Housing Bubble and Real Estate Market Tracker

by: Judy Weil

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"

“One hundred and seven less homes sold this March through May than last. If you think about the hundreds of thousands of homes in Rhode Island" – 671,240 dwelling units, according to the U.S. Census Bureau – "that puts the decrease in sales in context." - Cecile Cohen, president of the Rhode Island Association of Realtors. (Providence Business News, July 6th)

Real Estate Sales and House Prices

  • Big Island Home Prices Dip (Honolulu Star Bulletin, July 7th): "The number of [existing] single-family homes sold on the Big Island was down 18.83% for the first half, with the June figure falling by 22.6%. The number of Big Island condominiums' sold was down 37.79% for the first six months of 2007 and down 44.44% in June… Single-family Big Island home buyers paid $363,000 [on average], down 20.21% from June, 2006. The median price for a Big Island condominium in June ($405,000) represented a 9% drop from June 2006… On Kauai, the June median price paid for a single-family home and a condominium rose by 6.72% and 33.45% respectively."
  • R.I. Home Prices Decline 1.4% As Unsold Inventory Soars 38% (Providence Business News, July 6th): "Rhode Island Association of Realtors: The state’s inventory of unsold single-family homes increased sharply, rising 38% to 6,735 in the last week of June from 4,865 at the same time last year… The average time on the market increased 12.3% for houses sold in March through May – to 91 days, from 81 in the year-ago period – as their median price fell only 1.4% to $275,000."
  • What Does 'Median Home Price' Really Mean? (Tim Iacono in Seeking Alpha, July 5th): "LA Times: The problem with the median price, is that the relative strength of the upper end of the market versus the lower end of the market has pushed the median price higher than it would otherwise be… Fewer sales of cheaper homes moves the median higher, all else being equal. The chart belowSouthern California Home Sales in May… demonstrates the recent change in sales volume by price range in dramatic fashion for all of Southern California… [Also,] the cost of the massive wave of home improvements over the last few years is not factored in… either."
  • Investors Bank On Manhattan Rentals (The Real Deal, July 5th): "Investors are paying sky-high sums for large Manhattan rental buildings, and many of them plan to maintain the properties as rentals rather than converting them to condos. Recent deals include BlackRock Realty Advisors and Patrick Freyberg purchasing 530 Park Avenue for $212.5 million and Stonehenge Partners buying a 90,000-sf rental at 330 East 63rd Street… Ofer Yardeni, a co-founder of Stonehenge: "Holding onto a 'trophy' rental building and riding out the future growth in the rental market will allow owners to benefit from capital gains tax versus ordinary income tax that these owners would incur in a conversion."

Mortgates and Real Estate Lending

  • New Loan Eliminates 'Junk Fees' but May Not Save You Money (Washington Post, July 7th): "Bank of America's (NYSE:BAC) new "no-fee mortgage plus" program for home buyers… collapses all lender fees into one combination of interest rate and points… BAC is… the largest lender to eliminate "junk fees…" BAC [also] absorbs mortgage insurance charges on loans with less than 20% down payments. ABN Amro passes th[at] cost [on] to the borrower, as do all other lenders… [However,] BAC's inclusion of all lender and third-party fees in a single price does not necessarily mean that its price is lower than those of its competitors. It all depends on the market niche in which the borrower falls."
  • New CEO Says UBS Strategy Unchanged (Chron.com, July 6th): "Analysts, surprised by UBS (NYSE:UBS) CEO Peter Wuffli's sudden departure, voiced new concerns over expected losses from failed in-house hedge fund Dillon Read Capital Management, which is being shut down. Losses at the fund had contributed to the 6.5% decrease in the bank's Q1 net profits… Credit Suisse has seen its shares rise 3.5% since the beginning of the year, compared with just under 1% for UBS. Kinner Lakhani, ABN Amro analyst: "It remains to be seen whether all of the subprime hit was kitchen-sinked last quarter, or if there is more marked-to-market in Q2."
  • Rates Fall For 30-, 15-Year Mortgages (Forbes, July 6th): "Mortgage company Freddie Mac (FRE): Interest rates on 30-year, fixed-rate mortgages averaged 6.63% this week, down from 6.67% last week. Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 6.30% from 6.34%. Five-year adjustable-rate mortgages averaged 6.29%, down from 6.30%. One-year adjustable-rate mortgages rose to 5.71% from 5.65% last week. The rates do not include add-on fees known as points. All mortgage types carried a nationwide average fee of 0.4 of a point last week."
  • Mortgage Applications Rise (Forbes, July 5th): "Mortgage Bankers Association: MBAs weekly mortgage index, which measures the volume of applications for loans to buy or refinance homes [weekly], rose 0.1% on a seasonally adjusted basis. An increase in new home loans outweighed a decrease in applications for refinancing mortgages. The mortgage index, which measures the volume of applications for loans to buy or refinance homes, rose to 619.4 for the week ending June 29. The index was up 9.7% compared with same week a year earlier. The MBA's mortgage application index… does not include loans originated by nonbank lenders."

Subprime Fallout and Foreclosure Impact

  • Orange County Executive Summary (Orange County Business Journal, July 9th): "New Century Financial Corp. (PINK:NEWC.PK), the collapsed subprime lender that is liquidating in bankruptcy, said the SEC has elevated its look into the company to a formal investigation. A formal probe gives the SEC subpoena power. NEWC has shut down its lending business, is selling other assets and has replaced most of its top executives, including former CEO Brad Morrice. NEWC said it closed the sale of its mortgage servicing unit, which handles collections, to hedge fund Carrington Capital Management LLC… for $177.4 million, below the $184m it originally expected."
  • Increasing Rate of Foreclosures Upsets Atlanta (NY Times, July 9th): "Atlanta homeowners are falling behind on mortgage payments and losing their homes at one of the highest rates in the nation… A big reason… is a Georgia law that permits lenders to foreclose on properties more quickly than in other states… [Leading also to] sharp declines in property values… While the surge in foreclosures in other big cities like Cleveland, New Orleans and Detroit can be attributed to local economic challenges, Atlanta's… unemployment rate, 4.9% in May, is low and close to the national average of 4.5%. And businesses here are adding jobs, albeit at a slower pace than last year."
  • Subprime Securities: The Next $100 Billion Crisis – Barron's (Seeking Alpha, July 8th): "Interest rates on $800 billion in subprime loans will reset in 2007-2009, further endangering residential mortgage-backed securities. Originally constructed with premium AAA mortgage bonds on top, 'mezzanine' collateralized debt obligations in the middle, and high-risk, high-interest BBB and BBB- bonds on bottom, debt-rating agencies like Moody's and S&P then sugar-coated mezzanine CDOs by rating 80% of them AAA, assuming geographical loan diversification and varying 'slices' of debt values would protect the structure. Torrential-growth CDO² (BBB-only securities), twice removed from the loan collateral, are teetering -- just 5% in loan losses could render them worthless. Moody's forecasts 2006 subprime mortgage losses of between 6%-8%; some foresee 10%.... Investors will likely pursue debt-rating agencies for misleading ratings. Barron's says subprime losses could surpass $100b."
  • Foreclosures On the Rise (News-Record, July 8th) Greensboro, North Carolina: "The number of people in Guilford County who face foreclosure on their homes is at… three times the 1998 rate. But as the Triad economy has improved and more lenders are requiring counseling before approving a loan, the double-digit rates of increase have mellowed in the past three years. About 7% more people fell into foreclosure in 2006 than in 2005, but that is far less than the 47% increase in foreclosures between 2001-2002… Part of the recent decrease in foreclosures may be due to a pilot home protection program that has awarded $215,000 in mortgage assistance since 2005."
  • Regulators Speak Out On Sub-Prime Mortgages (LA Times, July 8th): "Federal financial regulators: Banks, credit unions and their mortgage subsidiaries [must] verify income, assets and employment on all loans except in special cases where borrowers could demonstrate substantial financial reserves... Effective immediately nationwide, lenders [must] underwrite adjustable-rate sub-prime mortgage applicants at the "fully indexed" interest rate, not at a deeply discounted teaser rate… The new guidelines… do not ban… once-popular lender practices... Lenders [must now] give borrowers… at least 60 days — before the rate reset date to refinance into more favorable loans without penalty… [and] only approve sub-prime adjustable loans "based on the borrower's ability to repay the loan according to its terms.".
  • Foreclosures Prompt Ramsey County Sheriff To Seek 2 New Deputies (West Central Tribune, July 7th): "The Ramsey County sheriff's office is so busy with home foreclosures that it is asking county commissioners for approval to hire two more full-time deputies. The salaries of the additional deputies would be covered in part by the extra money the sheriff's civil division estimates it will get from foreclosure fees. The sheriff's department charges $250 for each foreclosure it processes. The sheriff's office says the rapid growth in home foreclosures is taking away from other duties such as serving restraining orders and handling court-ordered child pickups."
  • Mass. Foreclosure Filings Rise Year Over Year (Boston Business Journal, July 7th): "ForeclosuresMass.com: The number foreclosure filings in Massachusetts increased by 32 % from May 2006-May 2007… 2,136 foreclosures were initiated last month, and the jump from April to May was the biggest month-to-month increase so far this year. The numbers don't reflect how many of those filings resulted in actual foreclosures… During the preceding 12 months, the number of filings grew by 74%, compared to the same period a year earlier."
  • Foreclosures Soar, Casting A Pall Over Real Estate (OC Register, July 6th): "FDIC: The value of U.S. homes held by commercial banks swelled 53% nationwide to $2.3 billion at the end of March, the highest since 1992, from $1.5b a year earlier. Bear Stearns (NYSE:BSC) [bought] at least 53 homes so far this year in San Diego County, 48 in Maricopa County, Ariz., and 40 in Cuyahoga County, Ohio, according to… property records. JPMorgan (NYSE:JPM) acquired at least 194 homes this year through foreclosure in Wayne County, Mich. Merrill Lynch (MER)… took possession of at least 87 homes this year in San Diego County. Citigroup (NYSE:C) [owns] at least 47 homes in Clark County, Nev. Countrywide Financial Corp., (CFC)… said it had $110.1 million of foreclosed real estate at the end of March, quadruple the $27.4m it held [in January]… Countrywide has acquired at least 21 homes in Decatur since November."
  • Troubled Borrowers Finding A Way Out (Arizona Republic, July 6th): "A growing number of homeowners behind on their mortgage and facing foreclosure… are turning to "short sales," [where] the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it. So a homeowner would sell the house to a buyer willing to pay the current market value of the home, and the lender takes a loss on the rest. Short sales are the latest trend for metro Phoenix's slowing real estate market... Homeowners… don't get a nasty foreclosure mark on their credit record. And lenders… avoid a costly foreclosure on the home."
  • The Consequences of Reckless Lending (by Mike Larson) (Money and Markets, July 6th): "American Bankers Association: In Q1'07, delinquencies on home equity loans were the highest since Q3'05. And the late payment rate on revolving home equity lines of credit is the highest since Q2'03… The Mortgage Bankers Association: 0.58% of ALL mortgages entered foreclosure in Q1'07… the highest level in U.S. history! The subprime delinquency rate jumped to 13.77% from 11.5% a year earlier, the worst [since 2002]— despite the fact the unemployment rate is much lower now (4.5% vs. 5.7%)… A whopping 14.51% of [certain] subprime mortgages made in Q3-Q4'06 are already either [delinquent], in foreclosure, or…the underlying property has been seized."
  • Florida Foreclosure Future Shock (CNN Money, July 6th): "Duane LeGate, president of House Buyer Network, arranges quick sales for home owners in distress… In… Orange County, Florida, home of Disney World… there's been a 700% increase in traffic of people filling out our forms. I could write the headline for what will be going on in Orlando in January-February:" Large increase[s] in foreclosures as well as lower prices, longer inventories and a slower sales pace… National Association of Realtors: Q1 Orlando prices rose 2.5% compared with a year ago, [denoting] a weak - but more stable - market. Nevertheless, LeGate [says] much of Central Florida is foundering."
  • How Subprime Home Loans Become Risky Investments (VOA News, July 6th): "Government [backed] Ginnie Mae, and Fannie Mae (FNM) and Freddie Mac (FRE) produce most mortgage-backed securities. But investment banks have increased their share, Last year, Lehman Brothers (LEH) processed more than $50 billion in [subprime-backed] securities."
  • Block Loses $1.5B In Lehman Financing (Kansas City Business Journal, July 5th): "SEC filing: Lehman Brothers (LEH) didn't renew an expired $1.5 billion warehouse financing facility for H&R Block Inc.'s (NYSE:HRB) Option One Mortgage Corp. subsidiary… Block says [it] had $9.25 billion in committed warehouse funds before the LEH financing expired. Bank of America increased Block's facility by $250 million, to $2.25b. This leaves Block with $8b in committed warehouse funds and $2b in uncommitted funds… Block agreed in April to sell Option One to… Cerberus Capital Management... [provided it has] at least $8b in financing… HRB estimates it needs $3b-$4b in financing for day-to-day operations of Option One "in view of our current mortgage origination levels."

Global Impact and Alternatives To The Housing Slump

  • New Zealand House-Price Inflation Accelerated to 12.2% in June (Bloomberg, July 9th): "New Zealand house prices rose at the fastest pace in 13 months in June, suggesting the central bank will keep interest rates at a record high this year. House prices surged 12.2% from a year earlier, according to [a]Wellington report by Quotable Value New Zealand Ltd., the government valuation agency. That's the largest increase since a 12.4% gain in May 2006… Central bank Governor Alan Bollard raised the official cash rate last month to a record 8%, saying a housing boom and rising employment were stoking domestic demand."
  • Barclays Plans To Exit Subprime Lending: Report (MarketWatch, July 8th): "Barclays Bank [PLC] is planning to reduce its exposure to consumers with lower credit ratings further still as rising interest rates put the squeeze on the debt-laden Britons, The Sunday Telegraph reports. A number of businesses selling so-called sub-prime loans and credit cards to consumers have been placed under review by the bank, the paper says. It also plans to exit all its sub-prime lending activities, it adds."
  • Merrill Lynch Lodges 760 Eur/Unit Counterbid For Berenice Real Estate Fund (CNN Money, July 6th): "Galante, a fund owned by Merrill Lynch (MER) , said it has lodged a €760/unit counterbid for real estate fund Berenice. The bid beats a €725/unit for each of the 570,000 Berenice units already made by Goldman Sachs-owned (NYSE:GS) Zwinger Opco, which expires July 20. Zwinger had itself outbid an initial €685 offer by Gamma RE, a joint venture between Pirelli Real Estate SpA and Morgan Stanley. (NYSE:MS)."
  • U.K. Cracks Down On Subprime Lenders (Forbes, July 5th): "With rising defaults playing havoc in the U.S. subprime market… regulators in Europe are concerned that… troubles in the sector could drift across the Atlantic, not just to funds or banks involved in the U.S. sector. Britain’s Financial Services… published a review of 11 lending firms, representing more than half the domestic subprime market by sales, and found that “none of the lenders adequately covered all relevant responsible lending consideration in their policies.” In some cases, the companies’ practices went against their own guidelines. By failing to monitor their practices, the companies approved “potentially unaffordable mortgages."
  • Groupe Casino, Whitehall to Build Polish Shopping Malls in $680M JV (Commercial Propterty News, July 5th): "Casino Guichard-Perrachon, S.A., France's largest supermarket owner, has teamed up with Whitehall real estate investment funds in a $680 million joint venture…Whitehall, a division of Goldman Sachs (GS), [will] finance 75% of the JV’s development costs of several shopping centers in Eastern Europe... Whitehall will invest a minimum of $680 million in the joint venture over the next five years. Groupe Casino’s contribution is the transfer of the three shopping centers to the partnership… The Whitehall deal comes nearly a year after Groupe Casino sold 16 Casino hypermarkets in Poland to GE Real Estate Central Europe for $687 million."

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

  • Bear Market Tightens Grip on Treasuries as Jobs Gain (Bloomberg, July 9th): "Economists at Lehman Brothers Holdings (LEH), Morgan Stanley (MS) and RBS Greenwich Capital: The bear market in U.S. Treasuries is [starting] as investors turn their attention to the strengthening labor market and faster inflation instead of the decline in home prices. They estimate 10-year government notes will return 1.28% this year, not even enough to cover inflation. The worst performance… since 1999, when they lost 8.25%. The combination of a U.S. jobless rate near a six-year low and inflation at the upper end of the Federal Reserve's comfort zone will keep the Fed from cutting interest rates to halt home price declines."
  • U.S. Rebound May Be Bumpier Than Fed Expects as Credit Tightens (Bloomberg, July 9th): "What started as a financing squeeze in the subprime- mortgage market now threatens other parts of the economy. Borrowing costs for companies are climbing as banks and investors demand more for their money. Consumers feel the pinch from rising interest rates and sagging house prices. As a result, the economy may struggle to achieve the 2-1/2-3% growth rate that most forecast… for the second half of 2007… Economists at International Strategy & Investment Group, UBS AG and Commerzbank AG see growth below 2% as consumer spending slows and business investment [struggles] under… tougher financing conditions."
  • No Housing Bottom in Sight - Barron's (Seeking Alpha, July 8th): "Homebuilder overhang should prolong the housing downturn. From Q4'05-Q1'07, new home inventory levels rose to 7.9 months from 4.7 months. Nominal mortgage rates aren't historically high, but the Office of Federal Housing Enterprise says a 2005 mortgage cost 5.9%, when house prices rose 10.7%. House prices rose only 3% this year, so real mortgage rates are at 3.5%, a big change from -4.8%. Barron's: If home prices are static, then sales could fall another 20%-25%… Rising mortgage applications offer only illusory hope: Subprime borrowers apply everywhere for approval, and cancellations are up… If the downtrend continues, housing-related industries like construction, furniture and appliances will suffer."

Homebuilders And Housing Stocks

  • Illinois Tool Works: This Company Deserves a 10% Premium, Not Discount - Barron's (Eli Hoffmann in Seeking Alpha, July 8th): "Illinois Tool Works (NYSE:ITW), which makes a "dizzying array of products for the automotive, construction and food and beverage industries," has received accolades from industry insiders and analysts… At 15x 2008 earnings, it trades at a 10% discount to similar companies… CEO David Speer… identifies and improves very small companies (last year he bought 53). ITW's corporate structure is "ultra-lean"; managers are adept… Investors need not worry about U.S. housing and auto slowdowns -- the markets account for just 13% of its revenues... Barron's says "the company's shares [could reach] 67-68 in the next year, a 23% gain."
  • Home Depot: A Great Value for Dividend Investors (Tyler McKinna in Seeking Alpha, July 8th): "Home Depot's (NYSE:HD) plan to… pay for [$22.5 billion in] stock buybacks with debt is dangerous, but HD's… dividends [have] tripled over just the past three years! With a dividend yield of 2.26%... higher than the industry average, and a paltry 28.25 dividend payout ratio, HD makes a great… dividend growth stock… S&P cut HD’s corporate credit rating by three notches to “BBB-plus,” the third-lowest investment grade, from “A-plus.” The outlook is listed as stable, [so] another downgrade is not expected over the next two years. HD shares rose 1.6% on this news… indicating that investors… expect to benefit from the increased dividends and stock buybacks."
  • More Beazer Buyers Sue Over Loan Terms (Myrtle Beach Online, July 7th): "Another lawsuit filed Tuesday against Beazer Homes (NYSE:BZH) by 10 homebuyers in northern Charlotte's Oak Hill development says a Beazer sales agent, Roderick D. Williams, falsified documents to help buyers get loans for Beazer homes… The lawsuit asserts that corporate management must have participated or condoned them… Buyers [have] suffered a variety of problems. One lost her home in foreclosure, and one filed for bankruptcy. Most buyers have taken on other debts to keep up with escalating mortgage payments they say weren't clearly disclosed… Property values [have declined] as Beazer's practices led to rampant foreclosures in Oak Hill."
  • Tupperware Freshens Up the Party (NY Times, July 7th): "[By] updating its image… shares of Tupperware (NYSE:TUP), the direct marketing company, are trading at their highest point in a decade… Tupperware is seeing its strongest growth… in 15 years. Every 2.3 seconds, there’s a party starting somewhere… They’re happening in Zululand in South Africa... The fastest-growing markets for us are Russia, Turkey, China and India… But we’ve also seen double digits this past year in the U.S. and Canada… Investors… [like our] cash flow, brand name and the fact that we now have a big footprint in the beauty business."
  • Homebuilders Merge, Call Bradenton Home (Tampa Bay Business Journal, July 6th): "Taylor Woodrow and Morrison Homes, have [created] one of the largest homebuilders in the country… The UK parent companies of Taylor Woodrow PLC and George Wimpey PLC, combined their worldwide operations to form the world's fifth largest and the United Kingdom's biggest homebuilder, Taylor Wimpey PLC… The company predominantly builds communities that range from luxury master planned properties to urban core developments [and] operates in Arizona, California, Colorado, Florida, Nevada, Texas and Canada… Taylor Woodrow builds mid-to-upscale housing and Morrison Homes builds first time and mid-market homes in the same U.S. regions."
  • KB Homes Sold Most In Region Through May (Sacramento Business Journal, July 6th): "New-home analyst Hanley Wood Market Intelligence: KB Home (NYSE:KBH) has taken the lead among homebuilders based on sales in the six-county Sacramento region through May, 2007. KBH sold 82 homes in May, putting it into the top slot with 346 net sales this year, down from 364 in May 2006. Centex Homes (CTX), which had held the No. 1 spot for several months, had a five-month total of 303, down from 368 in 2006. The May 2006 leader was D.R. Horton (NYSE:DHI), with 590 net sales; the total through May, 2007 was 182, a slide to fifth in the market."
  • Bellwetherreport.com: Fundamental Review for Beazer Homes USA (Insurance News Net, July 6th): "Beazer (BZH) builds nearly 19,000 single-family homes a year -- at an average price of about $287,000 -- for entry-level and move-up buyers. The company operates in high-growth regions in more than 20 states. Its Beazer Mortgage subsidiary originates mortgages for its homebuyers; another unit provides title insurance services… In late June, the home builder… fired its chief accounting officer "due to violations of the company's ethics policy stemming from attempts to destroy documents." The company is facing multiple lawsuits and its mortgage-origination business is under investigation. Beazer's credit spreads have also reached their widest levels in recent weeks."
  • Sales Starting on 'Manhattan-Style' Condo in Jersey City (The Real Deal, July 6th): "Sales will start next week for K. Hovanian's (NYSE:HOV) 48-story, two-tower development in Jersey City. The company is calling 77 Hudson Street, which will have 420 condo units, the city's first "Manhattan-style" building. Hovnanian officials said the development, in the city's Paulus Hook neighborhood, falls into this category primarily because of the way it is being constructed. Tom Graham, project executive for 77 Hudson, said it will be the first in Jersey City to sport a glass curtain-wall façade, and that it will have an amenities package similar to those in Manhattan condos."
  • Negative Housing Data Pile Up (MarketWatch, July 5th): "Meritage Homes (NYSE:MTH) said Friday its preliminary Q2 home orders fell 28% from a year earlier to $502 million, while its cancellations rose to 37% of gross orders, up from 32% in Q2'06 and from 27% in Q1'07. CEO Steven Hilton: "Weak demand and high inventory levels have increased competition among home builders, pressuring margins despite reductions in new home starts, lot supplies and operating costs." The company expects to book additional pre-tax charges between $75m-$80m for Q2 as a result of inventory impairments and land-option write-offs… On April 25, Meritage had predicted full-year net income in the range of $2-$2.50/share, but the market has worsened since then. Analysts polled by Thomson Financial are looking for profit of $1.15/share, on average."
  • Looking In On: Gaming (Las Vegas Sun, July, 6th): "Homebuilder D.R. Horton (DHI) bought 33 acres on Harmon Avenue near the Strip in 2004 for $87 million. The following year, it sold a 22-acre chunk of it to Edge Group for $108m, so Edge could develop the W hotel. Now… the W was canceled, and Edge has sold about 50 acres to Israeli conglomerate Africa-Israel Investments Ltd. Horton also is selling its remaining 10 acres. Price tag for all 60 acres: $625m, or $10.4m an acre. At that price, Horton could have gotten more than $343m if it had held on to all 33 acres."
  • EU Clears Sale of KB Home Division (Yahoo! Finance, July 6th): "KB Home (KBH) can sell its French homebuilding division Kaufman & Broad to private equity fund PAI Partners, European Union regulators ruled Friday… KBH, one of the largest U.S. homebuilders, said the sale of 50.01% of the unit would net it $783.2m. France-based PAI said in May it would make a public tender to buy the rest of the unit… The French unit accounted for just over a fifth of KBH's total revenue in Q1. Like other U.S. homebuilders, KBH has seen domestic sales battered by a housing downturn… KBH's French segment has remained a bright spot for the company."

Commercial Real Estate and REITs

  • Suburban Office Space Demand Grows With Supply (Reuters, July 9th): "CB Richard Ellis Group's U.S National Office Vacancy Index: U.S. suburban office space has become a favorite among developers and is attracting tenants squeezed out of downtowns by surging rents... The amount of newly completed U.S. office space climbed to about 11.5 million sf in Q2, and roughly 10 million of that was in the suburbs… Tenants quickly claimed the new space, and more, absorbing 17 million sf, with 14 million in suburban buildings. "The markets are receiving new space and still want more," said Ward Caswell, CBRE's U.S. director of research… [Office] vacancy rates in Q2 continued to fall."
  • Takeovers Boost U.S. Stock Funds (APP.COM, July 8th): "Real estate funds suffered as investment trusts that own apartments and office buildings fell from record highs. The 130-member Bloomberg REIT Index dropped 11% in the quarter and 19% since it set a record on Feb. 7. The $1.7 billion CGM Realty Fund, run by Kenneth Heebner in Boston, rose 9%, the group's highest return. The $11 million ProFunds Real Estate UltraSector, managed by ProFunds Advisors LLC, fell the most, Morningstar said. The fund, overseen by William Seale and George Foster, lost 15.5%."
  • Foreign Real-Estate Funds Boom (Wall St. Journal, July 7th): "[New] foreign real-estate funds: Charles Schwab Corp. launched a [London office property] global real-estate fund… WisdomTree Investments'… new ETF (NYSEARCA:DRW) tracks an index heavily weighted to Australia, Hong Kong and Japan. Closed-end funds for more-conservative investors… include the $2 billion Alpine Global Premier Properties Fund. Investors have poured about $6 billion into foreign real-estate funds this year… Fidelity Investments: Foreign REITs, the main holdings of these funds, rose nearly 31% a year in the three years ended April 30. U.S. REITs rose 22% in that period... Overseas REITs… make it easier to launch foreign real-estate funds, money managers say."
  • Japan Chain Offers $900M for Barney's NY (Crain's, July 5th): "Clothing retailer Jones Apparel Group Inc. said Thursday that Japan's Fast Retailing Co. has offered $900 million in cash for the company's Barneys New York Inc. unit, rivaling an earlier offer from Dubai-based investment group Istithmar... If Jones terminates its agreement with Istithmar prior to July 22 it will pay a fee of $20.6 million, or $22.7 million if the deal is ended later."
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