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"

"The next serious indication you'll get of what the market looks like will come probably three weeks after July 4. I would look at the tea leaves then to see if there's any indication that the market is coming back." - Robert Toll, CEO of Toll Brothers (TOL) Homebuilder, saying homebuying usually picks up after Independence Day. (Reuters, June 28th)

Real Estate Sales and House Prices

• Single-Family Home Sales (Signal.com, June 28th): "SCV Re/Max: Sales in the Santa Clarita Valley are down 21% this year compared to last year. California Association of Realtors: A similar drop has occurred statewide, with sales down 25% in May from the same period last year. Southern Regional Association of Realtors: The median price for a single-family home in May was $615,000 in the SCV, up from the January price of $531,000 and up 3.4% over April's prices… Inventory in the SCV remains high, with 2,240 active listings in May. A total of 179 single-family homes closed escrow during May, 23.5% down from a year ago."

• Ncco Bucks Trend Of Falling Home Prices (Delaware Online, June 26th) Delaware: The median New Castle County home price in May was $248,000, up 8.3% from May 2006. Kent County's… median price drop[ped] to $223,000 in May, down 5.1% vs. May 2006... Sussex County Association of Realtors: From Lewes to Dewey Beach, average sale prices for single-family homes last year declined for the first time since 2000... Prices in the communities closest to the ocean dropped 5% from 2005 to 2006… In New Castle County, there were 2,974 new and existing houses for sale as of June 11 -- about 1,000 more than last year."

• New Data Indicates San Diego Home Sales May Keep Plummeting (KPBS, June 26th): "Home sales fell 16% in San Diego last month vs. May 2006… The slump in the San Diego real estate market is affecting the local economy as growth continues to slow down. Marney Cox, economist with the San Diego Association of Governments: "Where that ripples into is not only just the construction workers but also the escrow and finance people who take care of that and also into the retail sector who are selling all of the furniture and carpet and stuff like that to those new homes. So it's beginning to broaden now, beginning to affect many other industries."

• Home Sales Dive 39% in Treasure Coast (Palm Beach Post, June 26th): "Florida Association of Realtors: Single-family home sales in the Treasure Coast, which exploded with new development during the housing boom, plunged 39%, to 315 in May 2007 from 519 in May 2006. New-home builders in the Treasure Coast have been slashing prices and offering buyer incentives, which has cut into the sales market for existing homes… Meanwhile, the median price of an existing single-family home in the Treasure Coast fell 9% in May, to $228,500 from $252,300… Single-family home sales plunged 25% in Palm Beach County. Last month was the 18th straight of declining sales in the county while inventory soared to nearly a three-year supply."

Real Estate Investing and Sentiment

• City Fund Issues First Affordable Housing Loan (Crain's New York Business, June 27th): "The NYC Acquisition Fund announced today a $23 million loan to the Fordham Bedford Housing Corp. to help the nonprofit developer acquire 283 rent-stabilized apartments in six buildings in the northwest Bronx. This is the first major loan for $230m fund, which was created last year to build or preserve 30,000 units of affordable housing over the next decade. Earlier this year, it made two smaller loans to developers who are building a combined 104 new affordable units."

• A Changing Family Picture (Builder Online, June 27th): "From 1990 to 2000, homes in which three or more generations live together grew more than 38%... According to a USA TODAY analysis of 2005 data from the U.S. Census Bureau's American Community Survey, multi-generational households tend to have bigger quarters and more income than households overall: 48% of multi-generational households had an income of $60,000 or more, and 37% are in housing with four or more bedrooms."

• Ranks Of Rich Grow At Faster Pace, But Slowdown Coming (CNN Money, June 27th): "The 11th annual World Wealth Report, by Merrill Lynch & Co. and Capgemini Group: The ranks of the richest Americans grew last year at an increased pace driven by a strong economy, but that growth is expected to moderate in coming years... The wealthy shifted their investment strategies in 2006… That shift was driven primarily by commercial real estate and REITs. Global direct real estate transactions reached $682 billion in 2006, up 38% from 2005. Global real estate investment, including direct real estate and REITS, totaled $900b in 2006, the strongest performance by global real estate markets ever."

• Factory-Built Homes Back In Vogue (Upstate House, June 27th): "Modular, manufactured, structural insulated panels and other types of "prefab" housing are reaching a growing segment of new-home buyers yet they are very different in the way they are built. The built-to-be-towed house -- in a custom, preassembled package or enclosed finished unit -- has changed dramatically, and so have its occupants. For example, modular home builders have begun to target last-time home buyers: customers who know what they want and are willing to pay outside the "affordable" range."

• Web 3.0 and Real Estate: An Overview (Sramana Mitra in Seeking Alpha, June 27th): "National Association of Realtors: More than 70% of buyers begin their search for a house on the Internet... Ad spending on online realty sites rose from 11.3% in 2005 to 11.9% in 2006… The yet untapped opportunity in online advertising lies in the fact that 61% of the real estate agents do not advertise on the Internet and 87% of the agents do not buy keywords on Yahoo or Google or MSN… Borrell Associates: Online ad spending on realty sites [should] reach 32.1% of overall Real Estate ads in 2010 from the current 17.7%... ComScore (SCOR): Total Internet audience for real estate sites grew by 15% from 34.79 million unique visitors in January 2006 to 39.85 million unique visitors in January 2007."

Mortgates and Real Estate Lending

• Mortgage Applications Fall (Forbes, June 27th): "The Mortgage Bankers Association… weekly mortgage index, which measures the volume of applications for loans to buy or refinance homes, fell to 618.6 for the week ending June 22. That's down 3.6% from the previous week but up 16.3% from the year-earlier week. The MBA said that applications were down for both refinancing mortgages and for new home loans.The average rate on 30-year, fixed-rate mortgages has risen by about one-half percentage point in recent weeks to 6.69% in the most recent Freddie Mac (FRE) survey. Generally, higher rates mean that borrowers are able to qualify for smaller loans."

Subprime Fallout and Foreclosure Impact

• Looking for Contagion in All the Wrong Places (Bill Gross in PIMCO, July, 2007): "The problem lies not in a Bear Stearns hedge fund that can be papered over with 100 cents on the dollar marks. The flaw resides in the Summerlin suburbs of Las Vegas, Nevada… (and empty) rows of multistoried condos in Miami, Florida… Homes that were financed with cheap and in some cases gratuitous money in 2004, 2005, and 2006. Because while the Bear hedge funds are now primarily history, those millions and millions of homes are not… Mortgage payments are going up, up, and up…and so are delinquencies and defaults… Bank of America: Approximately $500 billion of adjustable rate mortgages are scheduled to reset skyward in 2007 by an average of over 200 basis points. 2008 holds even more surprises with nearly $700b ARMS subject to reset, nearly ¾ of which are subprimes."

• Bear Stearns Knows What Its Doing: Bailout Just Another Investment Strategy (Zachary Scheidt in Seeking Alpha, June 28th): "Bear Stearns… does an excellent job of managing and investing its own capital. The corporate culture still reverberates around making positive returns on assets and traders are meticulously trained to manage risk, and build the company's asset base by seizing opportunity. This bailout is just that... An opportunity for the company to issue a loan (they are being compensated for the risk they are taking) and make a good return on their money. I… expect this wave of selling to be just about over. I would not suggest putting too much capital at risk, but the chances of a rebound are good."

• Credit Crunch Time (Wall St. Journal, June 28th): "Many of today's debt instruments and derivatives are new enough that they haven't been tested in a downturn. The index against which the Bear Stearns funds were trying to hedge has only been in existence for 18 months, so no one knew how it would behave when the subprime market swooned. That turned out to be bad for Mr. Cioffi, and it's probably worse if you're one of his investors, but it's a long way from market failure… Until things went south in the subprime space, even sophisticated investors didn't necessarily know what information was important to have."

• Carlyle Postpones $415 Million IPO of Mortgage Fund (Bloomberg, June 28th): "The Carlyle Group, the buyout firm run by David Rubenstein, postponed a planned $415 million IPO of a fund that invests in bonds backed by mortgages after a slump in the U.S. subprime market. Carlyle [said it] is preparing a revised timetable for the sale. The Washington-based firm planned to use most of the money from the IPO to buy AAA-rated residential mortgage-backed securities. The fund also targeted loans, high- yield bonds, and collateralized debt obligations."

• Housing and Hedge Funds (NY Times Op-Ed, June 28th): "Bear Stearns (BSC)reportedly put up $3.2 billion to help liquidate holdings. That’s 32 cents on the dollar for assets once valued at $10b… [Since 2005,] Wall Street firms have issued $500b [worth of] investments similar to the Bear holdings… If those were to tank, the damage could be felt broadly. It would likely become harder… to get loans for everything from homebuying, which supported the economy for most of the decade, to leveraged buyouts, which have buoyed the stock market… Hedge funds should be regulated if they accept pension money, because doing so exposes everyday Americans to outsized investment risks."

• Merrill's O'Neal Sees No `Contagion' From Subprime Mortgages (Bloomberg, June 27th): "Merrill Lynch (MER) CEO Stanley O'Neal said rising foreclosures on subprime mortgages in the U.S. aren't affecting other parts of the bond market. "It's reasonably well contained,'' O'Neal said today at a conference organized by Euromoney Institutional Investors Plc in London. "There have been no clear signs it's spilling over into other subsets of the bond market, the fixed-income market and the credit market.''

• State Officials, Lenders Meet on Foreclosures (Boston.com, June 27th) Massachusetts: "The Patrick administration’s top housing officials met with nine mortgage lenders today about the foreclosure crisis [to discuss] what the state and lenders can do to help "keep people in their homes." The nine lenders account for a significant share of the state’s residential mortgage market… Represented were Washington Mutual (WM), Wells Fargo & Co. (WFC); Option One Mortgage(HRB); JPMorgan Chase (JPM); HSBC Finance (HSB); Countrywide Financial (CFC); CitiBank (C); Bank of New York(BAC); and GMAC’s Residential Capital subsidiary(GM)."

• The Housing Crisis: Symptom or Cause of Market Volitility? (Roger Nusbaum in Seeking Alpha, June 27th): "To the extent that markets are interconnected, something unusual in some big segment, like the mortgage market, can cause problems for asset prices without causing people to lose their houses, or causing home values to be cut in half, as some fear. However the the bond market is very complex, the equilibrium between various bond market segments is complex, disruptions to that equilibrium will cause visible reactions. I am not calling for Armageddon, but the thought that this increased stock market volatility will persist seems very plausible."

• Wall Street Stoked the Mortgage Fiasco (Los Angeles Business Journal, June 27th): "Lehman Brothers (LEH) leant First Alliance mortgage company roughly $500 million and helped sell more than $700m in bonds backed by FA customers' loans. But FA later collapsed. Lehman landed in court, where a federal jury found the firm helped FA defraud customers… Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets… Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home."

Global Impact and Alternatives To The Housing Slump

• U.K. House Prices Rise More Than Forecast in June (Bloomberg, June 28th): "Nationwide Building Society, the biggest U.K. mortgage lender: U.K. house prices advanced this month at the fastest pace since December, bolstering the case for an interest-rate increase by the Bank of England next week. The average cost of a home rose 1.1% from May to 184,070 pounds ($368,000). The median estimate… in a Bloomberg survey was for a gain of 0.5%. The annual pace of house price growth accelerated to 11.1%, the fastest since January 2005. Today's report suggests four rate increases to a six-year high have yet to cool Britain's housing market… defined by a shortage of supply."

• Savings Bank Haspa To Sell Real Estate Holdings To US Investment Firm – Report (ABC Money.co.uk, June 28th): "German savings bank Hamburger Sparkasse [HASPA] is planning to sell a large number of real estate holdings to US investment firm Strategic Value Partners, Financial Times Deutschland reported, citing market sources… Strategic Value Partners will pay €400-500 million for about 100 Haspa branches in addition to several other commercial real estate properties. Morgan Stanley and Hamburg-based real estate investor Dieter Becken also placed bids."

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

• Population Grows in Only 2 of 8 O.C. Big Cities (OC Register Blogs, June 27th): "Fresh Census stats show that only two of O.C.'s eight "big" cities -- 100,000 residents or more, by Census' count -- added people in the year ended July 1, 2006. North Las Vegas grew the fastest; flooded New Orleans shrank the most. Here's a peek at how O.C. cities shaped up in these Census rankings by percent change in population."

• Toll Sees No Housing Jump Before April (Reuters, June 27th): "Luxury home builder Toll Brothers (TOL) CEO: The sagging U.S. housing market probably will not rebound before next April, when the presidential race narrows down and national confidence improves as a result. Many home-building industry executives, including Toll, attribute the anemic housing market to low buyer confidence, despite a healthy economy, strong employment and relatively low mortgage rates, currently at about 6.7%. "(My) personal view is that it will be a very quick and strong rebound" fueled by a release of pent-up demand for new homes. We're not into this recession in housing for a long period compared to the other downturns."

Homebuilders And Housing Stocks

• Best Buy Announces Record Buyback (Seeking Alpha, June 28th): "Electronics retailer Best Buy… will buy back up to $5.5 billion of its shares over the next few years, alleviating concerns the company was going to make a major acquisition. The buyback, which represents about a quarter of the company's outstanding stock, will be funded primarily through the company's cash and cash equivalents, which are currently at about $2.8 billion. The company also announced a 30% quarterly dividend increase, its biggest ever, and plans to open 400 more stores in the U.S… Best Buy holds 20% of the North American market for consumer products."

• Best Buy(back): Now That's How To Announce A Buyback (Todd Sullivan in Seeking Alpha, June 28th): "Best Buy's (BBY) will buyback $3b of stock [by] February 2008 [part of new $5.5 billion share repurchase program]... The company expects to fund the $3b ASR program through cash, short-term investments and interim borrowing… $3 billion dollars worth of stock will be gone in eight months. At current prices, that means about 65 million shares or about 13% of the outstanding shares… Giving 2008 EPS a boost of $0.37/share (13%) over 2007. This number assumes earning in 2008 equal to 2007. Any growth BBY delivers in excess of 2007 is just icing on the cake for investors.

• Not Yet Time for Homebuilders (Larry MacDonald in Seeking Alpha, June 28th): "The SPDR S&P Homebuilders Index Fund (XHB) is down about 15% since May 29. It’s tempting to buy this dip given the positions of top professionals like Ken Fisher of Fisher Asset Management in U.S. homebuilding stocks. But I believe it's still be too early to buy the SPDR S&P Homebuilders Index Fund because U.S. inventories of new and resale housing remain at 15-year highs -- while mortgage rates edge up and banks tighten lending standards."

• Toll Brothers Eyes China Home Market (Reuters, June 27th): "A team from the luxury U.S. home builder Toll Brothers Inc (TOL), which last year generated $6.12 billion in revenue, is leaving next week to visit major and second-tier cities across China. Toll said the aim is to join forces with a well-established builder in the China market that would benefit from the Toll name. China is urbanizing rapidly, with some 8 million people moving to cities each year and a growing middle class pushing up property values. CEO Robert E. Toll: "We'll concentrate on the China market a little bit, and then we will explore India and Korea."

• Beazer Sends Accounting Chief Packing (The Street, June 27th): "Beazer Homes (BZH) fired its chief accounting officer for attempting to destroy documents related to an in-house probe of the company's mortgage origination business. The homebuilder said in a SEC filing Wednesday that Michael T. Rand was terminated for cause due to violations of Beazer's ethics policy. The action was taken by the board and management following a briefing by the independent legal counsel retained by the board's audit committee."

• LI Builders Pause, Waiting For Land Prices To Fall (Newsday, June 27th): "Consultant Don Eversoll: Sales at Pulte Homes' (PHM) nine developments on Long Island are brisk, but the local office has shifted its focus from land acquisition and approvals to [profiting from] the projects that are ready to build… AvalonBay (AVB) VP Matthew Whalen, whose company is developing middle- to high-end, multi-unit rental complexes [says] the rental market is so "vastly undersupplied, that inflated land prices have merely led to less bidding wars for sites and some of the competition slowing down…" Last week, Pulte opened sales for a new multi-tenant development in Oceanside. Twenty-eight potential buyers have already taken the first step toward buying in."

• Bed Bath & Beyond Profit Slowed by Housing Weakness (Bloomberg, June 27th): "Bed Bath & Beyond Inc. (BBY), the largest U.S. home-furnishings retailer, said Q1 profit rose 4.2% after customers bought less bedding and curtains as U.S. home sales slowed… Net income climbed to $104.6 million, or $0.38/share, from $100.4m, or $0.35, a year earlier… Ronald Curwin, VP, investor relations: Profit for the year ending in February 2008 may be unchanged or decline if current housing conditions persist. Q2 profit will be about the same or slightly higher than $0.51/share from a year earlier. Q3 profit will be at or below last year's earnings of $0.50."

• Truck Driver Wisdom Suggests Housing Stocks Are Bottoming (Mike Goodson in Seeking Alpha, June 26th): "When a truck driver is quoted by the national press regarding the stock market, his views are close to being fully discounted and reflected in stock prices. His opinion reflected the consensus. [If he says things are bad, that's] a major buy signal for me… So… truck drivers… would say [now] that the housing market is in real trouble… [But] I am very comfortable with 6.9% of my portfolio in housing stocks. I really like all the attention and focus this industry is receiving now… Right or wrong, this focus is likely to help these stocks move to where they should be. I think that will eventually be higher."

Commercial Real Estate and REITs

• Kushner Selling 17,628 Apartments (Globe St., June 27th): "Kushner Cos. is under contract to sell 17,628 apartments of its multifamily portfolio… The news comes just eight weeks after the portfolio of 18,500 units in New Jersey, Pennsylvania, Delaware, Maryland and New York went on the block… The bulk of the portfolio is being sold to a joint venture of AIG Global Real Estate Investment Corp. (AIG) and an affiliate of Morgan Properties of King of Prussia, PA… The sale price was not released, but sources put the number in the $1-billion range, plus the assumption of more than $900 million of debt."

• Hines REIT Closes on $56.8M Purchase of Seattle Design Center (CoStar Group, June 27th): "Hines REIT, the investment arm of Hines Interests, has [acquired] the 390,684-sf Seattle Design Center for about $56.8 million, or $145/sf, with a projected first year cap rate of 7.5%. The seller was Bay West Group. Hines: The complex is one of only 20 design centers in the U.S. and the only full-service center in the Pacific Northwest… The five-acre complex's two buildings, known as the Atrium Building and the Plaza Building… contains a mix of 70 showrooms, 15 designer offices and approximately 80,000 sf of mainstream office tenants. It was 90% occupied at time of sale."

• Big Leases in Downtown Brooklyn (The Real Deal, June 27th): "Two recent leases at the renovated 177 Livingston Street in Downtown Brooklyn totaled 35,738 square feet. The building, a former Macy's warehouse, recently underwent a year-long renovation that turned it into a Class A property. HeartShare Human Services of New York and Legal Services for New York City took space at the property."

• Fitch Affirms Boston Properties Ratings (Chron.com, June 27th): "Fitch Ratings affirmed the investment-grade credit ratings of office REIT Boston Properties Inc. and its subsidiary Boston Properties LP (BXP). The ratings agency reiterated its "BBB" rating on the REIT's issuer default rating, its unsecured credit facility, its senior unsecured notes and its convertible senior unsecured notes, [and] "BBB-" for its preferred stock. The rating outlook is stable. Fitch said the ratings reflect the quality of the REIT's portfolio, solid debt service coverage ratios, modest leverage, adequate risk-adjusted capital ratios, a sizable unencumbered asset pool, a manageable lease maturity schedule, reasonable debt maturities, and access to capital on favorable terms."

• Reckson Forming New Opportunity Fund (CoStar Group, June 27th): "Reckson NYPT, the Australian-based REIT that owns some of former Reckson Corp.'s suburban New York City properties, is in the process of raising RexCorp Opportunity Venture II. The fund is designed to invest in opportunistic mixed-use real estate investments. The fund is initially expected to be capitalized with from $850 million to $1 billion and is shooting for a targeted internal rate of return of approximately 18% - 25%. RexCorp has a proven track record in opportunity fund investments and strong institutional investment partners. It successfully launched the $500 million RexCorp Opportunity Venture I in January 2007."

Web Site of the Day

For those that cannot just let the man walk silently off in to the night, here's a last stab at David Lereah, former chief economist for the National Association of Realtors—the man real estate bloggers love to hate. Click to enlarge. Thanks to the David Lereah Watch website for this. Don't worry all you "fans", there's a new one set up for Lawrence Yun, the new NAR chief economist. Good luck Mr. Yun!

Tracking the Housing Market and Homebuilder Stocks You can track developments in the housing market and homebuilder stocks by bookmarking our Housing coverage or subscribing to our free email service. If you have a blog or website of your own, you can track developments in the sector and provide great content for your readers with our Housing Market widget (left). It's simple to add -- just select "Housing Market" from the drop-down menu here.