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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"

  • "It's better for the crooks. It's only the good people who have to comply. Regulation, in my opinion, has caused part of the problem. When they attacked the pay option and interest-only loans, that really put a dent in a lot of the product, which is perfectly good product." - Countrywide Financial Corp. CEO Angelo Mozilo on proposed regulation in the subprime market. (Canada Financial Post, May 21st)

Real Estate Sales and House Prices

  • Regional Spotlight: Greater Hartford Home Prices Remain Stable in April (RIS Media, May 22nd): "Greater Hartford Association of Realtors: Despite an 8.6% increase in homes available for sale and a 9.98% drop in closed home sales, median home prices in Greater Hartford increased by nearly 2% in April… From January to April, new home listings increased 4.5%; pending sales increased 0.23%, closed sales decreased 7.31% and average days a home was on the market increased 7.94%, from 63 to 68 days. Sales for the region's condominium market decreased by 10.33% so far this year (from 1162 to 1042 units) while median sales prices increased 2.42%, from $165,000 in 2006 to $169,000 this year."
  • Centrum Auction Brings $7.3 Million in Bids (Dallas Business Journal, May 21st): "An auction of 16 Oak Lawn high-rise Centrum Tower condominiums on Sunday brought about $7.3 million in bids... Twelve units were sold "absolute," meaning the seller must accept the high bid. Michael Fine, Executive VP at auctioneer Sheldon Good & Co.: "The lowest final bid for those units was $360,000 and the highest was $650,000-- on a unit originally priced at $995,000 (a more than a 25% discount.)" Dallas-based Centennial Real Estate Corp. and Chicago-based GEM Realty Capital bought the Centrum's top eight floors in 2005 and converted the living units from apartments into 34 condominiums."

Real Estate Brokers

  • Realtors Still Upset After '60 Minutes' of Fame (Inman News, May 21st): "The group's annual legislative conference, during which Realtors lobby for a variety of industry issues on Capitol Hill. NAR's lobbying expenditures totaled about $16.8 million in 2006, according to the OpenSecrets.org Web site. NAR's lobbying expenditures ranked among the top-10 highest in the country, a list that also includes the U.S. Chamber of Commerce, American Medical Association, General Electric and Pharmaceutical Research and Manufacturers of America."

Real Estate Investing and Sentiment

  • What Exactly Is a Condop? (NY Times, May 20th): "A common misconception is that it’s a co-op that operates with condominium rules. But lawyers say that legally a condop has nothing to do with whether a building requires a board interview or allows rentals.“A co-op with condo rules is not a condop,” said Jeff Reich, a real estate lawyer. A true condop is a condominium building that has separate commercial and residential units, with the residential units controlled by a co-op corporation. The separate commercial units are typically retained or sold separately by the developer and can include retail space, office space and a parking garage."
  • NABE Forecasts Slower Economic Growth for 2007 (Reliable Plant, May 21st): "National Association for Business Economics Outlook: Residential investment remains a dominant force dampening growth in 2007. Nearly half of our forecasters think that the bottom in housing will not be reached until Q4'07 or later. Most respondents think that median home prices will decline this year, though the estimated drop is generally expected to be 3% or less. One-third of the panel thinks the problems in the subprime market are delaying or deepening the housing correction; significant fractions anticipate that subprime problems will hinder consumption or prompt significant changes in the regulation of the mortgage markets."

Mortgates and Real Estate Lending

  • Impac Acquires Company to Generate Own Mortgages (Orange County Business Journal, May 21st): "Irvine’s Impac Mortgage Holdings Inc. (IMH), which buys mortgages as investments, is looking to start making loans itself with the acquisition of Florida's Pinnacle Financial Corp. A subsidiary of Impac is buying Pinnacle's business of making loans [to first-time homebuyers] on its own and through brokers. The deal marks a change in strategy for mortgage investor Impac. To date the company has focused on buying and selling Alt-A loans, which are one step above subprime loans in terms of risk… Joseph Tomkinson, Impac CEO: "Impac had been looking to diversify."
  • Colorado Mortgage Fraud Declines (MSN Money, May 21st): " Mortgage Asset Research Institute: Colorado slipped to ninth place nationwide in terms of mortgage fraud in 2006, continuing a decline seen since 2004... Colorado's latest ranking compared with a fifth-place showing in 2005 and third place in 2004… The top 10 states for mortgage fraud in 2006, according to MARI's report were, in order: Florida, California, Michigan, Georgia, Utah, New York, Illinois, Minnesota, Colorado and Nevada… In terms of subprime loan origination, Colorado's rank slipped to 10th in 2006.... That was down from seventh place in 2005… and fourth in 2004."
  • Mortgage Fraud Is Up, but Not in Their Backyards (NY Times, May 21st): "Mortgage Asset Research Institute report: Reports of mortgage fraud rose 30% for loans made in 2006 [vs.] those made in 2005. (And it might take 3-5 years to uncover the full extent of fraud that occurred in [2006] loans.) The number of F.B.I.-reported fraud cases soared to 35,000 last year, from 7,000 in 2003… prompting the Mortgage Bankers Association to ask the House and Senate Appropriations Committees to dedicate $31.25 million… for the F.B.I. and the Justice Department to combat mortgage fraud. Firms that track mortgage fraud say it costs banks and lenders more than $4 billion a year."
  • Lender Discrimination Based on Property Type or Location? (Realty Times, May 21st): "One major lender, Aegis Mortgage Corp of Houston, agreed last week to change its policies banning loans on properties inside reservations, urban row houses, and group homes anywhere in the country. The company, which specializes in subprime lending and says it has funded 228,000 mortgages since 2003, announced its changes in a joint settlement with the National Community Reinvestment Coalition, a Washington DC-based consumer group. NCRC also filed suit in federal district court against another large mortgage lender, NovaStar Financial of Kansas City, Mo., when the lender refused to drop similar bans against Indian reservations, row houses in Baltimore, Maryland, and group homes for disabled adults."

Subprime Fallout and Foreclosure Impact

  • New Century Wins Court OK to Sell Servicing Unit (Reuters UK, May 21st): "A federal bankruptcy judge on Monday granted New Century Financial Corp. (NEWCQ.PK) approval to sell its loan servicing unit to hedge fund Carrington Capital Management LLC for $184 million…The price is about one-third more than Carrington offered prior to the auction, and may be adjusted… The loan servicing unit, which handles collections, was New Century's last major asset for sale… New Century had announced a $188m purchase price for the servicing unit, but that included a $4m credit to Carrington related to break-up fees and expenses."
  • Bankers Call for Subprime Lending Standards (MarketWatch, May 21st): "In a joint statement about responsible subprime lending, groups including the American Bankers Association and the Mortgage Bankers Association said lenders should make only subprime home loans to consumers that can repay them and that terms and features of loans should be disclosed clearly to consumers." A national uniform standard should provide fair and consistent application to both bank and non-bank mortgage lenders," said the statement, which also was signed by America's Community Bankers, the Consumer Bankers Association, the Financial Services Roundtable and the Roundtable's Housing Policy Council."
  • Mortgage Lenders Get Creative (CNN Money, May 21st): "In January, more than 60% of all mortgage loans were made to prime customers… That means there's a smaller pie of less profitable loans to be divvied up, prompting lenders to come up with new… offerings… Washington Mutual, (WM) has… a flexible mortgage that allows borrowers to switch from a fixed rate to an ARM and back again - without refinancing - at little or no charge. Bank of America, (BAC) has… a no-fee mortgage: No application fees, lender fees, appraisal fees, origination fees or private mortgage insurance, even if the loan-to-value ratio is greater than 80%, the normal PMI cutoff point."
  • Hard to Change Mortgages to Stop Defaults-Investors (Reuters, May 21st): "Michael Marriott, Credit Suisse Mortgage Group: The current standards for mortgage finance are just not flexible enough. For the future, we may be able to rewrite those documents so that they're more modification and remediation-friendly, but unfortunately (today's mortgage-backed security) deals... and the servicer's hands… are pretty tied…" Tom Lund of Fannie Mae: "When we began to look at the complexity of the ownership of these (investments) ... You have tax issues, you have REMIC (Real Estate Mortgage Investment Conduit) issues and accounting issues."

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

  • Housing Is Tumbling Even Faster Than Reported (Barry Ritholtz in Seeking Alpha, May 21st): "Real Estate Consultant John Burns: Closing Data: Sales have actually fallen 22% y/o/y... Mortgage Bankers Association Seasonally Adjusted Purchase Application Index is down 18% from its peak in September 2005. Builder Data: The nation's two largest homebuilders, D.R. Horton (DHI) and Lennar (LEN) have reported that orders have declined 27% to 37%, y/o/y -- even as they have dropped prices significantly. Realogy Corporation Data: In 2006, there was a y/o/y decline of 18% in brokerage related transactions at Realogy-owned firms (Century 21, Coldwell Banker, and ERA) 2005-2006 NAR state data is showing some very sharp y/o/y corrections: Florida down 28%; California down 24%; Arizona off 28%... Burns: The more likely actual sales decrease to be closer to 34%, 27% and 38%, respectively."
  • San Bernardino County Not Recession-Proof: Wishful Thinking Won't Work (Steven R. Smith in Seeking Alpha, May 21st) Southern California: "Resale prices have been going down in the County and in Upland for over a year, double digit in some areas. Oversupply conditions exist in most markets with some having over a 3-year supply. Concessions and cash-back deals are helping prop up prices, but on a $/SF basis, they are indeed going down throughout the… Inland Empire… Credit Suisse: As of the end of Q1, the region's new home market was downgraded from a D+ to an F. Many builders have stopped building because they are selling less than 2-homes per month, not enough to support the development holding costs."
  • JCPenney Q1 2007 Earnings Call Transcript (Seeking Alpha, May 17th): "Mike Ullman - CEO, (JCP): "There's a difference between the big ticket home business and I would call the soft or home furnishings business… Furniture and window covering are biggest ticket businesses. Obviously as you slow down new home openings and there's more existing homes on the market, that is not probably that positive for window covering and furniture. We're almost annualized against those two big businesses and those are only two of probably ten businesses in the home area… We don't think the home business is going to be a great growth business for us in the near term."

Homebuilders And Housing Stocks

  • Lowe's Profit Falls 12.1 Percent (Florida Today, May 22nd): "Lowe's Co's (LOW) profits fell 12.1% in Q1 [due to] mixed weather and a continued housing slump... Rival Home Depot (HD) said… its Q1 income dropped 29.5%. Lowe's had Q1 net income of $739 million, $0.48/share, down from $841m, or $0.53/share, a year earlier. Revenue rose to $12.2 billion from $11.9b a year earlier. Same-store sales, or sales in stores open at least one year, fell 6.3%. The company, which opened 15 stores in Q1, had expected a same-store sales decline of 2-4% for Q1… compared with a 7.6% drop at HD."
  • Home Depot: Growth For Growth's Sake Does Not Equal Prosperity (Todd Sullivan in Seeking Alpha, May 21st): "Home Depot (HD) without the Supply unit is worth far less than it is now…What HD needs to do is stop the expansion of its retail operations... They cannot continue to just grow and grow to get results… [Eventually] you begin to just cannibalize your own customers. Rather than focusing on their current locations and improving them and their customers' experience in them, they still have an almost myopic focus on more locations. [They] are experiencing discontent among many of their core customers as they have felt “neglected” or taken for granted and are leaving for competitors."
  • WCI To Keep Itself on the Block (Forbes, May 21st): "WCI Communities Inc. said Monday it will keep its "for sale" sign in place following the expiration of billionaire investor Carl Icahn's offer to buy the homebuilder. WCI had rejected Icahn's bid of $22/share, saying the offer was inadequate. Icahn then nominated 10 of his own directors who would be in the position to back his proposed buyout. On Monday, WCI urged shareholders to vote to re-elect the current directors, saying they will "continue to oversee a fair and transparent sale process."
  • Gold and US Real Estate Quietly Breaking Down (Tate Dwinnel in Seeking Alpha, May 21st): "Charts of the two major U.S. real estate ETF’s I track - the iShares Dow Jones US Real Estate (IYR) and the iShares Cohen & Steers Realty Maj. (ICF) show a breach of a four-year trendline. It should be noted that the International real estate market as tracked by the SPDR International Real Estate index is holding up well. In fact, it recently broke out of a decent looking base."
  • Black & Decker VP Exercises Options (Chron.com, May 21st): "A VP of tool maker Black & Decker Corp. (BDK) exercised options for 32,500 shares of common stock, according to a SEC filing. In a Form 4 filed with the SEC Thursday, Edward J. Scanlon reported he exercised the options Tuesday for $30 and $48.33 apiece and then sold them on the same day for $93.50 apiece. Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction."
  • Home Solutions of America: Hold On Through the Summer Months (Ant & Sons in Seeking Alpha, May 21st): "Home Solutions of America, (HSOA), a provider of restoration, construction and interior services to commercial and residential customers, announced Friday that its Fireline subsidiary [will] develop and construct 339 residential condominiums in NYC. The value of the contracts to Fireline exceeds $100 million… It looks like the company is starting to reap the benefits of the acquisition and realize its strategy of diversifying the business model to not rely solely on recovery contracts… Recent tornadoes in the Midwest and fears of tropical storms… only bolster the bull case. Homes Solutions should be able to capitalize on those natural disasters and win contracts… It is a good stock to hold heading into the summer months because any future contracts from a natural disaster are not priced into the stock."
  • Centex Ratings Story (Chron.com, May 21st): "Moody's Investors Service reiterated its ratings on debt issued [but] said Centex's (CTX) ratings outlook is now "negative," down from "stable." The negative outlook means the agency sees at least a 40% chance it will lower the ratings within the next 18 months. Moody's has concerns "over the company's increasingly weak operating and financial performance." Centex reported a 49% fall in earnings in the latest period, blaming a drop in home closings in what the company called one of the most difficult housing markets in 25 years. Moody's reiterated its current "Baa2" rating on Centex' senior unsecured debt."
  • Americans Take Less Vacation Time (Kentucky.com, May 21st): "It’s the time of year when magazines and newspapers rate and rank companies, products and especially people based on how well they performed in the latest year or years. One of the choice lists is the Forbes (May 21) selection of 10 “best performing bosses,” which this year includes Jeffrey S. Lorberbaum, CEO, Mohawk Industries (MHK): Forbes notes that the shares of the nation’s second-largest carpet maker were up 14% as of press time, and sales of $7.9 billion were up 19%."
  • Tupperware Approves $150M Buyback Plan (Forbes, May 20th): "Tupperware Brands Corp. (TUP), which sells consumer products including its namesake containers brand, authorized a five-year buyback plan for up to $150 million of the company's common stock… Tupperware said it plans to repurchase shares using stock option proceeds, which will partially offset dilution related to the options."

Commercial Real Estate and REITs

  • US Commercial Real Estate Growth Slows in Q1 –NAR (Reuters, May 21st): "The National Association of Realtors: Future commercial property activity index rose to a record high of 120.3 in Q1, up 0.2% from Q4 and up 0.8% from Q1'06. The modest uptick suggested steady absorption of industrial and office space in the next 6-9 months with slightly higher completions of office, warehouse, retail and hotel buildings… Leasing and sales of commercial real estate are predicted to rise 0.8% in Q3 versus Q3'06. Q3 net space absorption in office and industrial sectors would be 10-20 million sf, with about $335-$345 billion in newly completed commercial construction… vs. $323b of brand-new construction recorded in Q1."
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