Real Estate Sales and House Prices
- Report: Home Prices Have Increased 20% Since 2006 (NY Sun, May 15th): "Citywide home prices shot up more than 20% between early 2006 and 2007, a new report says, with the biggest gains seen in Manhattan. The average sales price for an apartment in the city rose to $745,000 in the first three months of 2007, up $140,000 compared with a year earlier, according to a report released yesterday by the Real Estate Board of New York. Previous findings by city brokerages noted more modest gains over the past year, though their data was generally confined to Manhattan."
- Illinois Median Price Slightly Higher in the First Quarter of 2007 (Earthtimes.org, May 14th): "Illinois Association of Realtors Q1 report: Total home sales (which include single-family homes and condominiums) totaled 29,390, down 14.2% from 34,235 home sales in Q4'06. The Q1 median home sale price was $197,000, up 0.5% from $196,000 a year earlier. The average sale price was $251,375, up 1.9% from $246,610 for Q1'06... Q1 condo sales across the state were down 11.1% to 9,421 condos sold compared to 10,595 in 2006. The median price for a condominium in Illinois in Q1'07 was $215,000, up 2.4% from $210,000 a year ago."
- Home Sales Continue to Slow While Prices Drop (Maryland Gazette, May 12th): "Maryland Metropolitan Regional Information Systems: In Pasadena, April home sales dropped about 20% compared to March… the average selling price increased 12% to $378,000. Brooklyn Park April sales were virtually unchanged compared to March, but… prices jumped 10% to about $193,000. The Glen Burnie area home sales were [flat] vs. March, though the average selling price increased roughly 3% to around $277,000. The median county home sale price was $345,000, a 1.4% decrease from April 2006… Up from $326,000 in March… Homes sold last month had been on the market an average of 107 days. Last April's average was 62 days."
- Vermont Housing Market in Deep Freeze? (WCAX, May 11th): "The number of houses for sale in Vermont has about doubled in the last two years… The downturn in the housing market in Vermont has not been as dramatic as other parts of the country. Experts say it's not a seller's market anymore, but it's not buyer's market either. Local realtor Geri Reilly: "It's what I call a stable market. So, you're not seeing anything appreciating, but we're not seeing the big dips -- we're not seeing people having to drop 25,000, 50,000." Despite more inventory, prices are stable."
Real Estate Investing and Sentiment
- From Paupers to Millionaires (NY Sun, May 15th): "Why not just give the public housing projects apartments away to the tenants who live there — and instantly make hundreds of thousands of poor New Yorkers into wealthy ones? Given the low turnover, the long average stay, and the lack of the political will to sell the buildings, these tenants for all practical purpose own the apartments already… Many of these housing projects are in prime neighborhoods… Those along the East River in Manhattan feature the same views enjoyed by those in Stuyvesant Town apartments starting at $3,675 for a 2BR… and by those in condominiums Donald Trump's World Tower sells for $10 million each."
- Location, Location, St. Joseph Make Sale (Milwaukee Journal Sentinel, May 14th): "The four Elliott's Ace Hardware stores in the Milwaukee area have already sold more than 120 St. Joseph kits this year… sales soared again in March… Joseph was a carpenter, the husband of Mary and the earthly father of Jesus… He's considered by some to be the patron saint of house hunters and house sellers. The tradition of burying his statue to help sell a home is supposed to include prayers to St. Joseph… Ann DeMartino, who supplies the Ace Hardware stores around Milwaukee… sold 120,000 St. Joseph statue kits last year, about 40,000 more than in most years."
- Dump Your Real Estate Agent and Save (Seeking Alpha, May 14th): "Redfin. The company, as described by TechCrunch, is offering a combination of MLS listing information (homes for sale) with historical sales data (homes already sold) into a single map… If you find a home you may want to buy, Redfin will apply the role of your buyer broker – backed by a call center with licensed real estate agents. Then, they say, they will reimburse you for 67% of the fee directly on closing. Don't expect much from Redfin today; the company's site is crashing from TV traffic received even before the report aired on CBS on Sunday night."
Mortgates and Real Estate Lending
- Big Lender Enters Mortgage Niche (Wall St. Journal, May 15th): "Countrywide Financial Corp. has launched a reverse mortgage aimed at allowing seniors with pricier houses to convert their homes' equity to greater income… The nation's aging population, along with the rapid housing-price appreciation from 2000 to 2005, has led to record growth in reverse mortgages… Federal Housing Administration: Originations of reverse mortgages insured by the federal government (which represent about 90% of the total) grew sharply in the 12 months ended Sept. 30 to 76,276 from 43,081 a year earlier… More lenders are entering a niche market traditionally dominated by IndyMac Bancorp (NDE); Wells Fargo (NYSE:WFC) ; Seattle Mortgage Co., which is being acquired by Bank of America (NYSE:BAC); and closely held EverBank Financial Corp.'s BNY Mortgage."
- Report: Countrywide Adding 2,000 Sales Jobs (Yahoo! Finance, May 14th): "Countrywide Financial Corp. (CFC) is planning on adding 2,000 sales jobs this year as its competitors are making staff cuts... The job additions will result in the opening of 100 new Countrywide branch offices…Countrywide has reduced its number of subprime loans… In 2004, Countrywide agreed to bring 7,500 jobs to Texas by 2010, as part of a $20 million grant from the Texas Enterprise Fund. In January 2006, Countrywide snapped up a Fort Worth office building to accommodate 1,500 jobs. CFC [also] bought a 420,000-sf office campus… [for] creating 5,000 new jobs at its regional headquarters in Plano."
- Hands Off: Allstate Bails On Golden State (KGO-TV, May 11th): "Allstate, California's third-largest home insurer, is backing away from writing homeowners policies. Allstate claims the combination of high housing costs and all-too-frequent natural disasters is just too much for it to handle anymore… Allstate says its decision to stop writing homeowners policies to new customers in California has nothing to do with the two big wildfires that broke out in… Southland this week. Instead, the state's third largest home insurer analyzed years of data… Consumer groups say the new policy ban is really a bullying tactic to get the state to approve a 12% rate hike."
Subprime Fallout and Foreclosure Impact
- U.S. April Foreclosures Dip 1%- RealtyTrac (Reuters, May 15th): "RealtyTrac: U.S. home foreclosures fell to 147,708 in April down 1% from a two-year high set in March... The latest figure, a sum of default notices, auction sale notices and bank repossessions, was 62% higher than a year ago… Nationally, the foreclosure rate translated into 1 foreclosure filing to every 783 households. Nevada [lead] with 1:232 households… [down] 21% from March but up more than 200% from April 2006. Colorado came in second with 1:314 households, falling 7% from March. Other states with high foreclosure rates were Connecticut California, Ohio, Georgia, Florida, Arizona, Illinois and Michigan… California reported the most foreclosure filings at 30,505 foreclosure filings -- or 1:400 households… down 3% from March. Florida came in second with 14,318 foreclosure filings, or 1:510 households. Ohio's foreclosure activity… surged 39% from March, to 11,431, or 1:418 households."
- HSBC Finance's First-Quarter Net Income Falls 39% (Bloomberg, May 15th): "Net income in Q1 fell to $541 million from $888 million last year, mainly as HSBC Finance (HBC) had to almost double the provisions set aside for credit losses to $1.7 billion… HSBC Finance, which generally serves consumers with limited credit history, posted a 19% drop in net income last year as loan defaults in the U.S. climbed amid higher interest rates… HSBC, Europe's largest bank by market value, bought the subprime lender Household International, for $15.5b in 2003… This year, interest rates will be reset for the first time on about $9b worth of HSBC Finance's adjustable mortgage loans, followed next year by adjustments on $4.7 billion of the loans… HSBC's second-half profit fell 5.7% last year to $7.06b as loan impairment charges and other credit risk provisions surged 36% during the year to $10.6b."
- Vista, Golden Star Dim; PetMed Express Jump (Wall St. Journal, May 15th): "Small-capitalization stocks fell as merger mania gave way to economic ennui and investors awaited inflation data... A Federal Reserve survey said banks operating in the U.S. reported overall weaker loan demand and tighter standards on "subprime" and other borrowing. Among small banks, Susquehanna Bancshares fell $0.37, or 1.7%, to $21.59 and Franklin Bank shed $0.10 to $16."
- Regional Spotlight: Future of Houston Real Estate Depends on Health of Energy Industry (RIS Media, May 15th): "Barton Smith, Director, Institute for Regional Forecasting at University of Houston: [This year,] the performance of the local residential and commercial real estate markets will depend greatly on the health of the energy industry... "The housing market in Houston is going to slow down... The starter home market will be most affected as loans become harder to come by for those with less-than-stellar credit." [Though] Houston… has seen foreclosures multiply, it hasn't experienced excessive housing price increases or overbuilding… although single-family home starts are starting to decline, primarily in the entry-level market."
- Banks Face Growing Pressure on Home Prices (Barry Ritholtz in Seeking Alpha, May 14th): "WSJ: Some [lenders] are turning to large-scale auctions to speed up the sale of… a growing backlog of foreclosed homes … At [a recent] San Diego sale, houses and condos typically sold for about 30% [some even 50%] below the previous sale or appraisal prices... As foreclosures… surge higher, lenders-in-possession will find themselves with an increasing number of homes… [With] large scale auctions -- 100 or so properties at a time… the impact of so much supply hitting the market… means buyers can be quite picky, bidders are free to low ball.… [and also] enormous price decreases from the loan amount, appraised value, or recent selling price."
- Consumer Groups ask Lenders for Six Months (Press Enterprise, May 14th): "A coalition of California consumer groups sent letters Monday urging six major mortgage lenders-- Countrywide Financial Corp., Wells Fargo & Co., Citigroup Inc., Bank of America Corp., Washington Mutual Inc. and Merrill Lynch-- to suspend foreclosures on home loans for six months and to find ways to keep borrowers at risk of default from losing homes. If the lenders don't act, hundreds of thousands of Californians who took on risky loans could lose their homes, according to the letter. More than 100 consumer groups, including economic-rights advocates, housing counseling services and legal aid groups, signed off on the letters."
- Ill., Mo. Foreclosures Fall in April (St. Louis Business Journal, May 14th): "Bargain Network: Illinois ranks No. 5 and Missouri No. 11 nationally for the number of real estate foreclosures in April. Missouri had 4,147 foreclosures in April, down 15% from March… Illinois had 7,993 foreclosures, down 28% from March. Nationally, 140,711 foreclosures occurred in April, down 10% from March. About 88% of the foreclosures were in the single-family residence market."
Global Impact and Alternatives To The Housing Slump
- Behringer Harvard and Leading European Pension Fund Announce Joint Venture to Acquire Luxury Apartment Communities in U.S. (PR Newswire, May 14th): "Behringer Harvard announced today that Dutch pension fund PGGM has agreed to co-invest up to $100 million with Behringer Harvard in… apartment communities in top U.S. metropolitan areas. Target assets will consist of well-located Class A multifamily communities purchased from reputable national and regional developers before the properties achieve stabilized occupancies. Robert M. Behringer, CEO Behringer Harvard: "As the investment manager for nearly two million Dutch healthcare and social work professionals, PGGM is highly selective about the programs it chooses to participate in."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Cooling Housing Markets Make Job Candidates Reluctant to Relocate (RIS Media, May 15th): "With homes in many markets around the country taking longer to sell and prices either flat or declining, employees being asked to relocate are balking in greater numbers… A Prudential Relocation survey on mobility trends found… 61% of [relocation clients] named cost-of-living and housing concerns as a top issue, while 22% said that selling the home, specifically, was a top concern. The survey [taken in September] reflects only the start of changing attitudes about many U.S. housing markets… Outplacement firm Challenger, Gray & Christmas [said] some companies spoke of losing prized recruits or paying higher relocation costs for people who feared they'd lose money on the sale of their existing home."
- Housings Roof Won't Cave In (Business Week, May 21st): "Builders, lenders, and realtors slashing jobs… But despite the weakness in home prices, homeowners [could] keep spending... Pay and capital gains are taking over from housing as the engines of spending growth. Wages and salaries grew about $360 billion in 2006 vs. average growth of just $275 billion in 2004-2005. Stock market wealth rose about 13% over the past year, judging by the Dow Jones Wilshire 5000 Composite Index. That more than compensates for the roughly 1% fall in housing values…Builders have borne the brunt of the slump by cutting the supply of new homes. Their cutbacks are keeping the growing backlog of unsold houses from getting completely out of control."
Homebuilders And Housing Stocks
- The St. Joe Company and Shea Homes Announce Start of Strategic Alliance (DBusiness News, May 15th) Jacksonville, Fla.: "The St. Joe Company (NYSE:JOE) announced Tuesday a strategic alliance with Shea Homes, the nation’s largest privately owned homebuilder, to be the exclusive builder for JOE’s active-adult neighborhood in JOE’s Victoria Park community in Deland, Florida, near Orlando… This alliance marks Shea’s initial entry into the Florida market. Under the terms of the agreement, Shea Homes will purchase up to 705 home sites developed by JOE in the Victoria Gardens neighborhood, a gated, age-qualified active-adult community. In the first phase of the agreement, Shea Homes intends to purchase 168 finished home sites through a take down arrangement."
- Home Depot Earnings Preview: Goldman Believes No News = Good News (FP Trading Desk in Seeking Alpha, May 14th): "Goldman Sachs analyst Matthew Fassler: Home improvement retailing giant Home Depot (NYSE:HD) shares could see some upside barring… bad news such as a sales shortfall… HD has [long] experienced low investor expectations… A premium hasn't been built into the stock [for] the potential sale of its HD Supply unit, which sells supplies to builders and contractors… Sale of this division in the low end of the likely range will have a breakeven impact on HD’s earnings… a higher price could lead to… a 5% EPS boost. "Either way, actual movement in this process could jumpstart psychology on HD shares."
- Standard Pacific Promotes its O.C. Execs (OC Register, May 14th): "Top executives overseeing Standard Pacific Homes' (NYSE:SPF) Southern California divisions are moving up the corporate ladder, the Irvine-based homebuilder announced today. Scott D. Stowell, who oversaw operations in six Southern California divisions, including Orange County, has been promoted to the newly established position of chief operating officer… Todd J. Palmaer, head of Standard Pacific's Orange County division, will succeed Stowell as Southern California regional president, and Ted McKibbin has been named to replace Palmaer as Orange County Division president."
- Home Improvement Stocks Gain Favor (International Herald Tribune, May 14th): "Black & Decker (BDK), the biggest U.S. power-tool company, and faucet maker Masco (NYSE:MAS) say that retailers are increasing orders, a sign that the worst housing decline in 16 years may be near an end. Masco said… its biggest customers, including Home Depot and Lowe's, are buying more Delta taps and Behr paint, sending the company's shares up 9.5%. Shares of Black & Decker (BDK) and Stanley Works, (NYSE:SNA) the hand-tool maker, have gained more than 16% this year... The world's largest home-improvement retailers are not doing that well yet. Home Depot's (HD) stock has dropped 3.2% to $38.86 so far this year, and Lowe's (NYSE:LOW) shares are down nearly 1% at $30.87."
- Stocks to Save Your Fortune (Motley Fool, May 14th): "Recently, a number of stock market experts have been trotting out a chart showing the correlation between the National Association of Home Builders' Home Market Index and the S&P 500 12 months later. See, the Home Market Index has collapsed. Homebuilders such as Centex (CTX), Toll Brothers (NYSE:TOL), and Pulte Homes (NYSE:PHM) are 20% off their highs. And these experts worry the entire market is next."
- Weak Spring May Drive Home Prices Lower (MarketWatch, May 14th): "Deutsche Bank: Home-builder executives said they're cutting prices or offering more incentives to make up for sales-volume declines in Q1: Ryland CEO: "We needed to adjust our prices [in Q1] in order to sell homes and compete effectively." M.D.C. Holdings (NYSE:MDC)… has reduced prices or added incentives due to an uninspiring spring season, competitors' price cuts and subprime worries in the market. Beazer Homes (NYSE:BZH) launched a Q1 promotion called "Dollar Dream Home Day" which offered $1 down and other components to bring in potential buyers. Lennar's (NYSE:LEN)… relatively early adoption of aggressive pricing strategies in early 2006 has resulted in much higher order volumes compared with other home builders. However, the order gap is narrowing."
- Why CAT Can Climb Even Higher (The Street, May 14th): "It's like the SAT: Caterpillar is to alternative oil projects as Deere is to renewable fuels… Deere has very little housing-related, while… the domestic housing industry needs Caterpillars to do the job. What's happening today is a combination of a Merrill Lynch push for CAT and some big orders CAT is winning right now for oil shale projects. It has taken forever… to get to the point where CAT is less levered to Toll and Lennar and more levered to Foster Wheeler and McDermott . But now it is happening in full force, and that should take CAT much, much higher."
- Will KB Home Ditch Its French Unit? (Business Week, May 11th): "S&P: KB Home (NYSE:KBH) might be tempted by the $783 million the sale of its French unit Kaufman & Broad SA (KBH.PA) could bring… to bolster its balance sheet, or fund future land acquisitions if prices fall to the point where [there's] a good opportunity… Kaufman & Broad's €1.3 billion in annual revenue, accounted for 18% of homes the company delivered in fiscal 2006. K&B SA… also has a commercial construction arm… KBH [stateside] is… reducing the time it takes to close on a home – [to] minimize order cancellations -- and writing down the value of its land holdings."
Commercial Real Estate and REITs
- Feldman Mall Properties, Inc. Reports Fourth Quarter 2006 Financial Results (Earthtimes.org, May 15th): "Q4 FFO was $0.18/share -- Full year 2006 FFO was $0.80/share – Feldman completed an agreement to issue up to $50 million of 6.85% convertible preferred shares… to Inland American Real Estate Trust… Feldman completed an unsecured credit agreement with Kimco Capital to borrow up to $25 million through a 7% promissory note, and completed the refinancing of the Stratford Square Mall for $104.5m… Declared Q1 dividend of $0.2275/share…Feldman will utilize the net proceeds from the offering to provide capital for the redevelopment of its mall assets, to repay borrowings under its line of credit and for general corporate purposes."
- Real Estate Roundup (Portland Business Journal, May 14th): "A few weeks ago, Colliers International and Grubb & Ellis Real Estate Services Worldwide [said] more Portland office space came on the market than was leased… the first period of "negative absorption" in recent years. Now CB Richard Ellis… released its own quarterly report showing negative absorption, a trend that could signal a slowdown in commercial real estate if it continues. CB Richard Ellis reported that about 30,000-sf more office space came on the market in downtown Portland than was leased in Jan.-Mar… CB Richard Ellis pegged the downtown vacancy rate at 8.9%."
- Chicago Real Estate Financing Firm Expands to Phoenix (Phoenix Business Journal, May 14th): "Commercial real estate veteran Gregory K. Miskovsky was named managing director of Cohen Financial's new Phoenix office, where he will introduce the Chicago company's commercial real estate financing, investment banking and capital services to the Southwest market… [Previously,] he was the senior director, divisional loans for Marcus & Millichap Capital… Brandon Harrington, previously an associate loan officer Marcus & at Millichap, will join too... The local Cohen team will [be] affiliated with the Colliers International… Cohen Financial is a national real estate capital services firm offering debt and equity placement, investment brokerage, loan administration and advisory services."
- Annaly Capital Will Rise as Interest Rates Fall - Barron's (Seeking Alpha, May 13th): "Annaly Capital Management (NYSE:NLY) profits from differentials between funds borrowed at short-term rates (5.1%) and the mortgage-backed security rates (5.68%) it buys. As interest rates have risen, Annaly's reduced yields have brought dividends down… Bulls say the housing slump will force Fed rate cuts. Even a 1% reduction could push dividends back up to $2/share, and Annaly's $15.86 shares could rise to $21... Bears say the economy's strength will push interest rates higher, squeezing yields and raising borrowing costs on Annaly's highly (9.8-1 ratio) leveraged funds. If rates do fall, borrower's prepayments will narrow spreads further."
Web Site of the Day
We've actually featured the Mortgage Implode-O-Meter before, both on Feb. 14th, 2007 and Mar. 15th, 2007, when "only" 38 lenders were either in early stages of bankruptcy, bankrupt, or sold. Just two months later the number of mortgage lenders who have "gone kaput" is up to 66.
Check out the 'Imploded' page, with a complete list of defunct lenders, their stories, and where they're at now. It could very well be that the subprime crisis won't spread through the economy, but the implode-o-meter certainly seems to test that theory. Worth a second look.
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