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"

"If investors start dumping them, oh boy, watch out for some massive credit widening. This is just the beginning of ugly things to come."- Dan Fuss, vice chairman at Loomis Sayles in Boston, where he helps oversee $77 billion in fixed-income assets, on what would happen if foreign investors stop buying all kinds of American debt. (Reuters, June 26th)

Real Estate Sales and House Prices

• NBA-Sized Party Pad Up For Sale (St. Petersburg Times, June 28th): "Matt Geiger's… estate boasts several lavish bars, a DJ station and dance floor, hot tubs, a pizza oven and even a cigar room… Though some might question the practicality of selling such opulent real estate in today's deflated housing market - the asking price for Hulk Hogan's Belleair mansion recently dipped from $25-million to $17.9m … The Pinellas County Property Appraiser's Office puts the market value of Geiger's estate and an adjacent piece of property at $11m, based on other sales from 2004-2005. The property tax bill for the estate would be more than $177, 000 - a year."

• Bust? What Housing Bust? (Yahoo! Finance, June 26th): "National Association of Realtors: In Seattle, the median home sale price was $380,200 during Q1'07, a 12.3% y/y increase… Ten other metro areas among the 156 markets covered by NAR also recorded double-digit, y/y price increases. So what have they get that other markets don't? A set of positive fundamentals, including strong job and population growth, which then fuel demand for houses. [Also,] in nearly all of the areas, prices never overheated, remaining relatively low through the boom years. It's easier to show outsized growth when you're starting from a low base."

• Home Sales, Median Prices Drop In Tucson (AZ Starnet, June 26th): "The Southern Arizona Housing Market Letter [monthly]. The number of homes sold and the median prices in the Tucson area dropped in May. showed new home and resale home closings were both down about 22% compared with the same month a year ago. The median prices also fell 6.7% for new homes and by less than 1% for resold home in May compared to May 2006."

• Can The Carey Estate On Shelter Island Fetch $33M? (NY Newsday, June 26th) New York: "The 7.5-acre waterfront Carey estate on Shelter Island was quietly bought in March by local investor Chris Knight from the family of Gov. Hugh Carey for $10 million and very publicly reoffered for sale at more than triple the price two weeks later… The new $33m price tag is driven by an appraisal that Knight received for securing the loan on the estate, in which the value was estimated at between $1.25m-$4 million per acre, depending on its proximity and access to the water."

• Unsold Home Inventory Index Up In May (San Jose Business Journal, June 25th): "The California Association of Realtors' unsold inventory index for single-family detached homes in May was 10.7 months, up from 6 months for May 2006… The median number of days it took to sell a single-family home was 51.7 days in May, compared with 44.5 days for May 2006. Home sales decreased 25% in May compared with May 2006, while the median price of an existing home increased 4.8%. Closed escrow sales of existing, single-family detached homes in California totaled 366,370 in May at a seasonally adjusted annualized rate."

Real Estate Investing and Sentiment

• Buffett Slams Tax System Disparities (Washington Post, June 27th): "At a fundraiser for Democratic presidential candidate Hillary Clinton: Warren Buffett's [speaks] on the impact of the real estate slump on the economy: (He doesn't see it spilling over to the broader market)."

• The Housing Mirage (Business Week, June 27th): "Morningstar (MORN) analyst Eric Landry: " '07 is going to be a bad year. [The housing bottom] could be a 2008 event, it could be a 2009 event..." It may be difficult to draw any strong conclusion from May home-sales data, given the very small month-over-month declines. This is especially true for new-home sales, which have a margin of error of 10.8%. Wachovia (WB) analyst Adam York: "The housing market data, especially new-home sales, is historically extremely volatile. If you get a lot of sales one month, there's an extremely good chance you won't get as many the next month."

Mortgates and Real Estate Lending

• GE Real Estate Favors Boosting Hotel Loans (Reuters, June 26th): "Alec Burger, senior VP of North American Lending: GE Real Estate… likes hotels and plans to lend hotel borrowers about $2 billion this year, up from $500 million a year ago: "The fact it costs me $900 for a room in New York now means it's a pretty good time to be a lender." GE Real Estate, the real estate arm of General Electric Co. (GE)… has an equity ownership [in North America] of about $14b, controlling $18b worth of real estate… The company has about $17.5b of total investment lending in the US and Canada and loans about $12b yearly."

• Heartwell Mortgage Goes Out Of Business (Wood Tv, June 27th) Michigan: "Heartwell Mortgage, a decades-old, local company founded by the father of Grand Rapids Mayor George Heartwell, is going under. Dozens of employees are now out of work, yet another sign of a sagging and intensely competitive local housing market. Thousands of houses are on the market and places like Kent County are setting pace for record foreclosures… Big banks backed by mountains of cash and individual stand-alone brokers made it an overhead, bottom-line issue. In a bottom-line market, Heartwell's nearly 40 years in the business will end in mid-July."

Subprime Fallout and Foreclosure Impact

• MISC Postpones Bond Sale on 'Market Volatility' (Bloomberg, June 27th): "MISC Bhd., the world's biggest owner of liquefied natural gas tankers, postponed a planned dollar- denominated bond sale because of fluctuations in debt yields sparked by losses linked to U.S. subprime mortgages. Kuala Lumpur-based MISC, a unit of Malaysian state-owned oil company Petroliam Nasional Bhd., hired Citigroup Inc. and Deutsche Bank AG to sell $750 million of 10-year bonds, an e-mail sent to investors earlier this week showed… Standard & Poor's rates MISC's debt A-, the seventh-highest investment grade, while Moody's Investors Service ranks it one level higher at A2."

• Bear Stearns Taps Managers To Save Hedge Fund (Yahoo! Finance, June 27th): "Bear Stearns Asset Management CEO Richard Marin is taking a stronger role in managing its two troubled hedge funds and tapped mortgage unit head Thomas Marano to save one of the funds… Bear Stearns (BSC) said Tuesday it does not plan to bail out the High-Grade Structured Credit Strategies Enhanced Leverage Fund, the second of two struggling hedge funds. Instead it will provide $1.6 billion of financing to save its High-Grade Structured Credit Strategies Fund. Days earlier the bank had said it would provide up to $3.2 billion in financing."

• Report: U.S. Banks To Curb Lending, Call in Existing Loans (NY Sun, June 26th): "Lombard Street Research' global strategist, Charles Dumas: The failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch… had to be called off after buyers took just $200 million of the $850m mix. "The banks were not prepared to bid over 85% of face value for CDOs rated ‘A' or better…We hear buyers were lobbing bids at just 30%. We don't know what the value of this debt is because the investment banks shut down the market in a cover-up... There is $750 billion of dubious paper out there in the form of CDOs held by banks that have a total capitalization of $850b."

• HUD: Colorado Can Recover From Foreclosure Crisis (Denver Business Journal, June 26th): "U.S. Department of Housing and Urban Development: Colorado's home foreclosures [situation]… still isn't as bad as… in the late 1980s and early 1990s. And because Colorado home owners recovered from that foreclosure crisis, they can recover from this one. So far this year, the percentage of loans in foreclosure in Colorado is roughly 1.4%, compared to 2.75% in 1990… [Though] Colorado's mortgage delinquency rate is up this year, with nearly 4% of such loans past due, it's still below roughly 4.7% nationwide. The last time the state's mortgage delinquency rate outpaced the nation's was in the early '90s."

• Homeownership Ethos And Subprimes (James B. Lockhart in the Washington Times, June 26th): "Fannie Mae (FNM) and Freddie Mac's (FRE) numerous problems in recent years show that since the debt market and rating agencies do not provide effective market discipline, the job of the regulator is even tougher. Putting their size in perspective, FNM and FRE own or guarantee almost 40% of all home mortgages. As of March 31, 2007, the combination of the mortgage-backed securities that they guarantee ($3.1 trillion) and their debt outstanding ($1.6 trillion) totaled $4.7 trillion; not that much smaller than the publicly-held debt of the U.S. of $5.0 trillion."

• Foreclosure Rates Spur Home Ownership Fair (Clayton News Online, June 26th): "Atlanta Regional Commission: Foreclosure rates in the south metro Atlanta region are soaring, particularly in Clayton County. In the year 2000, Clayton County had a foreclosure rate of 1.7%. In 2006, the rate rose to 4.3%, the highest in the 10-county metro region. The rise in the number of foreclosures is attributed in part to a high percentage of loans coming from sub-prime lenders. Sub-prime loans have higher interests rates, meaning that the borrowers pay more in additional interest payments. Clayton County ranked second in the nation with 38.2% of all conventional, home purchase loans coming from sub-prime lenders."

• CDO Market Near Halt Amid Deeper Subprime Worries (Reuters, June 26th): "J.P. Morgan Securities (JPM): Only $3 billion of new high-grade CDOs were marketed to investors in the latest week, down dramatically from just one month ago when the pipeline stood at over $20b. Since that time, $18b of those CDOs have priced. Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. A change in foreign taste would be disruptive across many asset classes since this pooling of debt assets, including subprime mortgages, have resulted in a tremendous compression of yield spreads."

• Subprime Crisis Opens Banker, Broker Rift (Reuters.com, June 26th): "The crisis in the U.S. subprime mortgage market has heightened tension between mortgage lenders and brokers who both hope to shape any laws aimed at stamping out dangerous loans. Legislation [pending] requiring more disclosure by mortgage brokers… is likely to widen [the] rift… [In May,] Mortgage Bankers Association Chairman John Robbins… said [mortgage] brokers… need more oversight… In response, National Association of Mortgage Brokers President Harry Dinham said: "Most residential mortgage loans are quickly sold into the secondary market. In fact, most lenders are really just brokering the transaction but afraid or ashamed to admit it."

• Two Ways to Play Mortgage Lenders (The Street, June 25th): "Impac Mortgage Holdings (IMH) is a small-cap mortgage REIT that acquires, originates and sells Alt-A mortgages… A good chunk of Impac's mortgage assets likely will go bad. The [risky] bull case: The worst of times are behind [Impac] because the company has adequately set up loss reserves… [And there's] news of a dividend boost… IndyMac (IMB) is a large-cap mortgage bank [which] profits from buying and selling Alt-A mortgages. Historically, this business represents about 75% of IndyMac's net income, and lately it has been under pressure. Bank of America: We believe that Countrywide (CFC) and IndyMac's credit risk and anticipated increase in future credit losses are not yet reflected in their current stock prices and that their risk/reward profile support our sell rating."

Global Impact and Alternatives To The Housing Slump

• Danang’s Largest Domestic Investor Puts $180 Mln Into Real Estate (Thanh Nien News, June 27th): "Under the deal signed earlier this week with the city government, Hoang Anh Gia Lai Corp. plans to invest $150 million to build a waterfront hotel-apartment-office-shopping-complex along the Han River in Hai Chau district. The corporation… will also build an estimated $30 million worth of high-end apartments for sale in Thanh Khe district… Additionally, the company is set to begin work on a $25 million resort project in Ngu Hanh Son District in August. With the fresh investment, Hoang Anh has become the largest domestic investor in Danang with a total of $250 million at work in the city’s property and tourism projects."

• As Asia REITs Multiply, Consolidation Looms (Wall St. Journal, June 27th): "The number of REITs in the region, excluding Japan, is likely to increase to about 80 by mid-2008 and 100 by mid-2009 from 55 currently, according to Michael Smith, managing director and head of Asia real estate for Goldman Sachs's investment-banking division. With so many companies competing for the same properties, the bigger ones might find it easier to buy an entire portfolio instead of individual assets… UBS's Asian Real Estate Research division: Singapore is likely to be the center for merger-and-acquisition activity as it is the biggest REIT market in Asia after Japan."

• No Vertigo For Hungry Asia Property Investors (Reuters, June 27th): "Asian economies are booming, and property is once again hot… fuelled by cheap credit, cross-border investment and rising incomes… In Singapore, some residents are seeing their rents jump 50% overnight. Property executives effuse about India, despite a doubling in urban land prices since foreign property investment was ushered in two years ago. Japan [is] still hugely popular, although average Tokyo office prices have leapt 25% in last two years… Investors believe government cooling measures will bring order to China's market, while failing to stem a hunger for homes among the expanding and increasingly affluent middle class."

• GE Bullish On Mexican, Brazilian Real Estate (Reuters, June 26th): "Joseph Parsons, president of North American equity at General Electric Real Estate (GE): GE RE is increasing its real estate investments in Mexico and looking to enter the Brazilian property market in a bid to increase its exposure to those growing Latin American economies. "We see Brazil as maybe the next Mexico… The country is stabilizing; the government is proactive and business-oriented; it has enormous natural resources; it has a growing middle class; it has a lot of positive dynamics…" In Mexico, GE RE plans to invest about $400 million in industrial space over the next three months."

• European Property Industry Set To Consolidate (Reuters UK, June 26th): "Credit Suisse Chairman for European Real Estate, Ian Marcus: European real estate companies are set to consolidate as greater transparency in the industry and easy access to credit create opportunities for growth. "We know there is no problem accessing capital and therefore I think there will be consolidation in the sector across Europe, and because the UK is by far and away the largest listed sector in Europe we will see further consolidation in the UK… Five British property firms in the FTSE 100 index of leading UK shares had all changed their management in the last 2 years."

• GE Real Estate and Helios Phoenix Create Euro 175M Romanian Warehouse Development Joint Venture (PR Newswire, June 26th): "GE Real Estate, Central & Eastern Europe (GE) and Helios Phoenix have announced… a joint venture to undertake €175 million of distribution warehouse developments throughout Romania. The transaction represents GE Real Estate's first entry into the Romanian real estate market. The JV will initially develop seven Class A logistics and distribution warehouses, totalling 315,000 sqm… in the largest cities of Romania... The[re's] ongoing demand for high quality industrial warehouse and logistics facilities across Romania underpinned by its strong GDP growth. The first projects, to be undertaken on a speculative basis, will be in Bucharest, Timisoara, Constanta, Brasov and Cluj."

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

• Housing Prices and Sales Continue to Fall (Seeking Alpha, June27th): "Home prices in 10 major U.S. cities fell 2.7% y/y -- their fastest pace in 16 years -- while prices in a 20-city group fell a more modest 2.1%, according to S&P's Case-Shiller home price index released Tuesday. Also Tuesday, the National Association of Realtors said that the median existing-home price fell 2.1% y/y in May to $223,700. Annual resales fell to 5.99 million/year, their lowest level in almost four years. Commerce Department: New home sales fell 1.6% to a seasonally adjusted 915,000 units/year, while downward-revising April's new home sales gain from 981,000 units/year to 930,000. New home sales have dropped 15.8% over the past year and 21.1% YTD. Inventories fell 1.1% to 536,000; after peaking in March at 8.3 months, the current figure represents a more modest 7.1-month supply."

• U.S. Metropolitan Home Values Drop Most in Six Years (Bloomberg, June 26th): "Fourteen cities showed a y/y decrease in prices for the month, led by a 9.3% drop in Detroit and a 6.7% decline in San Diego. The biggest increases in home values were in Seattle, where prices rose 9.6%, and Charlotte, North Carolina, with a 7% gain. The S&P/Case-Shiller 20-city index dropped 1.3% in March from a year earlier, less than the initial estimate of a 1.4% slump."

• A Look At U.S. Home Price Performance in 20 Markets (Hickey and Walters in Seeking Alpha, June 26th): "The April 2008 S&P/Case-Shiller Home Prices were released on Tuesday, so we have updated… the chart below which shows the difference between the most recent S&P/Case-Shiller Home Price report and the May 2008 housing futures offered by CME, which trade off of the S&P/Case-Shiller Indices. As shown, from now through May 2008, investors are still looking for declines across the board."

Homebuilders And Housing Stocks

• Mark Sellers' Prescient Call on Home Depot (Eliot Penn in Seeking Alpha, June 27th): "On September 8, 2006, Mark Sellers, a hedge fund manager [and] a columnist for the Financial Times [wrote:] "I believe Home Depot (HD) should offer to repurchase 25% of its outstanding stock in a tender offer, using debt to finance the transaction." Arguing HD's $34 stock was worth at least $50. He saw a… short-lived opportunity… to create shareholder value through $17 billion in share repurchases-- a "mini-leveraged buy-out." On June 19, 2007… HD announced that it would sell its supply unit for $10.3b and use the proceeds plus its cash and an additional $12b in new debt to finance $22.5b in share buybacks."

• Lennar's Earnings - Or Lack Thereof (Eddy Elfenbein in Seeking Alpha, June 27th): "Yesterday morning, Lennar Corp. (LEN) reported earnings (or lack thereof). The company lost $0.22/share, and that doesn't include a huge $1.33/share charge. Sales dropped 37%. Here's a look at Lennar's sales and earnings for the past few years. The last number is my estimate for this year."

• Four Energy Efficiency Stocks For a Cool Summer (Jeffrey Lin in Seeking Alpha, June 27th): "To buy American Standard [soon to be] Trane [is]… a pure play on the HVAC business where commercial and residential heating and cooling [and indoor air quality]… accounts for some 56% of energy use by U.S. homes… Trane products operate in more than half of all commercial buildings in North America... Trane’s HVAC hardware such as chillers, the big tanks of refrigerant that cools the air, is probably the best quality in the industry. With 73% of sales in the U.S. and only 10% in Asia, Trane has a lot of potential for growth in Asia as cities start popping out of the ground and needing HVAC systems."

• Logility Customers Honored at Start-IT Technology & Business Awards (PR Newswire, June 26th): "Logility, Inc. (LGTY), a leading supplier of collaborative solutions to optimize the supply chain, announced today that… Shaw Industries ha[s] been honored at the 2007 Start-IT Technology and Business (T&B) Awards… Logility customer Shaw Industries, a 2006 Start-IT T&B Award recipient, was recognized at this year's award ceremony as a finalist for Manufacturer of the Year. Shaw, a subsidiary of Berkshire Hathaway, is the number-one producer of carpet, rugs, ceramic, hardwood and laminate flooring for residential and commercial applications."

• MBIA, Newcastle: Short Ideas For the Decrease in Land Prices (Colin Peterson in Seeking Alpha, June 26th): "Standard Pacific Corp.'s (SPF) land positions are in [overheated] markets... They have a high degree of leverage, and the recent revelation that their joint ventures are subject to margin calls and recourse to the company is stunning. Only a fool would buy their stock… MBIA Insurance. (MBI)… guarantees the performance of "municipal bonds, asset-backed and mortgage-backed securities, etc"… MBI's [leverage] is astonishing. From [a] $7B capital base, they guarantee the performance of over $600b in debt. [With] MBI's… blow-up potential… because of high leverage, you don't need to be very specific about the possible cause. A few municipal defaults? Or… mortgage securities?"

Commercial Real Estate and REITs

• Blackrock To Acquire $1.7bn Fund Of Funds Business From Quellos Group (Hedge Week, June 27th): "US asset manager BlackRock… has agreed to acquire fund of funds business of Quellos Group for up to $1.7bn, creating one of the largest fund of funds platforms in the world with more than $25.4bn in assets under management Quellos, which manages hedge, private equity and real estate funds of funds as well as specialty and hybrid offerings on behalf of institutional and individual investors, will receive $562m in cash and $188m in BlackRock common stock upon closing of the transaction."

• In Silicon Valley, Steady but Cautious Growth Returns (NY Times, June 27th): "BEA Systems software company… bought [an abandoned Silicon Valley] tower for $135 million… In the last year, Google, Yahoo and Apple have together invested more than $400m in large blocks of land or buildings... Companies like Cisco Systems… are signing leases for vast amounts of space, some for the first time since the tech bubble burst... NAI BT Commercial: The office vacancy rate across the valley stood at 10.1% as of March 31, the lowest rate since 2000… Thomson Financial: Venture capital investments in Silicon Valley rose to $10.5 billion last year, the highest level since 2001."

• Jones Lang Chief Sees Peak In REIT Buyouts (Reuters, June 26th): "Jones Lang LaSalle (JLL) CEO Colin Dyer: The wave of massive buyouts in REITs may have peaked as a strategy of funding real estate takeovers by flipping properties soon after completing a deal comes under pressure… Acquisitions like Blackstone Group's (BX) $23 billion purchase of Equity Office Properties [EOP] in February were unlikely to soon be repeated: "EOP may be the last of the big deals that gets done in this current market. We believe that is trending down in favor of smaller, more contained and more detail-evaluated transactions."

• Coastal Office Real Estate Has the Most (Barron's Online, June 26th): "Friedman Billings Ramsey & Co.: As Q2 draws to a close, we revisit our outlook for office markets across the country… Generally, we expect outperformance to continue on the coasts, where all of the top eight and 20 of the top 25 markets/submarkets based on the average [forward] 10-year spread are located… We expect continued underperformance from the non-coastal markets/submarkets, where six of the bottom eight and 13 of the bottom 25 markets are located."

• Winthrop Trust Sells America First Stake (Chron.com, June 26th): "Winthrop Realty Trust, a REIT, said Tuesday it sold its stake in America First Apartment Investors Inc. for a gain of about $9.7 million. Winthrop said it sold its 793,956 common shares for $25.02/share, resulting in net proceeds of about $19.8m. The REIT said it acquired the shares from January 2005-August 2006 for an average per share price of $12.63. America First is a REIT that owns and manages apartment complexes."

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Comments

[censeo]

RE: Quote of the day; I find this: "Bill Gross, the chief investment officer of Pacific Investment Management Co., or PIMCO, on Tuesday lambasted rating agencies for failing to warn investors about the riskiest segments of the U.S. credit markets..." stunningly disingenuous. Does a chief investment officer rely on rating agencies? Anybody following the trend in flighty mortgage programs will have seen the writing on the wall. I'll assume he has kept himself informed. So, then, he's a greedy pig and a sheep following the flock off the cliff. Blame him and others like him managing funds with the attitude, "I don't care, the sky is blue today and anyway it's other peoples money." Who set up this mess. Not the rating agencies. Mr. Gross is the one on six-inch heels. And now he's stumbled and is saying the agencies bumped into him? Give me a break.

[RE.porter]

newenglin you have no clue!

PIMCO has been warning about this situation for over a year and has been criticizing the agencies that should be doing the same! They are just coming out of the woodwork now and Gross is merely ensuring transparency about their ethical obligations.