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 mortgage brokers are the wild, wild West of mortgage finance. We need to bring a sheriff to town.” - Sen. Charles Schumer, a New York Democrat, on the role of mortgage brokers in the subprime mortgage crisis, due to a lack of regulatory oversight. (Wall St. Journal, July 5th)

Real Estate Sales and House Prices

• More Big Gains Unlikely In Oahu Home Prices (Honolulu Advertiser, July 4th): "Honolulu Board of Realtors: The median price for existing Oahu single-family homes sold last month set a record at $685,000 — eclipsing the previous record of $668,300, set in May 2006. But last month's price was a modest 7.2% gain from $639,000 in June 2006… Condominiums sold for a median $334,000 last month, up 7.7% from $310,000 in June 2006. The previous record was $329,000 in July 2006… Board of Realtors: The number of sales declined by roughly 15%-50% in areas from 'Aiea to Nanakuli… Total O'ahu sales [continued to decline, down 8.2% from a year earlier. Condo sales dropped 14.7%."

• Study Indicates Increase In County House Prices (Leavenworth Times, July 3rd): "Kansas City Regional Association of Realtors: Several Kansas City counties experienced increases in new home prices this May, but existing home prices were close to the same level or lower than they were last year… The metro’s home supply was down from a 7.5 month supply in April to a 6.3 month supply in May. This suggests that the market is moving toward an equilibrium between a buyer’s market and a seller’s market… The number of homes for sale has increased by more than 1,600 in the Kansas City area since last year."

• Elad Buys L.A. Condo Project for $140M (Commercial Property News, July 3rd): "Elad Group has acquired the site of the Carlyle on Wilshire, a condominium tower under way on Wilshire Boulevard in Los Angeles. The project traded hands for about $140 million, according to the sellers, developer Woodridge Capital and Wilshire Carlyle Partners. Elad CEO Miki Naftali: "There's a limited inventory of high-end condos in Los Angeles, especially well-designed, full-service properties, so we believe the Carlyle is a tremendous opportunity. That's especially true in the Wiltshire corridor--there's practically no other land there to build on."

• Area Home Prices Rise, Against Trend (Herald News, July 3rd): "Illinois Association of Realtors: In Will County, the median home sale price for Q1 was up 2.1% to $221,500. Other nearby counties had similar increases: Cook was up 3.4% to $255,000; DuPage was up 0.6% to $267,000; and Kendall was up 2.2% to $230,000. The average home price in the Chicago area was $317,452, up from $309,643 in May 2006… Statewide, home sales rose 10.7% between April and May. But home sales were down 18.6% y/y. May home sales were down 20.7% y/y in the Chicago area. Statewide, the median home price… is $205,000, the same price y/y."

Real Estate Investing and Sentiment

• CoreNet Chicago: Silos Gone, Corporate Real Estate Pros Must Embrace Integration (CNN Money, July 3rd): "Francisco J. Acoba, of Deloitte Touche Tohmatsu on CoRE 2010, a research initiative undertaken by CoreNet Global to assess [changes] in the corporate real estate profession: Competitive advantage will accrue to an organization that uses a network of business partners--that is, a networked virtual organization… Optimizing the entire portfolio of business enterprise resources will require a skill set beyond real estate. "By 2010, the primary responsibility of the senior corporate real estate or infrastructure leader will be to plan and manage a network of partners to deliver services… and to managing a highly dispersed network of assets."

Mortgates and Real Estate Lending

• Housing-Market Data Might Paint A Better Outlook Than Reality Warrants (NWI, July 5th): "Goldman Sachs: Over the last decade, the y/y change in the MBA's "purchase applications index" has shown a 76% correlation with the y/y growth rate of the combined new and existing single-family home sales, lagged by one month. [But] the index fails to account for… the turmoil in the mortgage finance business. The purchase applications index is now showing a 9.5% rise for June from year-ago levels. The MBA survey refers to mortgage applications, not originations, which legally bind borrowers to the mortgage… In times when lending standards are tightening… more applications are rejected, and therefore, originations go down."

• FBI Lacks Resources To Fight Boom In Mortgage Fraud (Seattle PI, July 4th): "Mortgage Bankers Association: Mortgage fraud cost banks and consumers at least $1 billion last year, but neither the Bush administration nor the Democratic Congress is giving the FBI the resources it needs to combat the problem. The MBA, which represents home-loan lenders, has been asking for $6.25 million to fund 30 new Federal Bureau of Investigation special agents as well as two federal prosecutors and 15 regional task forces combating an explosion of fraud. MBA: In the post-9/11 era… The Bush administration failed to budget for replacements for 2,500 agents reassigned to investigate terrorism."

• National Mortgage License System Planned (The Street, July 4th): "The Nationwide Mortgage Licensing System is being developed by two industry groups, the Conference of State Bank Supervisors and the American Association of Residential Mortgage Lenders, to accept and process license applications and renewal forms online. They say the system will help standardize licensing requirements across the nation. It should also make it easier for regulators to identify and punish fraudulent or unqualified lenders."

Subprime Fallout and Foreclosure Impact

• Aegis Founder Takes Mismanagement Claims To Court (Chron.com, July 4th): "Rick Thompson, founder and former president of Aegis Mortgage Corp., once one of the nation's largest subprime lenders, … recently filed lawsuit [against] giant New York private-equity firm Cerberus Capital Management [claiming that] had management moved more quickly, [Aegis] would have been able to sell shares before problems in the subprime market made the company less attractive to investors. Thompson [who] started the company with $500,000 14 years ago and… owns 15% of the company, says… that in January 2005 [before the subprime crisis began,] investment firms looking to help Aegis launch a public offering valued the company between $600 million and $1 billion."

• Subprime Crisis Hits Texas Homeowners (Dallas Morning News, July 4th): "RealtyTrac: Texas ranks third in the nation in the number of foreclosures… Foreclosure Listing Service Inc.: Homes posted for foreclosure in the Dallas-Fort Worth area rose nearly threefold between 2000-2006… Mortgage Bankers Association: At the end of March, less than 1% of prime loans in Texas were 90 days or more past due or in foreclosure… The comparable figure for subprime loans was 8%. First American LoanPerformance: In Texas, subprime loans make up 18% of mortgages. But they accounted for about 45% of Texas foreclosures last year… About 16% of Dallas subprime loans had payments overdue by 60 days or more in April, vs. 13% nationwide."

• Home Loan Foreclosures On The Rise In Cuyahoga County (My Fox Cleveland, July 4th): "Home foreclosures in Cuyahoga County continue to surge. The hardest hit county in the hardest hit state may see 17,000 foreclosures this year -- almost a 25% increase from last year. County Treasurer Jim Rokakis calls it the epicenter of the mortgage meltdown in America. Ohio's foreclosure rate for Q1'07 was 3.5% -- almost triple the national figure. The region's sagging economy has combined with the failure of subprime mortgages and predatory lending to create a growing mortgage mess. "

• Downey Financial: Foreclosures Surge in Second Quarter (Colin Peterson in Seeking Alpha, July 3rd): "[A] Downey (DSL) Real Estate Owned survey for Q2 2007… DSL's REOs as of June 6, 2007: Downey REOs exploded in Q2… Based on the historical contribution of 40% of REOs by the 7 counties [covered in this survey], we can guess that Downey total REOs will increase by approximately 29/.4 = 72 for Q2 2007… A dollar amount somewhere in the low eight figures… Of the total non-performing assets, real estate acquired in settlement of loans represented $17 million at March 31, 2007, up from $9m at December 31, 2006 and less than $1m at March 31, 2006. The inventory and foreclosure data in the Downey/SPF California markets is terrible. Downey's borrowers seem to be treading water."

Global Impact and Alternatives To The Housing Slump

• Investors Shun 'Falling Knife' of European Real Estate Stocks (Bloomberg, July 5th): "Rising interest rates and declining profits from real estate are pushing investors to ditch European property stocks after a four-year rally. The Bloomberg Europe Real Estate Index just completed its worst quarter in a decade and the stocks are still expensive compared with European averages… Increases in borrowing costs -- economists expect the Bank of England to raise its benchmark rate for the fifth time in a year today -- will eat further into revenue from buying and renting property. At the same time, prices of offices and malls in locations such as London are predicted to start falling."

• Rate Rises Hit Secondary Property Prices (MSNBC, July 5th): "Prices for "secondary" commercial property across Europe are falling amid rising interest rates, according to Aubrey Adams, chief executive of property agents Savills. Transactional demand for "prime" assets remained strong in the first half… But yields on secondary property – poor assets in unglamorous locations – were rising. "Investors are being increasingly selective, focusing on strong opportunities for upward rental growth." Shares in Britain's biggest commercial property companies are down by 20 per cent or more since January amid fears that rising debt costs could prompt broad falls in the value of shops and offices."

• Lasalle To Triple Asian Investments To US$20 Billion (Taipei Times, July 5th): "LaSalle Investment Management, a unit of Jones Lang LaSalle, said it plans to triple its investments in Asia to $20 billion from $7 billion in the next three to four years… invest[ing] in markets such as Japan, China, Hong Kong, Taiwan, South Korea, Singapore, Thailand, Australia and New Zealand. Jack Chandler, LaSalle Investment Management's CEO, Asia-Pacific: "Our Asian funds have outperformed our internal rate of return of about 18-20%, and have done better than other regions" in the past three to four years." Private Equity Intelligence: More than 100 real estate funds may raise a record US$69 billion this year."

• Blackstone Helps Europe Love Hotels (Forbes, July 4th): "Blackstone Group's… $26 billion offer for Hilton Hotels was exactly what traders needed on Wednesday to forget their fears of terrorism, rising interest rates and risky credit. Hotel stocks were among the biggest gainers in London and Paris on Wednesday afternoon, with Britain's InterContinental Hotels (IHG) gaining 49 pence (99 cents), or 3.9%, to £13.07 ($26.36) and French group Accor (ACRFF) soaring 6.66 euros ($9.07), or 10.26%, to 71.56 euros ($97.42). Another U.K. company, Whitbread (WTCBF), which owns the Premier Travel Inn brand, rose 52 pence ($1.05), or 3%, to £18.05 ($36.40)."

• Auto Industry Just One Driver Of Bratislava Real Estate Boom (Chron.com, July 4th): "The flourishing auto industry [and] Slovakia's entry into the European Union three years ago, [are some of the] factors fueling a steep increase in real estate prices in the Bratislava region of Slovakia... The building boom is transforming the capital as older houses are torn down and replaced by apartment buildings. Milan Misik, of Arthur Real Estate: "There is more demand than supply, and in Bratislava there is practically no unemployment, and the economy is going well and loans are available so there are a lot of investors now."

• CA Immo Seeks IPO For REIT Unit In Germany, Total Investment Vol Up To 2 Bln Eur (Forbes, July 4th): "CA Immo AG said it will offer 26-49% of CA Immo REIT AG, its planned REIT unit in Germany, to private and institutional investors in a Germany-based IPO. The IPO will take place at some point between Q4'07 and the end of June 2008. In a statement, CA (CA) Immo said it expects the IPO to generate new own funds of up to €500 million, while the REIT's total investment volume should reach €1.5-2 billion, of which €1b will be invested by the end of the current financial year."

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

• Foreclosures, Home Sales Cast a Pall on Public Spending Plans (Washington Post, July 5th): "Washington D.C.: Manassas City Council commissioner of revenue: Manassas… budgeted a 2.5% drop in real estate property assessments for fiscal 2009, but values have dropped 6%... There are 20% more houses for sale now than at this time last year, and… foreclosures continues to rise [resulting in a] falling property tax base. Allen Scarbrough, the county's investment portfolio manager: The Prince William Board of County Supervisors budgeted for a 2% overall drop in assessed real estate values, but the county is seeing a nearly 4.5% drop… from May 2006 to May 2007 prices… requiring delays of long-term capital projects such as building schools and roads."

Homebuilders And Housing Stocks

• Home Depot is Cheap, Regardless of Upcoming Guidance (Echo To All in Seeking Alpha, July 5th): "[For Home Depot (HD)… The two year buyback is ambitious as it will call for over $11B a year, which assumes some $40M/day of buybacks, taking away one million shares a day from every open trading day. Also, after reviewing the supply biz and its affect on EPS over the last 4 quarters, I assumed a 10% reduction with out the supply biz. (The range varied from 8-10%) From the numbers attached, even if the guidance is drastically reduced, HD still looks pretty cheap with a pretty low forward PE at current prices. Assuming HD consistently trades at a PE of 15, the stock will be in the mid 40s. And if the retail conditions improve, the stock could certainly see 50."

• Housing-Market Data Might Paint A Better Outlook Than Reality Warrants (NWI, July 5th): "The Commerce Department reported last week that the median sales price of new homes fell 0.9% in May from a year ago, after tumbling 10.9% in April. But those numbers don't include the… lavish incentives like plasma televisions, pool installation and closing costs that sellers are increasingly using to woo buyers… A home selling for $600,000 gets reported for that price even though all those extras technically are reducing the net sale price. Sales incentives at Lennar Corp. (LEN), one of the nation's biggest builders, averaged $43,700 a home in FQ2'07, up from $24,700 in FQ2'06."

• Kaufman Et Broad To Pay 4.83 Eur Interim Div When PAI Stake Purchase Completed (ABC Money, July 3rd): "French homebuilder Kaufman et Broad SA said it will pay an interim dividend of €4.83/share once the acquisition of a 50.01% stake in the group by a unit of private equity PAI Partners [from US homebuilder KB Homes (KBH)] has been completed. The purchase is being carried out through Financiere Gaillon 8 SAS, controlled by funds managed by PAI."

• Pool Corp. Warns: No Surprise Here, But Watch 20% Short Interest (Notable Calls in Seeking Alpha, July 3rd): "Swimming pool distributor Pool Corp (POOL) warned Monday: Full-year earnings [will] be in the range of $1.75-$1.85/share [vs. previous projected] $2.00-$2.10/share… citing decreased new pool construction in FL, AZ and CA… three of the company's four largest markets (the fourth being TX) due to a slowing housing market… There is currently a large short interest in the stock (10 million shares, or 18.3 days to cover)… over 20% of float. The stock should be down $3-4 today… anything beyond $4 is buyable for a bounce… I think things will continue to deteriorate in housing… The only reason for buying the bounce is that… POOL had become a somewhat crowded short and I think some of these positions will be covered into today's weakness."

• Cramer's Housing Plays Holdings (Stockpickr. Com, July 3rd): "Cramer… likes Sears (SHLD) "because Sears has made great strides in clothing but not in housing-related, so if housing pops, you've got a real horse on your hands." Cramer: "Robert Niblock, who runs Lowe's (LOW)… [says] it really doesn't matter if homes sell or not. If they don't, the people who currently live in them remodel. If they do, the new people remodel. It is a win either way… I pulled up… when Lowe's was at $34 and it was business as usual. Now, a couple of points lower and I think you'll have a good one."

Commercial Real Estate and REITs

• Soaring Rents Pinch Businesses Across the U.S. (Wall St. Journal, July 5th): "Reis RE research: Nationwide, effective rents on office properties… jumped an average of 3.1% during Q2'07, up from gains of 2.8% in Q1 and 2.1% in Q2'06… In some cities… fatter corporate profits [and] stepped up hiring [is] fueling demand for space [when] supply is tight… In markets such as Boston and San Francisco… deal-making frenzy has left [many] office buildings [with] nontraditional landlords such as private-equity firm Blackstone Group (BX) and investment bank Morgan Stanley (MS). Real-estate brokers say… these landlords [are] taking a harder line in lease negotiations, seeking to push rents high enough to offset the lofty sums they paid for their properties."

• Insider Trading Suspected Ahead of Hilton Buyout (Seeking Alpha, July 5th): "Shares of Hilton Hotels (HLT) rose 6.44% to $36.05 Tuesday -- ahead of the after hours announcement of the company's sale to the Blackstone Group (BX) for approximately $20 billion in cash or $47.50/share, at a 32% premium. The rise in the shares before the news -- their strongest surge since 2005 -- has prompted rumors of insider trading. Volume surged in Hilton shares buy options… Tuesday's most-active contract, August $40 calls, went up 8x to $0.85 while July $30 puts shed 67% to a nickel. Implied volatility on Hilton options -- an indicator of trader expectations of big moves in the underlying stock -- surged to 40.87%, their highest since October 2005."

• Is the End Near for The Mills? (Commercial Property News, July 3rd): "Mills Corp., the troubled…retail REIT recently acquired by a Simon Property Group (SPG) and Farallon Capital Management L.L.C. joint venture for approximately $1.6 billion, will soon be no more. The company… will file a certificate of dissolution with the State of Delaware for plans to dissolve and liquidate as of August 1… Mills had… struggled to recover from… heavy debts [mostly from] accounting errors dating back to 2002. Featuring locations in coveted major metropolitan markets, the Mills portfolio consists of 20 regional malls and 15 Mills properties accounting for an aggregate 45 million sf… now managed by SPG."

• Shareholder Millennium Partners to Sunrise Senior Living: Sell, Restructure or Change Leadership (CNN Money, July 3rd): "Millennium Partners, L.P., a hedge fund and minority shareholder in Sunrise Senior Living (SRZ) Inc., today called for the company to be sold, restructured or for changes in management… Millennium owns 1.3 million, or 2.5%, of Sunrise's shares of common stock. [In May] Sunrise said the SEC [was formally investigating] insider stock sales, stock option grants and accounting practices. On May 29, another shareholder, the SEIU Master Trust, had called on the board to remove its outside directors and "replace them with truly independent directors who have the abilities and experiences necessary to rectify the company's leadership problems."

• Record Price For Commercial Real Estate (CNN Money, July 2nd): "IDGNYC Inc, a tenant broker for commercial real estate: Office rents have soared in Manhattan over the past few years, especially for the most coveted office space. The average gross rent for Class A building in the most expensive business area has reached nearly $75/sf. That's up about 40% in just three years. As in the NY residential real estate market, the strongest segment seems to be the high end. Just a few weeks ago 660 Madison Ave, three blocks from 450, was sold for $1,476/sf. Another building a few blocks south on Park Ave drew a bid for $1,200/sf."

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Comments

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2007 Oct 14 04:26 PM

[Albuquerque...:]

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2007 Oct 14 04:26 PM