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"

“We continue to experience a temporary distortion in comparing median existing-home prices. Because the sales volume has shifted from many high-cost areas to moderately priced markets, we’re not getting a true apples-to-apples comparison. When you look at other measures, such as this week’s price index from Freddie Mac which is based on repeat sales, overall home prices are rising slowly.”- Lawrence Yun, chief economist of the National Realtor's Association, on their latest downwardly revised forecast for 2007 home sales and prices. (National Realtor's Association Press Release, June 6th)

Real Estate Sales and House Prices

• Home Prices Continue to Climb (Herald Net, June 7th) Seattle: "The median sale price last month was $353,779, a figure more than 9% higher than the number a year ago… There were 765 condos on the market in May, a 117.95% increase from May 2006. There were 250 condos sold in May at a median price of $239,950. That price was 18.06% higher than year-ago figures and more than twice as high as the price increase for single-family homes. For single-family homes alone, the median price was $375,808, an 8.93% increase from May 2006. Sold last month were 1,128 houses. Pending sales were down 17.8%, so there should be a drop in sales again next month."

• Connecticut Median Home Price Doesn’t Budge, Sales Down Slightly According to Warren Group (RIS Media, June 7th): "The Warren Group: The median price of single-family homes in Connecticut stayed steady at $270,000 from Jan.-Feb., while sales in the same time period fell 2.2%... Year-to-date price stayed the same. The median price in April rose 1.9% from $269,900 to $275,000. YTD sales fell 2.2% from 10,138 last year to 9,913 this year. April sales dropped 3.5% from 2,852 to 2,751… Condo sales dropped 6% from 1,168 in April 2006 to 1,098 this April, and YTD sales fell 8% from 4,331 to 3,985. The median price of condos rose 5.7% in April from $183,000 to $193,500. The YTD price increased 4.2% from $187,000 to $194,900."

• A Shorter Parade: Some Builders Sit Out This Year's Home Show, but Size and Style Still There (Capital Times, June 7th) Wisconsin: "MTD Marketing: Home building [has] slowed dramatically in Dane County [since] last year. The 1,389 building permits issued here last year were down 40.1% from 2005 and well below the range of 1,920 to 2,577 back to 1999, while the 381 permits in Jan.-Apr. of this year were down 31.8% from a year ago and well below the range of 630 to 826 back to 1999… The 5,283 listed with the South Central Wisconsin Multiple Listing Service at the end of April were 10.3% more than a year ago, 82.9% more than two years ago and nearly triple four years ago."

• Rise in Home Inventory Continues to Hurt Prices (Wall St. Journal, June 6th): "Online brokerage ZipRealty: The number of homes listed for sale in 18 major U.S. metropolitan areas at the end of May was up 5.1% from April… The sizable increase is notable because, on a national basis… May is one of the peak home-selling months because families with children often aim to move during the summer vacation. Some of the biggest inventory increases last month came in the metro areas of Seattle, up 12% from April; San Francisco, 11%; Los Angeles, 10%; and Washington, D.C., 9%. For the 15 cities for which year-earlier comparisons were available, combined inventory was up 29% from May 2006."

• Home Prices Differ on Kauai, Big Isle (Hawaii Star Bulletin, June 6th): "Hawaii Information Service: The median price of a home on Kauai fell significantly, by 26.4% in May to $570,000… That's a big drop from the median price the previous year… $775,000. Real estate agents sold 39 existing homes, the same number sold in May, 2006… Median home prices on the Big Island, on the other hand, went up slightly, by just 1%, to $439,500 in May compared to $435,000 the same month last year. A total of 150 existing homes changed hands on the Big Island in May, 17 lower than the same month last year."

Real Estate Investing and Sentiment

• What Makes Christian Real Estate Different (Best Syndication, June 6th): "Christian Real Estate is a network of Christian real estate buyers, sellers, brokers and agents from all over America… Avid believers of Christianity… and Real Estate professionals [who] are determined to provide service with integrity and excellence that will glorify the name of the Savior - Jesus Christ… They put forth your needs and interests and work with full faith and servant heart, not for material gains… Christian Real Estate strongly believes in the power of prayer. As you put up your house for sale or begin the search your dream house, be assured that not only your prayers but also your agent's prayers cover all your efforts and the final transaction."

• From Bubble Talk to Double Talk (Motley Fool, June 6th): "If you must get your scuttlebutt from folks in the biz, I suggest you take your lead on this housing market from the homebuilders. Their uniform view can be summarized as, "The housing market is in rough shape." The management at outfits like Toll Brothers (TOL), Hovnanian Enterprises (HOV), D.R. Horton (DHI) and others has been much more candid[than the NAR], no doubt because the Feds who regulate securities take a dim view of bogus predictions."

Mortgates and Real Estate Lending

• Bank of America Funding Creates Homeownership in Nevada (DS News, June 7th): "The Bank of America (BAC) nCharitable Foundation donated $240,000 to 12 local housing nonprofit organizations in Southern Nevada in an effort to celebrate National Homeownership month.“These funds are especially important in Nevada as foreclosures increase and low-income housing needs rise,” said George W. Smith, Nevada President of Bank of America."

• 2007 RE/MAX Housing Study: Metro Detroiters Moving Toward More Traditional Mortgages (Earthtimes.org, June 7th): "Sixty-seven percent of metro Detroit homeowners are currently unsatisfied with their non-traditional mortgage and intend to refinance into a traditional mortgage. Non-traditional mortgages include adjustable rate, interest only or reverse mortgages. This finding is according to the 2007 RE/MAX Housing Study, which surveys Oakland, Wayne, Macomb and Monroe county residents."

• Lower Home Sales, Prices Forecast; Mortgage Demand Dips (USA Today, June 6th): "The Mortgage Bankers Association's mortgage application index slipped 1.7% to a seasonally adjusted 625.3 in the week ended June 1. A rise in applications to buy homes was overshadowed by the drop in refinancing applications. The MBA's seasonally adjusted purchase index rose 1.5% to 433.6, but the refinancing gauge fell 6.1% to 1,757.1, its lowest of the year, in the June 1 week. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, rose 0.03 percentage points to average 6.35%, its peak since 6.36% was reached in the Oct. 20 week. Refinancings represented 38% of total mortgage applications, down from 39.7% the prior week and the lowest share since July."

Subprime Fallout and Foreclosure Impact

• Ohio Sues Real Estate Firms for Pressuring Appraisers (Bloomberg, June 7th): "Ohio, the state with the third highest number of foreclosures, sued 10 real estate companies for improperly pressuring appraisers to inflate home values… The companies, based in Ohio, California, Arizona and New York, set specific estimated values on properties and communicated a desired price to appraisers, according to the lawsuits… RealtyTrac: Foreclosure filings in Ohio jumped 135% in April from a year ago, pushing the state's rate to almost two times the national average… States have opened investigations of mortgage brokers, lenders and appraisers as delinquencies rise across the U.S., led by subprime borrowers. "

• Are Subprime Loans Really to Blame? (DS News, June 7th): "Algorithmics: Much of the press coverage concerning the 'subprime meltdown' has focused on the products themselves and the credit risk involved…After studying… more than 7,000 Operational Risk Case Studies, the agency has concluded that “many of the subprime mortgage product cases appearing in Algorithmics' FIRST database of loss events involve an element of insufficient operational risk processes… including lax underwriting, insufficient background checks and inadequate documentation, as well as failure to train and supervise front-line personnel… 83% of the cases can be attributed to relationship risk, including mis-selling, suitability issues, contract obligations and regulatory and compliance violations.”

• Dodd Challenges Bernanke to Write Tougher Loan Rules (Bloomberg, June 7th): "U.S. Senate Banking Committee Chairman Christopher Dodd said the Federal Reserve must develop more aggressive consumer protections for mortgage lending, writing new regulations instead of settling for unenforceable guidelines: "I think they're just assuming the market is going to take care of all of this…" Dodd and Federal Reserve Chairman Ben S. Bernanke are at odds over how best to prevent abuse and fraud in consumer lending at a time when delinquency rates on subprime home loans have soared to a four-year high. Fed officials prefer… discreet channels of supervision and guidance letters. Dodd prefers "bright line'' rules."

Global Impact and Alternatives To The Housing Slump

• City Bonuses to Boost House Prices (This Is Money UK, June 7th): "City dealmakers and traders' [2007] bonuses at least equalling last year's £8.8bn are [expected]... Much of this cash will be pumped straight into prime London flats and houses, helping to maintain the relentless upward march of prices despite higher interest rates… There is now a clear two-tier market in London with the super wealthy continuing to push up prices while the vast majority struggle with ever higher monthly payments… The large number of cash buyers - many of them foreigners - means any efforts to control the market through higher interest rates will have only a limited effect."

• WisdomTree Debuts International Real Estate ETF (ETF Guide, June 6th): "A number of newly launched exchange-traded funds (ETFs) have been begun tracking international real estate… The WisdomTree International Real Estate Fund (DRW) which began trading yesterday. The fund tracks an index comprised of approximately 224 dividend paying companies in 19 developed market countries across Europe, Asia and Far East whose primary business is operating or developing real estate. This is WisdomTree’s 25th fund focused on non-U.S. equity markets. WisdomTree's real estate ETF has an expense ratio of 0.58% and will compete head-to-head with the SPDR DJ Wilshire International Real Estate ETF (RWX) which was introduced during Q1'07."

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

• NAR Revises Home Prices, Sales Forecast Down Again (Seeking Alpha, June 7th): "The National Association of Realtors: Annual median single family home prices should decline 1.3% to $219,800 in 2007, and not 1% as projected in May, which was a revision of January's predicted 1.2% gain… A 2.3% decline in new home prices to $240,800 from May's $246,400 projection. Home sales are expected to decline 4.6% from 6.48 million units to 6.18 million, almost double May's -2.7% forecast. New home sales are likely to fall 18.2% to 860,000, revised from -17.8%, and another 18% y/y decline from 2005-2006. Only 1.43 million housing starts are expected, 370,000 less than 2006. Pending sales are down 3.2% in April, and 10% y/y. NAR chief economist Lawrence Yun… predicts a 3.7% rise in 2008 sales to 6.41 million units… Online brokerage ZipRealty: Inventory is up 29% y/y, with a 6.5 month supply of new homes and an 8.4 month supply of existing homes -- the highest since 1992."

• Housing Inventory Build Worsens (Barry Ritholtz in Seeking Alpha, June 7th): "Raymond James' chief strategist, Jeff Saut: "For those that insist that real estate is not spilling over into the real economy: “Why has the Association of Home Appliance Manufacturers’ Index posted a roughly 10% decline in shipments?” Or, “Why is Circuit City (CC) laying off 3,400 of its best sales personnel and attempting to hire maladroit sales people at a much reduced compensation package?” Similarly, “Why is Citigroup (C) cutting 15,000 financial-related jobs?” And, “Why is GMAC stating that its Residential Capital subsidiary is going to hurt profits? Why are sub-prime mortgage companies… like ACC Capital closing their “call centers,” and why are delinquencies rising not only in the Alt-A complex, but in prime portfolios as well?”

• Housing Prosperity Just Around Corner? I Don't Think So (Henry Blodget in Seeking Alpha, June 7th): "Those of you who had the misfortune to live through the dotcom crash will recall… all the way down, we {analysts] kept revising forecasts (read: cutting estimates) to previously inconceivable levels, and each time we cut them, we reiterated our expectation that the inevitable trough and upturn was about six months away. It wasn't until two years after the shakeout began, when half of online advertising revenue had evaporated and more than 75% of the companies in the sector had keeled over that the downturn finally ended... And by that time, most of us were so demoralized that we'd stopped predicting that there would ever be an upturn."

Homebuilders And Housing Stocks

• Homebuilders Dragged Down by Meritage, Rate Fears (Reuters, June 7th): "Shares of home builders slid on Thursday, dragged down by a warning of weaker sales from Meritage Homes Corp. (MTH) plus fears of rising interest rates. "Interest rates are part of the concern at the moment, but it seems like there are more impairments coming for [homebuilders] all the time," said Mike McGarr of Becker Capital Management. "We're staying away from them at the moment. Companies from D.R. Horton Inc. (DHI) -- the largest home builder in the US -- to luxury home builder Hovnanian Enterprises (HOV), were down 3.5-4.8%... The Dow Jones U.S. Home Construction Index (DJUSHB) down 3.4%."

• The Stocks the Funds are Buying (Motley Fool, June 7th): "Schwartz Value Fund (RCMFX): A very strong, if conservative, portfolio. Consider Lifetime Brands, which markets kitchenware under the names Kitchen Aid and Cuisinart, among others… Solid (if mundane) product line, stock has taken one of its periodic poundings, leaving forward P/E at 10. Good market position, solid management (30% insider ownership), great [year-over-year] growth. What's not to like? Not much, from what I can tell… Schwartz's 10-year average return… is up on the S&P 500 by better than 2.5 percentage points over the same period."

• U.S. Retail May Sales Slow; Macy's Trails Estimates (Bloomberg, June 7th): "Wal-Mart Stores Inc., the world's largest retailer, said U.S. sales at stores open at least a year gained 1.1%, on the low end of its forecast for a 1-2% advance. Saks Inc. and other luxury retailers posted results that beat analysts' estimates. U.S. retail sales from February-May rose at about half the pace from a year earlier as consumers reined in purchases of non-essential items such as clothing and home furnishings… Michael Niemira, chief economist, International Council of Shopping Centers: "The longer-term story of this slower-growth pace is largely a story tied directly or indirectly to the housing market."

• Building Materials: Chapman Requests Meeting To Discuss Costs (Lon Juricic in Seeking Alpha, June 7th): "Large shareholder (8.1%) Chapman Capital's… letter to Building Materials Holding Corp. (BLG) CFO William M. Smartt: "Building Materials Holding Corporation's cost reduction and capital allocation strategies are of paramount importance to its short and medium term financial performance. Operating margin erosion is the natural result of the hyper-cyclical revenue declines hitting all residential building suppliers… After having discussions with various parties knowledgeable of Mr. Mellor's spending habits while in his current role at the Company… your own focus on reversing some of the "boom years'" expense patterns is crucial to BMHC's expeditious path to profitability."

• Investor Begins New Talks in Bid for WCI (Bradenton Herald, June 7th): "Billionaire investor activist Carl Icahn is making another attempt to buy Florida luxury homebuilder WCI Communities Inc. (WCI) One of Icahn's affiliates entered into the bidding process just six weeks after WCI shareholders rejected his unsolicited $22/share offer, which had an implied purchase price of about $921 million. The company has since put itself up for auction… Icahn offered to buy the company in early April. His bid was rejected, but Icahn then nominated 10 of his own directors who would be in the position to back his proposed buyout. On Tuesday, an independent investor services group recommended WCI shareholders vote against Icahn's slate of directors."

• Bed Bath & Beyond: Q1 Earnings Disappoint (Eddy Elfenbein in Seeking Alpha, June 6th): "After the bell on Monday, Bed Bath & Beyond (BBBY) said Q1 earnings will be between $0.36/share and $0.38/share. Wall Street was looking for $0.39/share. Frankly, this is upsetting, but it's not that bad.As usual, housing is to blame. Steven Temares, the CEO, said "the overall retailing environment, especially sales of merchandise related to the home, has been challenging." Last year, BBBY reported earnings of $0.35/share. The company is due to report on June 27. The stock opened trading yesterday at $37.93."

Commercial Real Estate and REITs

• REIT CEO Cites Demand-Supply Imbalance in Seniors Housing Sector (Multi-Housing News, June 7th): "David Hegarty, CEO, Senior Housing Properties Trust: Many markets in Florida and Texas are not seeing a lot of new development although demand for the housing remains strong. “For the country as a whole, the demand still significantly [exceeds] new supply coming on line… We are not seeing that changing for the next few years.” The bulk of Senior Housing Properties Trust’s current investments in seniors housing is in the states of Florida, Texas, Arizona and Southern California… The demand-supply imbalance may last a number of years as obtaining permits, building and filling up seniors housing in those markets are a “multi-year process.”

• Fear of Rising Interest Rates Sends Annaly Mortgage Lower: Time to Buy (David Neubert in Seeking Alpha, June 7th): "Annaly Mortgage (NLY) ($14.50) got clobbered yesterday… Annaly is a great way to earn dividends/mortgage interest… I realized that there was nothing specifically wrong…I think Annaly is a mortgage REIT with a mark-to-market portfolio that is worth paying over book value. I like Mike Farrell and the open way he runs this mortgage fund disguised as a REIT. Because the dividends from a mortgage REIT do not qualify for lower taxes, the place to own this high dividend fund (5% yield this year look for 9-10% next year) is in one's IRA. I have it in my IRA, but today's trade was for my taxable account.

• REIT CEOs: Market Top Still To Come (Globe St., June 7th): "Despite the fact that "everyone" wants to claim we're at the top of the market, mega mergers as well as major asset sales are going to be with us for a while, EOP driving force Sam Zell stated. GE Real Estate CEO Michael Pralle: Bucking the general wisdom that the market is about to turn has caused "stomach-turning" deal decisions in his shop: "The most quoted phrase in our office is that every deal we make is a mistake." "The biggest surprise is coming," said Steven Roth of Vornado Realty Trust, "rents will continue to rise and make the current prices seem right on the money."

• Flipping Over Barney's (Slatin Report, June 6th): "Joining the growing crowd of boutique buildings selling for well above $1,000/ft and well below the current ten-year Federal funds rate (4.96% on June 4), the flagship Barney's New York location, 660 Madison Avenue, is trading again, this time for a record-setting $1,471-sf, or about $375 million… The buyer is a neophyte New York investor, Italy's Gruppo Zunino of Milan, which beat out a range of other overseas investors as well as veteran locals."

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Comments

[Nidhi]

With 10 year treasury yield rate going up to 5.14%, the mortage rates will go up too. Will have to see how housing reacts this summer;

Do you think some creative financing is the only way for this housing situation?

creating-wealth.blogsp...

[Frank Li]

Talk about praying that your house will sell!

<blockquote>&quo... Makes Christian Real Estate Different (Best Syndication, June 6th): "...Christian Real Estate strongly believes in the power of prayer. As you put up your house for sale or begin the search your dream house, be assured that not only your prayers but also your agent's prayers cover all your efforts and the final transaction."<...

[pam apollo]

Is there any statistic that takes into account that some of repeat sales can have major renovations including large increases of square footage? It seems like all of the normal priced homes have been sold and replace with large rebuilds that may be listed as resales. It is not as if the same house is being sold for a price 300% higher. Does anybody have any insight on when regular people will be able to afford regular homes here in Westchester, New York?