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 had never seen so much money thrown around in one weekend. It was crazy. All these kids, literally 18 to 26, were loaded -- the best clothes, the cars, the girls, everything.'' - Taher Afghani, 27, a former subprime mortgage broker in 'Mortgage Alley' in Southern California, describes a company trip for mortgage brokers in the subprime heyday. Hearing about how young brokers made big money pushing risky loans on homebuyers, Afghani quit his $58,000/year job at retailer Target and got a $120,000/year job at Costa Mesa-based Secured Funding Corp. He's since been fired. (Bloomberg, May 30th)

Real Estate Sales and House Prices

• Surge in House Prices Ranks State 15th in U.S. (Birmingham News, June 1st): "Office of Federal Housing Enterprise Oversight House prices across Alabama, buoyed by strong growth in Mobile and Huntsville, rose 7% in the last 12 months, outpacing most states and the national average. The state ranked 15th in home price appreciation nationwide. Utah led the list with a 17% gain in home prices during the period. The nationwide average was 4.3%. Home prices in the Birmingham metro area, meanwhile, increased 4.7% over the past 12 months. The study didn't give home sale prices, only a rate of change."

• U.S. Home Prices Gain at Slowest Pace in a Decade (Bloomberg, May 31st): "Office of Federal Housing Enterprise [Ofheo]: U.S. home prices in Q1 rose at the slowest pace in a decade, led by declines in Massachusetts and Michigan... Prices for single-family houses rose an average 4.3% from a year earlier, the smallest gain since the 4.1% increase in Q3'97… The Ofheo report includes home prices and refinancing appraisals for homes -- urban, suburban and rural -- that Fannie Mae (FNM) or Freddie Mac (FRE) hold in their loan portfolios. While the sampling includes all U.S. regions, it includes only properties that have mortgages under $417,000, the maximum for loans bought by the government-chartered companies."

• Island Real Estate Bucks Mass. Downturn (Boston Herald, May 31st): "On Nantucket and Martha’s Vineyard, the real estate party that came to a crashing halt across the state in 2005 never really stopped, it only slowed down a bit. Single-family home prices on both resort islands, fueled by multimillion-dollar sales of waterfront estates, are up significantly over the same time last year. By contrast, home prices across the state are down 12.3 percent from June 2005, when they peaked at 364,000, the Warren Group recently reported… On Nantucket, the median home price is now $1.63 million, up from $1.55 million the year before. On the Vineyard, the median price is just under $700,000, up about $50,000."

Real Estate Investing and Sentiment

• GMAC Real Estate Adds One of Metro Phoenix's Fastest-Growing Firms (Earthtimes.org, May 31st): "GMAC Real Estate (GM) announced today that one of metro Phoenix's fastest-growing real estate firms, Sonoran Properties, is joining the company. Sonoran Properties has experienced major growth in just a few short years, going from a one-person shop to six-offices and a staff of 175."

Mortgates and Real Estate Lending

• PMI Europe Names Beatriz Calvo as Country Manager for Spain (PR Newswire, June 1st): "PMI Mortgage Insurance Company Limited (PMI Europe), the AA rated European mortgage insurance and credit enhancement subsidiary of The PMI Group, Inc. (PMI), announced the appointment of Beatriz Calvo as Country Manager for Spain today, as it prepares to enter this key European market. Calvo: "Mortgage insurance has been widely adopted in Spain so clearly this market will benefit from a new, AA-rated entrant. Through PMI Europe's mortgage insurance we can help more Spanish people to buy their own homes. And through our capital markets securitisation solutions, we can customise products to help lenders offset risk."

• Accredited Declares Q2 Dividend on Preferred Shares (Business Wire, June 1st): "Accredited Home Lenders Holding Co. (LEND) announced that the Pricing Committee of the Board of Trustees of its subsidiary, Accredited Mortgage Loan REIT Trust (AHH.PrA), today declared a quarterly cash dividend on Accredited Mortgage Loan REIT Trust’s 9.75% Series A Perpetual Cumulative Preferred Shares at the rate of $0.609375 per share. The dividend will be paid on July 2, 2007 to preferred shareholders of record at the close of business on June 15, 2007."

• Dewey Ballantine Opens in Charlotte, North Carolina (PR Newswire, May 30th): "Dewey Ballantine LLP, a leading international law firm, announced today that it has expanded its financial services practice through the opening of a new office in Charlotte, North Carolina - the second largest banking center in the United States. [The] structured finance practice focuses on structured real estate products and equity investments, including the representation of issuers and underwriters in commercial mortgage-backed securitization [CMBS] transactions, real estate CDOs and the securitization of other real estate interests, sale-leaseback, mezzanine financing, and syndicated finance transactions."

Subprime Fallout and Foreclosure Impact

• Hedge Funds Dispute Subprime Aid for Homeowners (Credit Flux, June 1st): "Financial Times: A group of more than 25 hedge funds has asked ISDA to address their concerns that banks that both handle subprime mortgage payments and sell derivative protection could be involved in market manipulation. The funds claim banks are making concessions on the underlying mortgages - such as lowering the interest rate or extending the life of the loan - to avoid making good on derivatives contracts that pay off in cases of default… A former SEC chairman says such gaming, if proved, would be actionable under federal securities laws. However, the dispute pits hedge fund interests against those of stretched US mortgage borrowers."

• NM Subprime: Bad, But Not as Bad as it Could Be (New Mexico Business Weekly, June 1st): "New Mexico subprime delinquencies increased 25% during 2006… one in eight of these loans statewide is overdue… Nearly 14% of subprime Adjustable rate morgage loans [were] delinquent… New Mexico's foreclosure rate on subprime loans is higher than all its… neighbors except Colorado… real estate values have not fallen here as they have in other parts of the country… Also, only about 10% of New Mexico's mortgages are subprime… Mortgage Bankers Association: 12.19% of all New Mexico subprime mortgages were overdue as of Dec. 31, 2006. That's a big jump from 9.6% past due just nine months earlier, at the end of Q1'06."

• Foreclosures on the Rise in Naperville, Report Claims (Naperville Sun, June 1st): "Housing advocacy group National Training and Information Center: The threat of foreclosure affected 57% more Naperville families in 2006 than it did in 2005. NTIC report: "The 2006 numbers were in some ways just the tip of the iceberg. There were a lot of these ARMs written out there, and there are a lot of them that are going to reset this year… 2007 is going to be an even worse year. Foreclosure proceedings were initiated on 209 Naperville properties in 2006, compared to 133 in 2005."

• Suburbs Share Home Foreclosure Problem (Dallas News, May 31st): "While big cities Dallas and Fort Worth have the most home foreclosures, some suburbs – including Arlington, Garland, Grand Prairie and Mesquite – are also seeing large numbers of home loan defaults. In the northern suburbs, Frisco is playing catch up with a 57% jump in residential foreclosure postings in the first half of 2007. North Texas Foreclosure Listing Service: "Only about 30% of the [areas] total home foreclosures… are in Dallas and Fort Worth... The North Texas city with the highest number of residential postings filed during the first half of 2007 was the city of Arlington with 1,488 foreclosure notices."

Global Impact and Alternatives To The Housing Slump

• Simon Property Group Opens First Premium Outlet Center in South Korea (PR Newswire, June 1st): "Simon Property Group, Inc. (SPG) announced today that its Chelsea division opened Yeoju Premium Outlets, the first Premium Outlet Center in South Korea. The project is located on Expressway 50 -- a heavily traveled east-west highway approximately 36 miles southeast of Seoul in Gyeonggi Province. Population within a 40-mile radius of Yeoju Premium Outlets is approximately nine million people. The 250,000 square-foot first phase of the project opened fully leased to 120 tenants."

• AMB Property Corporation(R) Enters Tijuana with Acquisition of Distribution Facility Fully Leased to Hitachi Transport (PR Newswire, May 30th): "AMB Property Corporation(AMB), a global developer and owner of industrial real estate, today announced [the] acquisition of a 264,000-sf Tijuana facility that is fully leased to Hitachi Sistema de Transporte Mexico, S.A. de C.V., a subsidiary of Hitachi Transport System (America), Ltd. The facility, named AMB Frontera Distribution Center, is located approximately 2.5 miles from the Otay Mesa U.S./Mexico border crossing... Hitachi is using AMB Frontera Distribution Center for the distribution of home electronics and other products manufactured in Mexico bound for the U.S."

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

• Active Market Conditions, Shortage of Labor and Increases in Material Prices Contribute to Construction Costs Increases In Second Quarter of 2007 (PR Newswire, May 31st): "Turner Construction Company: The Turner Building Cost Index Q2'07 index showed a 1.93% increase in construction costs over Q1'07 and a 7.62% increase over Q2'06 index… Turner VP Karl F. Almstead: "Construction costs continue to be driven by the increasing level of activity in the non-residential building sector and a lack of available skilled labor to deliver projects. In addition, volatility is creeping back into the materials markets. Although drywall prices have turned down, structural steel, copper and petroleum based products are on the upswing again. Manufacturers and suppliers are also passing along increased transportation costs in their pricing structures."

Homebuilders And Housing Stocks

• Hovnanian Reports Q2 Loss; Withdraws 2007 Guidance (Seeking Alpha, June 1st): "Luxury homebuilder Hovnanian Enterprises (HOV) posted a Q2 loss Thursday, its third consecutive quarterly loss, and is withdrawing its full-year guidance on the "increased uncertainty of housing market conditions." The company posted a net loss of $30.7 million (-$0.49/share) on land impairment and predevelopment write-offs against a profit of $101.0 million ($1.55) in the year-ago quarter. Analysts were expecting a net loss of -$0.48. Excluding the write-offs, Hovnanian had a pretax loss of $7.1 million (-$0.12/share). On May 4, the company forecast a loss of $0.45-0.50 including write-offs and $0.30 excluding them. Total revenues were down 29.4% to $1.1 billion. The company has withdrawn its March 8 forecast for 2007 EPS of $1.10-1.50 2007 before charges and break-even to $0.40 after charges."

• Icahn Wants WCI Delay (The Street, May 31st): "Billionaire investor Carl Icahn is still agitating for change at Florida homebuilder and real estate services firm WCI Communities (WCI) after a failed $22/share takeover bid. The activist investor has requested that the WCI board postpone its annual meeting, scheduled to be held June 15, because he believes the election of directors might jeopardize an ongoing auction of the company."

• Sears' Q1: Given Housing Weakness, A Good Quarter (Todd Sullivan in Seeking Alpha, May 31st): "Earnings improved… True it's because of "certain items," but cash is cash and profits are profits. It is clear the housing slowdown is hurting Sears as it does a ton of home related sales (appliances, paint, furnishings etc.). Apparel sales continue to improve at Sears, and that is good news as once housing turns around… retail operations should see significant improvement. If we strip out all the "other factors" affecting earnings for 2006 and 2007, earnings were flat. Considering the relationship Sears has with the housing market through both its appliance sales and "home services" division, this bodes very well. In short, good quarter, not great, but given housing, good is just fine."

Commercial Real Estate and REITs

• CMBS Spreads: More Insanity in Commercial Real Estate? (Toro in Seeking Alpha, June 1st): "Collateralized mortgage-backed securities market [CMBS] products have been critical in expanding liquidity for real estate investors. However, as we have seen in the [subprime] CDO market… when spreads widen, liquidity dries up and demand for real estate falls. The marginal buyer [the last buyer]… has been using a ton of debt… packaged in CMBS products. [Click here for charts] Since spreads are widening, the cost to the marginal buyer is rising. And the marginal buyer is unlikely to continue buying real estate when the already negative carry widens further… Residential mortgage securitizations are down… 40%-60% this quarter. Supply is rising. Last year, structural nonresidential construction rose 9%. Moody's: Interest-only loans accounted for 84.6% of Q1 commercial securitized lending, up from 6.6% in Q1 2003. I am short commercial real estate."

• London Investors Buy Into REIT Shares (MarketWatch, May 31st): "Land Securities shares closed up 3.1%, British Land shares advanced 1.5%, Liberty International shares climbed 1.8% and Hammerson shares rose 2%. The sector could be getting a lift from takeover activity in the U.S., where shares of REITs have been strong in the past two days after Archstone-Smith (ASN) agreed to a $22.2 billion buyout deal late Tuesday. Chet Riley, RE analyst, Lehman Bros.: Recent deals in the sector suggest that "no REIT is untouchable… around $160b of capital has been returned to REIT investors in the U.S. and commented that this money needs to find a home."

• Don't Buy into the REIT Rally (MarketWatch, May 30th): "Bryan Perry, Changewave: Taking advantage of the new REIT structure in the U.K. and Germany along with the booming "Chindia" economies: 1) Fidelity International Real Estate Fund (FIREX)… The biggest of the international REIT Funds- and pays out the biggest dividend yield, currently 8.20%... 2) Thornburg Mortgage (TMA)… is a lender to fully documented higher net worth [prime] homebuyers… TMA beat Wall Street estimates in Q1 [and there's] significant insider buying… Three Specialty Finance REITs I'm recommending: ALESCO Financial (AFN), dividend yield 12.47%. Crystal River Capital (CRZ), dividend yield 9.80%. Deerfield Triarc Capital (DFR), dividend yield 10.61%. By combining the three REITs in equal purchases, we get an aggregate dividend yield of 10.96% at current prices."

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Comments

[john gaats:]

Can you really qualify the housing market as a bubble based on what you listed? I would call it over pricing. Or can you come up with better wording?

2007 Jun 01 02:10 PM