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 county attracted an enormous amount of speculators. The speculators put down deposits on houses and the builders started construction. But by late 2005, a lot of those speculators said, 'Ahh, I don't want the house anymore.' "- Brad Hunter, director of Metrostudy's South Florida division, blaming speculators for high inventory and lower building starts that hit the relatively affordable Port St. Lucie, Florida housing market. (Palm Beach Post, May 1st)

Real Estate Sales and House Prices

• Jack White Sells His Detroit home (Chicago Tribune Metromix, May 1st): "Grammy-winning musician Jack White, of rock duo the White Stripes, has sold his 5,800-sf Detroit home for $590,000, well below its initial $930,000 asking price… White bought the property in 2003 for $524,000... Last August, he put the house on the market for $930,000 and later cut the price to $650,000… White now lives in Nashville, where he paid about $3.1 million for a nearly 20,000-sf house in December 2005… Michigan Association of Realtors: In Detroit, the average price of a home fell 23.5% in the first two months of 2007 from year-earlier levels."

• Second-Home Snapshot (MarketWatch, Apr. 30th): "National Association of Realtors: Second-home sales were 36% of all existing and new residential real estate transactions in 2006, down from 40% of all sales in 2005… Vacation-home sales went up 4.7% to a record 1.07 million homes in 2006 from 1.02m in 2005... Investment-home sales dropped 28.9%, falling to 1.65m homes in 2006 from 2.32m in 2005… The share of vacation-homes rose, making up 14% of all home sales, up from 12% in 2005. Of all homes purchased last year, 22% were for investment, down from 28% in 2005… The median price of a vacation home was $200,000 in 2006, down 2.0% from $204,100 in 2005. Typical investment-home prices were $150,000 last year, down 18.3% from $183,500 in 2005."

• Take My House ... Please! (Cincinatti.com, Apr. 29th): "New home sales figures depict a deep slump in the Greater Cincinnati and Northern Kentucky real estate market: Sales of existing single-family homes and condos reached a four-year low in Q1. The number of homes for sale is at an all-time high. The number of days it takes to sell [rose to] 101 days in Southwest Ohio and 86 days in Northern Kentucky, about a week more than last year… From 2005 to 2006, average prices dropped in 103 of 184 Southwest Ohio neighborhoods and in 35 of 76 Northern Kentucky neighborhoods."

Real Estate Investing and Sentiment

• Bullish Real Estate Economist to Step Down (CNN Money, Apr. 30th): "The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving the National Realtors Association… David Lereah was the Realtors' analyst through the five-year run-up in home values that ended in 2005, and he has continued to deliver the group's outlook through the current downturn. After leaving NAR, Lereah will become a senior executive at Move Inc., an online real estate service… [Some] excoriated the former bank regulator and economist with the FDIC for maintaining a rosy outlook on the home market even while the demand for homes has evaporated."

• Trump Your Taxes with Real Estate (Motley Fool, Apr. 30th): "Part of what makes owning rental property so attractive is being able to take additional tax deductions. In addition to expenses like loan interest and property taxes, you'll be able to deduct a portion of the value of your property each year as depreciation. Furthermore, expenses you incur in managing the property, such as transportation, property insurance, repair and maintenance costs, and professional fees are usually deductible against your rental income. For many owners, these deductions add up to the point where a substantial portion of their profits from their rental properties are essentially tax-free."

Mortgates and Real Estate Lending

• Mortgage Losses Hurt National City in Q1 (MSN Money, Apr. 30th): "National City Corp.'s (NCC) earnings [were] below analysts' expectations for Q1… NCC posted net income of $319 million, or $0.50/share, down from $459m, or $0.74/share in Q1'06. Analysts, on average, had expected the Cleveland-based bank to post $0.61/share for the most recent period. Total interest income was $2.2 billion, up from $2.15b in Q1'06. Net interest income dropped to $1b from $1.1b, due to a $107m provision for credit losses, up from $27m in Q1'06. Net interest margin fell to 3.69% from 3.81%. National City said the margin decline was directly related to its "originate and sell" strategy for nonconforming mortgages, home equity lines and loans."

Subprime Fallout and Foreclosure Impact

• Why This Slump is Different (Business Week, May 7th): "Roughly 56% of all loans outstanding, $5.7 trillion worth, have been pooled into mortgage-backed securities, vs. just 12% in 1980… Each foreclosure costs lenders, the government, and homeowners an estimated $80,000… Foreclosure can cut the price on nearby homes by 1.4%... EMC Mortgage (BSC) set up a... team [to] help homeowners renegotiate. Citigroup and Bank of America (BAC) pledged $1 billion in below-market loans… [for struggling] homeowners… Ocwen Financial (OCN), which collects payments on $50 billion in mortgages for other lenders, recently doubled the size of its loan-mitigation department… OCN pays its staff bonuses if they can avoid foreclosure…[But] by keeping borrowers in houses they never should have bought, lenders could be setting everyone up for a steeper fall down the road."

• Subprime Lender Cutting to the Bone (The Oregonian, May 1st): "Millennium Funding Group, a major regional subprime lender, has halted its lending and cut all its jobs amid nationwide mortgage turmoil. The company had laid off 76 in March. After 71 layoffs late last week, only 10 workers remain in Millennium's downtown Vancouver headquarters. Their jobs will end after Millennium's remaining loans are closed… Millennium is a loan originator and wholesaler, financing loans and setting payment rates for products offered by retail brokers. ACE Holding [Millenium's owner] said "subprime was roughly 60% of business when we acquired Millennium in November, and that market just isn't there right now."

• Bond Demand Put Risky Subprime Borrowers Into Homes (Bloomberg, Apr. 30th): "Demand for bonds, and investors' complacency toward risk, can be blamed for the record early delinquencies and defaults on subprime home loans… The poor performance of subprime home loans made last year stems from an average drop of at least 0.50 percentage point in the yield premiums for credit risk on all types of fixed-income assets since 2000, Mortgage Bankers Association Chief Economist Doug Duncan said, citing research: "That allowed another cohort of borrowers to get into homes that wouldn't have if credit spreads were wider."

• Will FHA Loans Replace Subprime? (DS News, Apr. 30th): "The National Association of Mortgage Processors (NAMP) predicts the Federal Housing Administration, or FHA loan, will replace subprime mortgages in the marketplace… NAMP said recent changes to FHA loans could also refuel their re-emergence as solutions for subprime borrowers. The agency added that, “According to FHA Commissioner Brian D. Montgomery, FHA has shifted from its historical emphasis on the repair of minor property deficiencies and now only requires repairs for those property conditions that rise above the level of cosmetic defects, minor defects, or normal wear and tear.”

• Prince George’s County Tops in State for ’06 Foreclosures (Maryland Gazette, Apr. 27th): "Prince George’s County led the state in foreclosures in 2006, and has continued that pattern for Q1'07… 1,558 foreclosures were recorded in the county last year, with 590 in Q1'07, up 56% from Q1'06… Mortgage Bankers Association 2006 National Delinquency Survey: Of the nearly 129,000 subprime home loans serviced in Maryland in 2006, about 2%, or 2,580, were in foreclosure by the end of Q4'06, up from 1.3%, or 1,677, in Q1'06… Lower than the national average of 5%. Subprime loan delinquencies in Maryland also rose significantly in 2006, from almost 8% in Q1 to 12% in Q4."

Global Impact and Alternatives To The Housing Slump

• HSBC sells HQ in Record Property Deal (China Post, May 1st): "HSBC Holdings PLC, Europe's biggest bank, said Monday it had sold its global headquarters in London to Metrovacesa SA of Spain in the biggest single property deal in British history. Metrovacesa paid US$2.18 billion for a 998-year lease on the 210-meter (689-foot) tower at 8 Canada Square in Canary Wharf, London's second financial district. HSBC will remain in the building under a 20-year lease, with a five-year option."

• Signs of Market Cooling as Approved Mortgages Drop by 12 Percent (This Is London, Apr. 30th): "The British Bankers' Association (BBA) said 75,098 homebuyer loans were agreed during March, up on February's total in line with seasonal trends. But the figure was 10,000 [or 12%] lower than the same period in 2006 - a potential sign that some of the heat may be coming out of the market. Overall, there were 198,000 mortgages approved for all purposes in March, representing £22.3 billion. The average size of a loan approved for house purchase was recorded at £150,800, 12% higher than a year earlier."

• Spanish Property Sector Cools (Forbes, Apr. 30th): "A week after a sectorwide selloff… Spain's biggest property stocks closed down Monday an average of 2.0%... house builder Parquesol Inmobiliaria y Proyectos…(- 5.5%)... Property investment firm Renta (RTACF) (-2.4%)... Commercial and Residential property investor Inmobiliaria Urbas, (-3.5%)… Fears… that Spain's property bubble was about to burst were sparked by news of creative accounting at Valencian property developer Astroc and market rumors of stock dumping, which caused Astroc shares to fall 43% on April 18… Spanish home prices have risen… 170% since 1997… Around 800,000 houses were constructed there last year, more than France, Italy and Germany combined."

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

• Dollar Trades Near Record Low Versus Euro Before Housing Report (Bloomberg, May 1st): "The dollar traded near a record low against the euro before housing figures in the U.S. [are released]… The U.S. currency has dropped 3.3% against the euro this year as traders bet the interest-rate advantage over Europe will narrow. "The housing market is still casting dark clouds over the U.S. economy,'' said Kazuo Mizuno, chief economist at Mitsubishi UFJ Securities Co. in Tokyo... "This may force the Fed to cut rates at the end of the year, buffeting the dollar.''

• Home Equity Debt: The Long Slow Squeeze Continues (Tim Iacono in Seeking Alpha, Apr. 30th): "Homeowners with no intention of selling their home…who extracted home equity [are] getting squeezed every month as they service home equity debt… It no longer makes sense to refinance the extracted equity back into a new first mortgage…WSJ: "The amount borrowers owe on their home-equity lines of credit has slipped in the past six months, to $561 billion at the end of March, the first such decline since 1999, according to… Equifax and Moody's Economy.com. [Despite] a pickup in fixed-rate home-equity loans, total home-equity borrowing rose just 9% in the 12 months through March, well below the 21% average annual growth rate of the past five years."

• Building Materials' Sawed Off Results (Motley Fool, Apr. 30th): "Builders FirstSource (BLDR) struggled in the quarter, reporting earnings last week that plummeted from $0.54/share to a single penny. Nevertheless, it achieved earnings, however puny. … San Francisco-headquartered Building Materials Holding (BLG), announced… a loss of $5 million, or $0.17/share, from last year's net income of $28.1 million, or $0.95/share. The company's earnings loss resulted from a 35.7% decline in revenue. Building Materials Holding operates through a pair of segments. SelectBuild offers various construction services, including wood framing, masonry, plumbing, labor management, and construction scheduling. BMC West markets building products, including structural lumber and building components."

• FPL Group Q1 2007 Earnings Call Transcript (Seeking Alpha, Apr. 30th): "For Q1, Florida Power & Light (FPL) reported net income of $126 million, compared with a $122m in Q1'06. The corresponding contributions to EPS were $0.32 this year compared to $0.31 last year. Customer growth continued strong for Q1'07. The average number of FPL customer accounts increased by 98,000 or 2.2%, slightly ahead of our long-term historical growth rate. While housing starts have fallen dramatically from their peak, they remain at levels that support good long-term growth, and we continue to believe that as long as the Florida economy remains fundamentally healthy, we will continue to see good customer growth."

• Patrick Industries Reports First Quarter Results (MSN Money, Apr. 30th): "Patrick Industries (PATK), a leading manufacturer and distributor of building and component products for the Recreational Vehicle, Manufactured Housing and Industrial markets, reported a net loss of $0.6 million, or $0.13/share, on net sales of $78.1m for Q1'07, compared with net earnings of $0.7m, or $0.15/share, on net sales of $89.3m for Q1'06… Industry sales for manufactured homes were down 39% year-to-date… Industrial and other sales, which include sales to the kitchen cabinet, office furniture, store fixtures and other industries, represent approximately 36% of the Company's sales for 2007, compared with 24% for Q1'06.

• Sagging Market Begins to Affect Property Taxes (Sign On San Diego, Apr. 29th): "San Diego County Assessor Gregory Smith: About 900 homeowners since January have requested property tax reassessments based on falling prices in their neighborhoods. By mid-May… he expects as many 2,500 requests with 1,800 reductions likely to be granted, more than 26 times as many as last year… During the recession 15 years ago, assessment reductions reached a peak of $16.8 billion for 203,001 homes, commercial properties and time-share units in 1997. Of that total, 157,686 were residential. The discounts [equaled] about $168 million in lower tax payments, a relatively small amount compared with the $1.5b collected that year."

Homebuilders And Housing Stocks

• Home Building Slows in Response to Sales (Palm Beach Post, May 1st): "Research firm Metrostudy: From 1996-2005, Palm Beach builders routinely broke ground on 2,000 homes a quarter. In Q1'07, builders started only 836 new homes... Home starts took pronounced dips in Q3 and Q4'06… DiVosta Building Corp. said Monday it was laying off nine workers from its Palm Beach County operations. That follows a layoff of 218 workers last year… Builders Centex (CTX) and Lennar (LEN) backed away from plans to build 10,000 homes at Vavrus Ranch in Palm Beach Gardens... Minto Communities has cut prices at its Olympia development by more than 10%, according to an ad in Sunday's Palm Beach Post."

• Homebuilder Centex Swings to Q4 Loss (Seeking Alpha, May 1st): "U.S. Homebuilder Centex (CTX) posted a loss of $22.3 million (-$0.18/share) versus its earlier forecast of break-even and versus $369m ($2.86) earned in Q4'06. Analysts were expecting a loss of -$0.03. Figures include land impairment charges of $202 million, or $1.01/share… but don't include earnings from discontinued operations of $221.1m related to Centex's construction services business, sold off in March, and some home equity operations. Including those profits, the company posted net income of $198.9m ($1.60/share), down from $391.8m ($3.04) a year earlier. Revenue dropped 11% in the quarter to $3.67 billion against analyst expectations of $3.34 billion… closings fell 14%."

• Stock Portfolio Adjustments for Global Warming and Rising Sea Levels (Tom Konrad in Seeking Alpha, Apr. 30th): "Could the Chicago Mercantile Exchange's new housing futures or options effectively short real estate prices in coastal cities? While this may be a good… hedge against further implosion of the current housing bubble, these derivatives all expire within one year… too short a horizon to hedge the risk of rising sea levels. In addition, given mass flooding from a rise of sea levels… the very indices that the futures are based on [could] be changed to only reflect the values of real estate in higher lying areas, which would probably increase in value as people moved to higher ground."

• Centex Wants Out of Tustin Base Partnership (Orange County Business Journal, Apr. 30th): "Homebuilder Centex (CTX) [wants] to withdraw from Tustin Legacy Community Partners LLC, the partnership that’s building Legacy Park, a roughly 820-acre masterplanned development… at the 1,500-acre former Marine base… Legacy Park calls for 2,100 homes and 6.7 million sf of offices, restaurants, shops and hotels in the next 6-8 years. The project broke ground late last year… [and will comprise] 4,500 homes when completed… Lennar Corp., Newport Beach’s William Lyon Homes and John Laing Homes are building an additional 2,500 homes elsewhere at the site. Centex has a 50% stake, in the Tustin Legacy partnership."

• Black & Decker VP Exercizes Options (Chron.com, Apr. 30th): "A vice president of power tool and hardware maker Black & Decker Corp.(BDK) exercised options for 8,500 shares of common stock, according to a Friday SEC filing. Les H. Ireland reported he exercised the options Friday for $39.74 to $60.19 apiece and then sold all 8,500 shares on the same day for $92.34 apiece."

Commercial Real Estate and REITs

• Vornado To Develop in Harlem for First Time in 30 Years (NY Sun, May 1st): "Vornado Realty Trust (VNO), owners of 22 million sf of Manhattan office and commercial space, is planning to build Harlem's first office building in more than 30 years… Lower land costs and government incentives to entice office users to the site would let Vornado offer rents less than half the $100/sf rate that new Midtown offices command… Rents for Class A office space in Midtown Manhattan rose 33% to an average of $82.44 a foot annually, in the 12 months through March, according to real estate brokers Colliers ABR."

• Health Care Property Investors, Inc. Reports Results for the Quarter Ended March 31, 2007 (Digital 50, May 1st): "Health Care Property Investors (HCP), today announced results for Q1'07. Funds From Operations ("FFO") applicable to common shares was $102.4 million, or $0.50/share of common stock, for Q1'07, compared to FFO applicable to common shares of $73.0m, or $0.53/share of common stock, for Q1'06... Q1'07 FFO figures included the impact of merger-related charges of $0.03/share of common stock and write-offs of costs related to acquisitions not consummated of $0.01 per diluted share of common stock… Merger-related charges in the 2007 period include the amortization of fees associated with our CNL Retirement Properties, Inc. (CRP) merger financing."

• New York Times Building Bought by Israeli Company (NY Sun, May 1st): "The New York Times Building, headquarters of the newspaper since 1913, was bought by Africa Israel Investments Ltd., an Israeli holding company, for $525 million. Tishman Speyer Properties LP owns the 15-story building… New York office buildings are fetching record prices in a market buoyed by rising rents and falling vacancies. Real estate broker Cushman & Wakefield: Office rents in Manhattan reached an all-time high in Q1… vacancies fell below 6% for the first time since 2001 … Africa Israel plans to spend $170 million to renovate the property… Tishman Speyer bought the property… in 2004 for $175 million."

• Hilton Hotels Q1 2007 Earnings Call Transcript (Seeking Alpha, Apr. 30th): "Robert LaForgia, CFO: "We completed the sale of Scandic for approximately $1.1 billion, and also we signed an agreement to sell up to 10 hotels in continental Europe to Morgan Stanley Real Estate for about $770 million. We are extremely pleased with the pricing on these transactions. The Scandic deal… sold for 10 times trailing 12 month EBITDA, and the pricing on the 10 owned European assets was a solid 15.2 times trailing 12... Upon completion of this deal, Hilton will have sold over $3b of assets… $3.2b, of the assets that were acquired in the Hilton International acquisition… we will have sold over $4.5b of assets since the beginning of 2005."

• Eagle Says Will Go to JV for 'Approximately $700M' (Commercial Property News, Apr. 30th): "Eagle Hospitality Properties Trust [is] to be acquired… in a cash deal valued at $13.35/share [or] $700 million. The deal's estimated value includes 23.6 million shares to be bought at $13.35/share, $100m in preferred shares, and the assumption of $265m in debt… [Representing a] 21% premium over Eagle's three-month average closing price. AP AIMCAP will walk away from the deal with Eagle's 13 full-service and all-suite properties… an aggregate 3,516 guestrooms in Arizona, California, Colorado, Florida, New York, Kentucky, Ohio, Illinois, Massachusetts and Puerto Rico. The properties carry the flags of Embassy Suites, Hilton, Hyatt and Marriott."

• Analysts See Entry Point Into Brookfield Properties (FP Trading Desk in Seeking Alpha, Apr. 30th): "Brookfield Properties Corp. (BPO) is looking pretty cheap these days, according to analysts. With the company’s share price down almost 20% since peaking in February it could be a buying opportunity. Gail Mifsud, real estate analyst at Blackmont Capital, noted Brookfield trades at about the same level as Equity Office Properties Trust traded at before it was sold. “Equity Office is of inferior quality,” he said."

• Analyst Upgrades Brookfield Properties (Forbes, Apr. 30th): "RBC Capital Markets analyst Neil Downey raised his rating on the Brookfield Properties REIT to "Outperform" from "Sector Perform" and maintained his price target of $48, implying upside of 16.4% over its closing price Friday of $41.22 on the NYSE. Downey likes how Brookfield's market rent has climbed to $33 from $26 from a year ago, while new developments - representing about 1.6 million sf - will begin contributing to the REIT's net operating income in late 2007 through to 2010."

• Inland Western, Morgan Stanley Join Forces on $1B Retail Play (CoStar Group, Apr. 30th): "Inland Western Retail Real Estate Trust is partnering with Morgan Stanley Real Estate (MS) [to] acquire and manage retail properties… across the U.S. and plans to amass a portfolio value at $1 billion… With a $500 million portfolio of retail assets contributed by Inland Western [the venture] plans to build out the portfolio with about $500 million in acquisitions of top quality neighborhood, community and power centers and shopping centers… Morgan Stanley… representing an unnamed state pension fund in the partnership, will provide 80% of the equity and Inland Western will be responsible for 20%."

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

[LIFEWALKER]

On the Jack White Sale he made a gain of 11.20% on the sale in three years time thats 3.7% per year approx.
not a bad gain, that fact that he was asking $930,000 is not relevant.

Bill Plein