 50%."

• Tennessee Foreclosures Drop in March (Nashville Business Journal, Apr. 23rd): "RealtyTrac's March U.S. Foreclosure Market Report: The state's foreclosure activity dropped 17.15% from February to March, but Tennessee is still 14th overall in foreclosures… Tennessee had one foreclosure filing for every 772 households and had 3,178 households in some stage of foreclosure in March… Neighboring states Arkansas and Mississippi ranked at No. 30 and No. 48, respectively… Nationally, there were a total of 149,150 foreclosure filings in March, up 7% from an adjusted February total and up 47% from a year ago. The… national foreclosure rate [was] one foreclosure filing for every 775 U.S. households in March."

• Mortgage Delinquencies Reach All-Time High (Trumpet.com, Apr. 23rd): "Equifax, the percentage of mortgages in default rose to 2.87%—eclipsing the worst levels following the 2001 recession…The real threat to the economy is the tightening of credit conditions [largely] a result of sub-prime mortgage losses… Sub-prime loans… take up one quarter of the U.S. mortgage market. In other words, a quarter of the nation’s home demand may be about to evaporate as sub-prime mortgage lenders continue to go bankrupt and lending standards are tightened. Without that demand, housing prices, along with new construction, will probably continue to fall."

• St. Lucie Foreclosures Rise 444 Percent (Palm Beach Post, Apr. 23rd): "Realty Trac: Foreclosures for March in St. Lucie County rose 444% over March 2006 as falling home prices and rising mortgage rates pushed 370 homeowners into some stage of default… A year ago, only 68 households in St. Lucie County were in foreclosure… In Palm Beach County, foreclosures rose 6% in March y/o/y, but in Martin County they fell 12%... In Florida, which ranked seventh in the nation in foreclosure rates last month, one in every 511 households was in some stage of foreclosure in March. That compares with one in every 775 nationwide."

• Defining Two Camps Of Subprime Lenders (Markos Kaminis in Seeking Alpha, Apr. 22nd): "Diversified lenders are selling out of the sector while those remaining must still contend with a difficult operating environment. While consolidation is likely to reduce competition within subprime, sales of subprime units simply shift the risk to a new firm, typically at a discounted price. Thus, we would sell short the shares of those players remaining in operation within the subprime sector and without significant diversification of risk. Those firms' shares are seeing appreciation on news of these sales by peers, but we contend that the earnings reports of still at risk firms will shed light on the subprime specific weakness that remains. So, the share rise offers opportunity for short entry into subprime pure plays."

• Foreclosures Soar in County (Ann Arbor News, Apr. 22nd) Michigan: "Washtenaw County homeowners are facing foreclosures in record numbers, the result of a weak economy, a glutted housing market, and adjustable rate mortgages that have bit homeowners hard as interest rates jumped."I used to do five or six foreclosures a week. Now I do 19 to 30,'' said Special Deputy Jimmy Moore, who auctions off mortgage foreclosures every week at the Washtenaw County Courthouse… The Washtenaw County Clerk's office recorded 99 deed sales of foreclosed properties in February, more than any other month in more than two years. The combined total for the first two months of 2007 increased by 117% from the same time in 2006."

• Subprime Assault on Southern California (Financial Times, Apr. 20th): "It used to be that we would get one call a month from someone needing help [about mortgage foreclosure],” says Vilma Mercado, home ownership centres manager with the Neighbourhood Housing Service of the Inland Empire, which promotes home ownership. “Now we’re getting close to 50.” Riverside County appears to have been most badly hit by the subprime collapse, with mortgage defaults in Q1'07 up 168% from Q1'06, according to DataQuick."

Global Impact of The Housing Slump

• Spain's Property Stocks Drop on Concern Bubble Burst (Bloomberg, Apr. 24th): "Spanish real-estate firms... Inmobiliaria Colonial SA's shares dropped 13% and Grupo Inmocaral SA's stock fell 11%... Banco Bilbao Vizcaya Argentaria SA, the country's second-biggest bank, declined 2.8% on speculation bad loans will rise… Spanish house prices rose at the slowest rate since 1998, a government report showed, following an eight- year rally... Banco Bilbao Vizcaya Argentaria SA: Higher borrowing costs will probably restrict this year's price increases to between 3%-5%... Down from about 15% at the peak of the market. Spanish companies have been the top performers in the Bloomberg Europe Real Estate Index in the past four years."

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

• Consumer Confidence Falls to 8-Month Low (Chicago Tribune, Apr. 24th): "Consumer confidence in the U.S. declined to the lowest level in eight months in April, sapped by concerns about rising gasoline prices and a wave of mortgage defaults. The Conference Board's index of consumer confidence fell to 104.0 this month from 108.2 in March. The index averaged 105.9 last year… Douglas Porter, deputy chief economist at BMO Capital Markets: "There was some further deterioration in plans to buy homes and appliances... The share of Americans who plan to buy a home in the next six months fell to 2.7%, the lowest since November 2004, from 3.2%."

• Housing Bubble Boondoggle (Counterpunch, Apr. 24th): "The housing decline is further complicated by Wall Street innovations in derivatives trading which has generated trillions of dollars in "virtual" wealth and is affecting the Feds ability to control inflation through interest rate manipulation. As [noted hedge fund manager] Kenneth Heebner said, "You have hedge funds buying these subprime and Alt-A loans and leveraging them at 10 to 1. They buy a pool of mortgages at 8% and they borrow against it in yen for 3% and then lever it at 10 to 1 so you have a lucrative profit."

• Cemex Executives See Profit Boost in '07 (Forbes, Apr. 24th): "Mexican cement maker Cemex SA said Tuesday they expect earnings to increase slightly in 2007, despite a slump in the U.S. housing market. The world's No. 3 cement maker estimated it will make about US$4.3 billion in earnings before interest, taxes, depreciation and amortization, or Ebitda, compared to US$4.1 billion in 2006. VP Hector Medina: A "general improvement" of economic conditions and continued public infrastructure programs in the U.S. would help to offset the slowdown in the residential sector."

Homebuilders And Housing Stocks

• Contrarian Investors Seek Value in Housing (James Cullen in Seeking Alpha, Apr. 24th): "Homebuilders: We believe that the bottom for housing stocks on a P/B basis will be higher than either of the previous scenarios, due to improved capitalization of balance sheets (as seen by generally decreasing leverage) and industry consolidation… The sector actually bottomed in July 2006 at approximately 1x book, and the successive higher lows seen in a number of stocks as well as XHB are encouraging… We are negative on Technical Olympic (TOA)… Stocks like Levitt (LEV), Orleans Homebuilders (OHB) and WCI Communities (WCI)... value traps that should be avoided… Centex is my current preferred choice, with Ryland a close second."

• Homebuilders Stocks Fall (Hemscott UK, Apr. 24th): "Shares of homebuilders fell Tuesday after the National Association of Realtors said sales of existing homes declined by 8.4% in March, the biggest one-month drop in more than 18 years… Shares of DR Horton Inc. dipped $0.22 to $22.37, Lennar Corp. fell $0.35 to $42.81, while KB Home shed $0.44 to $43.82, all in afternoon trading on the NYSE. Shares of Hovnanian Enterprises Inc. fell $0.49 to $24.46, Centex Corp. dropped $1.03, or 2.3%, to $44.77, and Toll Brothers Inc. slid $0.10 to $29.07."

NVR's Earnings: Not As Bad As Feared

(William Trent in Seeking Alpha, Apr. 23rd): "NVR, Inc., one of the nation’s largest homebuilding and mortgage banking companies, announced that diluted EPS for Q1'07 decreased 33% and net income decreased 36% when compared to Q1'06... [But] new orders in Q1'07 increased 8% to 3,917 units, from 3,633 units in Q1'06. New orders in the Mid Atlantic and Mid East regions increased 18% and 11%, respectively, from Q1'06. The Mid Atlantic region… cancellation rate in Q1'07 was 16% compared to 17% in Q1'06 and 20% in Q4'06. The Washington DC cancellation rate in the quarter was 22% compared to 26% in Q1'06 and 34% in Q4'06…Cash on hand of $555 million is sufficient to cover liabilities due over the next year… However, with earnings expected to plummet to $32/share next year, the multiple looks a little lofty."

• Sherwin-Williams: Once The Cloud Evaporates, Away We Go (Todd Sullivan in Seeking Alpha, Apr. 23rd): "Sherwin Williams has taken a hit the past month due to its ties to the U.S. housing market… The Global Group's net sales in the quarter increased 5.7% to $402.2 million from $380.6 million in Q1'06… The growth in the global group offset the decline in the U.S. DIY and New Residential segment. The shares buybacks did the rest as SHW was able to avoid an earning decline of a strong 2006 comparison… This international segment will take on further prominence and do more to insulate SHW from the U.S. housing market due to its recent purchase of India's Nitco Paints."

Commercial Real Estate and REITs

• JER To Buy Highland Hospitality for $2B (Globe St., Apr. 24th): "Affiliates of JER Partners Acquisitions IV LLC have agreed to buy locally based Highland Hospitality Corp. for $2 billion in cash. Highland Hospitality Corp. is a lodging REIT based here that focuses on the premium and upscale full-service and limited-service markets… JER would assume Highland’s approximately $260-million existing debt and acquire all of its outstanding common stock and operating partnership units for $19.50/share. As part of the acquisition agreement, no future dividends will be paid on the common stock. The purchase price is a 15% premium over Highland's three-month average closing share price."

• Whitehall Real Estate Partners Bets on Four Nevada Gaming Properties for $1.3B (Commercial Property News, Apr. 23rd): "American Entertainment Properties, a wholly-owned subsidiary of American Real Estate Partners, has agreed to sell its gaming operations, American Casino & Entertainment Properties L.L.C., to an affiliate of Whitehall Street Real Estate Funds, a series of real estate investment funds affiliated with Goldman, Sachs & Co., for $1.3 billion… AREP said… it anticipates realizing a gain of approximately $1 billion on its investments in ACEP… John Knott, VP CB Richard Ellis Gaming: "Carl Icahn [chairman of… AREP] is looking for a different place to put his money, and Whitehall sees an opportunity to improve the property by investing capital,"

• SL Green Shuffles Leadership (Commercial Property News, Apr. 20th): "SL Green Realty Corp. has made several changes to its top-level leadership. The Manhattan office REIT said that the changes are reflective of the company's recent growth... Andrew Mathias has been promoted to the role of president of SL Green… Gregory Hughes has been promoted to COO. Currently SL Green's CFO, he will continue to operate in that role in addition to his new duties… SL Green owned 33 New York City office properties as of March 1, 2007. The REIT's total holdings include some 24 million-sf, making the company New York City's largest office landlord."

• Commercial Real Estate Earnings Outlook (Motley Fool, Apr. 20th): "The Dow Jones Wilshire REIT Index… soared 34.4% in 2006, and has gained 2.9% in the first quarter… An increasing number of 401(k) pension funds have added REIT investment options, while many pension funds have increased their real estate allocation. Global markets have also witnessed the introduction of more REIT products... Still, valuations are high... Demand for office space in Q1 generally slowed… Look for companies in markets where demand for office space remains high and rent even higher… such as Boston Properties (BXP), Corporate Office Properties (OFC), Mack-Cali (CLI), Maguire Properties (MPG), and SL Green (SLG)."

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