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"

"Have you been to Miami lately? It's like we have a new state bird: the building crane."- Florida Governor Charlie Crist at a homebuilders' conference last week in Orlando, on the phenomenon of a current building boom in Florida amidst an acute housing bust in Florida. (Bloomberg, July 20th)

Real Estate Sales and House Prices

• Real Estate Slump Affects All (Record-Courier, July 22nd): "Sierra Nevada Realtors Association: When compared to last year's figures, existing home sales have dropped 33% in Douglas County for the period ending in June. The $400,000 median sales price is down 7% and the sales-dollar volume is down 44%. Those figures don't include homes sold by owners… Douglas County's building permit total has dropped dramatically, from 574 single-family dwellings during fiscal 2005-06 to 175 for fiscal 2007, which ended June 30… There are about 88 homes for sale in the Gardnerville Ranchos for under $300,000, but two years ago realtors would be lucky to find seven homes in that range."

• In Search of the Elusive 3-Bedroom (NY Times, July 22nd) NYC: "Bill Milvaney, a Bellmarc Realty broker: “Even with $4m, $5m or $7m to spend, we’re just not finding [4BR apartments] out there.” Prudential Douglas Elliman: While the average sale price for studios and 1-2BR apartments hasn’t changed much in the last year, the average price for 3BRs went up by nearly 18%, to $4.187m. For 4BRs, the increase was… more than 36%, to $9.175m. Even though larger apartments represent the most robust part of the market, they still make up a relatively small share of it. Three-bedroom apartments accounted for only 5% of the sales in Q1; four-bedrooms represented only 1%."

• While Median Home Prices Continue To Climb In Utah, Unit Sales Are Down (Salt Lake Tribune, July 21st): "In Salt Lake County, 3,490 homes changed hands in the April-May-June time period, down 19% over Apr-June 2006. Utah County sales were down nearly 20%, followed by a 17.5% drop in Tooele County. Davis was down about 16%, followed by Weber County, down 8.2%. The median selling price for Q2 in Salt Lake County rose 15.5% to $254,000 - a solid figure, but not the more than 20% rate of last year. Nearly all Zip code areas logged increases, but only a half dozen of more than 30 areas have values that rose more than the 20% increases seen last year."

• Phila. Area Home Sales Fall (Forbes, July 20th): "Home sales in the Philadelphia area fell by 9.5% in the first half of the year… Prudential, Fox and Roach Multiple Listing Service single-family home and condominium data: The southern New Jersey suburbs showed the biggest decline, down 13%, while northern Delaware was down 11.7% and southeastern Pennsylvania fell by 7.5%... Homes in the region also stayed on the market an average of 66 days, up from 52 during the same period last year… Median prices of homes sold held up: South Jersey rose 5.8% to $218,000, Pennsylvania was up 2% to $270,000 and Delaware edged up nearly 1% to $224,000."

• Miami Condo Glut Pushes Florida's Economy to Brink of Recession (Bloomberg, July 20th): "In the middle of the biggest glut of condominiums in more than 30 years, Miami developers keep on building. Mark Zandi, chief economist at Moody's Economy.com: The oversupply will force prices down as much as 30%, the worst decline since the 1970s, and help push Florida's economy into recession as early as October… Florida Association of Realtors: Thirty-seven new high-rise condos and 20,000 new units are being built in Miami's 1,040-acre downtown, where sales fell almost 50% in May… The new units will join the 22,924 existing condos in Miami-Dade County that were for sale in April."

Real Estate Investing and Sentiment

• Dealtalk: Hedge Funds Opt To Be Lenders Of Last Resort (Reuters, July 23rd): "After Kara Homes Inc. declared bankruptcy in October, hedge fund Plainfield Specialty Holdings provided financing to help the troubled homebuilder keep operating… [Hedge] funds are increasingly dabbling in troubled assets of all stripes -- from plots of land to controlling equity stakes… Credit Suisse/Tremont Hedge Fund Index: Funds that invest in distressed debt rose 0.95% in June and are up 9.1% year-to-date… That outperformed the fund's general index which rose 0.78% in June and 8.7% YTF… Hedge Fund Research in Chicago: $7.5 billion was raised during Q1 for distressed securities funds, amounting to a record $80.3b in 238 funds."

• Central Tracking Site For Home Lenders (Seattle Times, July 23rd): "DepotPoint tracks foreclosures, tax delinquencies and bankruptcies, providing an early-warning system for mortgage lenders. It makes information audit-ready for attorneys; and gives free access to foreclosure addresses and auction status on the Web site. It gives paid subscribers more detailed property information and advice."

Mortgates and Real Estate Lending

• PMI Names Ray D. Chang as Senior Vice President and Corporate Treasurer (Yahoo! Finance, July 18th): "The PMI Group, Inc. (PMI) announced [Wednesday] the appointment of Ray D. Chang as Senior VP and Corporate Treasurer. Chang's responsibilities will include managing the corporation's consolidated capital structure and liquidity position, directing overall cash management functions, developing and coordinating capital market transactions, and overseeing the corporation's commercial banking relationships.… Donald P. Lofe, Jr., Executive VP and CFO, said, "We are committed to the ongoing enhancement of a world-class corporate finance team that will enable us to support expansion across the credit spectrum and around the globe."

• PMI Names David A. Kerns as Vice President, Corporate Capital Management and Analysis (Yahoo! Finance, July 18th): "The PMI Group, Inc. (PMI) announced [Wednesday] the appointment of David A. Kerns as VP, Corporate Capital Management and Analysis. Kerns' responsibilities will include managing the corporation's long-term corporate rating agency and regulatory capital strategy, planning, and related structures, including leading the annual capital plan strategy development process, and monitoring capital needs and usage for maximum financial efficiency. He will also serve as the corporation's main liaison with the rating agencies."

Subprime Fallout and Foreclosure Impact

• Bear Stearns Shares Show Cayne's Dummy `Body Blow' Won't Hurt (Bloomberg, July 23rd): "While shares of Bear Stearns (BSC) dropped 3.8% since [its hedge funds failed], Lehman's (LEH) stock tumbled 8.4%, Goldman Sachs Group (GS) shares fell 5% and Merrill Lynch's (MER) stock declined 4.2%... Bear, the biggest U.S. broker to hedge funds, doesn't expect to lose even a dime on the bailout... Most analysts [expect] a negligible impact on profit and book value… CEO Cayne's decision to provide the loan to the $925 million High-Grade Structured Credit Strategies Fund may have helped burnish the firm's reputation and minimized the collateral damage… Bear had no obligation to lend the [funds] money… [Though] Bear [has] $34m of its own capital [invested] in the funds and has $43m of unsecured loans outstanding."

• Subprime Takes Toll On High-Grade Corporate Bonds (Reuters, July 23rd): "Merrill Lynch: The perceived risk of owning investment-grade corporate bonds rose on Friday by the most since February as worries about the subprime mortgage market took a toll on investors' appetite for risk. Spreads, the extra yield that investors demand for the risk of holding investment-grade corporate bonds, widened by 3 basis points on average on Friday to 108 basis points. That was the biggest move since February 27, when Chinese stocks sold off sharply, hurting risk appetite worldwide and causing high-grade corporate spreads to widen by 3 basis points."

• CEOs See 'No Clear Signs' of Crisis as Woes Intensify (Bloomberg, July 23rd): "Borrowing costs for non-investment grade companies [have risen] to the highest in nine months. ServiceMaster Co., US Foodservice and 19 other companies have canceled bond sales because nobody wants to buy them. JPMorgan Chase & Co. CEO Jamie Dimon [noted] waning demand for loans used in leveraged buyouts [on July 18]. Two days later, an index that measures the default risk of the loans weakened to a record… As losses spread beyond subprime mortgage securities to corporate financings, Federal Reserve Chairman Ben S. Bernanke said [Thursday] he's watching for signs that falling housing prices have spilled over to the rest of the economy."

HSBC Set To Report 39pc Profit Jump

(Hong Kong Standard, July 23rd): "Despite investor despair over the meltdown in the US subprime mortgage market, analysts expect HSBC to report net profit in the first half grew 39% q/q to US$9.79 billion… Credit Suisse's Bill Stacey: US consumer finance business [is] to record impairment charges of 65% above that seen in the first half of last year. [Among] the key parameters to watch are… "The extension of problems outside second-lien and correspondent-initiated mortgages. We look for delinquencies on the total portfolio to rise 43 basis points [to 4.16%] in 2007, with a higher increase in Q2 than the five basis point deterioration in Q1."

• JP Morgan Sees Rate Reset, Refi Problems Looming (Reuters, July 20th): "J.P. Morgan Chase & Co. (JPM): Many U.S. homeowners will have more problems as troubled loans reset at higher rates and it becomes more difficult to refinance over the next 18 months. Chris Flanagan, J.P. Morgan's global head of asset-backed securities and collateralized debt obligation research, [on] a conference call with clients on Friday... forecast more rating downgrades of ABS and ABS CDOs over the next 6-12 months. S&P's on Thursday cut ratings on portions of 75 ABS CDOs that affected almost $2 billion of debt, which make up less than 1% of about $250b of synthetic CDOs rated by S&P. The cuts on Thursday also included 10 CDO tranches that were cut to junk from investment-grade status."

• The Striking Price (Barron's, July 23rd): "Market operators are rush[ing] to the options market to buy defensive put contracts on financial stocks ranging from the mortgage companies that made the loans to the investment banks that securitized [subprime] mortgages… Michael Schwartz, Oppenheimer & Co.'s chief options strategist: [In] Select Sector Financial SPDR (XLF), investors could buy the December 36 put at $1.75, and sell the December 35 for $1.25, for a debit of $0.50. If XLF drops to 35, investors make $0.50 and realize a 100% return. In Bear Stearns (BSC), Schwartz recommends buying the October 135 put and selling the October 130 put for a $2 debit. If the stock falls to 130, the return is $3, or 150% on the investment."

• Brief Foreclosure History & Mortgage Delinquency Maps (Barry Ritholtz in Seeking Alpha, July 19th): "An inordinate number of recent home buyers have been defaulting on their mortgages. The why of this is rather simple: These are the folks who historically have not been home owners due to their debt obligations, low income, and/or poor credit. In the past, they were known as renters."

• Alliance Bancorp Files for Liquidation: Alt-A Companies Suffer in Sympathy
  (Michael Shedlock in Seeking Alpha, July 19th): "Given the blowup and bankruptcy of Alliance Bancorp, inquiring minds might be wondering how other Alt-A companies doing. Let's take a look at five Alt-A originators and one company (Luminent Mortgage Capital Inc.) that does not originate Alt-A mortgages but does buy them on the secondary market… Look to hear a lot more on the Alt-A word. Judging from the charts above, none of it will be any good."

Global Impact and Alternatives To The Housing Slump

• Subprime Anxiety And Earnings Worries Could Cool Midsummer Stock Markets (CBC News, July 23rd) Canada: "Definitely there's been a push and pull from concerns over the U.S. housing morass…" said Doug Porter, deputy chief economist at BMO Nesbitt Burns."The earnings reality has come back to bite us a bit . . . and at least some of that weakness can be tied to the deepening decline in the U.S. housing sector. There are obviously places in the economy and therefore U.S. profits where we are seeing weakness in the economy coming back to bite the market."

• U.K. House Prices Increase at Slowest Pace This Year (Bloomberg, July 23rd): "In London, the average price of a home climbed 21.7% from a year earlier to £394,730 this month. Values in the City of Westminster borough increased 5.7% from June and 52% in the year. In Kensington and Chelsea, where average prices of £1.46 million make it the city's most expensive district, values rose 71% since July 2006… Luxury home prices in London rose at the fastest monthly rate in at least 31 years in June. The average price of houses and apartments selling for at least £2.5 million gained 3.1% in June. Prices advanced almost 35% from June 2006, the biggest annual gain since mid-1979."

• CIBC May Have C$100 Million Writedown on Mortgages (Bloomberg, July 23rd): "RBC Capital Markets analyst Andre-Philippe Hardy: Canadian Imperial Bank of Commerce, the country's fifth-largest lender, may reduce the value of its investments tied to the U.S. housing market by as much as C$100 million ($95.8 million) in Q3. A writedown of C$50m-C$100m at CIBC may cut profit 5% for the period ending July 31. Hardy, who rates the shares "outperform": Cut his per-share estimate to C$1.88 from C$1.98. "The continued weakness in securities related to U.S. subprime housing will likely force CIBC to mark down its exposures. A markdown would almost certainly be partially offset by lower income taxes and incentive compensation.''

• Australian Home Building Slows, Lags Behind Demand, BIS Says (Bloomberg, July 23rd): "Australia's construction industry is slowing as land shortages and rising costs deter home builders, according to BIS Shrapnel Pty, a Sydney-based forecaster. Housing starts will fall 1% to 148,000 in the year ending June 30, 2008… Housing starts probably will lag behind demand for a fourth consecutive year, BIS said. Housing affordability dropped to a record in Q1 as land prices, interest rates, labor and material costs rose, prompting more Australians to rent rather than buy."

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

• U.S. Home Builder Woes Reach Into Other Industries (Yahoo! Finance, July 20th): "On Thursday, U.S. Federal Reserve Chairman Ben Bernanke said subprime mortgage losses could reach $100 billion and threaten consumer spending, which so far has remained generally untouched by the housing recession… Other companies are feeling the deteriorating demand for new homes. On Friday, construction equipment maker Caterpillar Inc (CAT) said the U.S. housing market hurt Q2 sales. Gregory Hayes, VP of accounting and control at United Technologies Corp (UTX), said [last week] the sagging U.S. housing market likely would continue into the latter part of 2008. The company makes Carrier air conditioners."

Homebuilders And Housing Stocks

• Editors Note: Several homebuilders will be reporting earnings this week: Centex Corp. (CTX) on Tuesday, July 24th; Ryland Group (RYL), M.D.C. Holdings (MDC) and Pulte Homes (PHM) on Wednesday, July 25th; Meritage Homes (MTH), D.R. Horton (DHI), Standard Pacific Corp. (SPF) and Beazer Homes (BZH) on Thursday, July 26th. June's existing home sales and new home sales will be reported on Wednesday (July 25th) and Thursday (July 26th) respectively. (MarketWatch, July 19th)

• Caterpillar Is Still a Butterfly (Motley Fool, July 23rd): "Caterpillar's (CAT) results released Friday [show] that housing's influenza is resulting in chills and fever in other areas… We'll have to await other indications of a spread of housing's contagion to the equipment manufacturing sector. Deere (DE), which operates on an October year and also serves the housing sector, will next report its earnings in mid-August… Housing's slump continues with no real end in sight. NVR (NVR), a major Virginia-based homebuilder, checked in on Friday with a 52% drop in quarterly profits. That report followed similar negative announcements by such other big builders as Pulte (PHM) and D.R. Horton (DHI)."

• Stock Surge Bypasses SW Florida (News Press, July 22nd): "[After] luxury builder WCI Communities' (WCI) [turned down] Carl Icahn's offer to buy… the company's shares for $22/share in January… Icahn's [subsequent] proxy fight to oust WCI's board, coupled with a stagnant Florida real estate market [has] pushed down the stock more than 13%. In May, WCI reported a quarterly net loss of $15.8 million, or $0.38/share, net income of $40.2m, or $0.89/share, a year ago. Shares have fallen even further in July as shareholders await… any news about a buyer… Jack McCabe, a real estate analyst from Deerfield Beach: "I wouldn't be surprised to see a deal cut before the Aug. 30 [shareholders] meeting."

• No Lid Found Yet On Tupperware Growth (Chicago Tribune, July 22nd): "Russia, China and India [are] among its fastest-growing markets. [It has a] global sales force of 1.9 million independent representatives… Tupperware Brands (TUP) also bought a beauty products division from Sara Lee in 2005, broadening its product line. … Tupperware is admired for its strong cash flow and sales momentum in emerging markets. As a result, its shares are up 47% over the past 12 months. The company plans to repurchase up to $150 million of its shares over the next five years. Thomson Financial: On Wall Street, Tupperware rates three "strong buy" recommendations and two "holds."

• Gabelli Multimedia's Larry Haverty Picks Five 'Elephant in the Room Stocks' (Eli Hoffmann in Seeking Alpha, July 22nd): "Best Buy Co. (BBY) -- its main competitor, Circuit City Stores Inc. (CC), is under tremendous pressure… The stock ($46) is going to $60. Bed Bath & Beyond (BBBY) -- "one of the best-managed retailers I have ever seen." Rival Linens & Things seems to be struggling. Shares have lagged despite stellar performance due to a lack of shareholder-centric initiatives... Shares ($37) will hit $45-50 within the year. Kohl's (KSS) -- it is a high-tech, low-expense true growth company whose gross margins outdo its competition. Kohl's is picking up customers from lagging sales at Sears Holdings (SHLD) and Macy's (M)."

• Jim Cramer's Mad Money Lightning Round Picks, 7/19/07 (Miriam Metzinger in Seeking Alpha, July 20th): "Bearish calls: Toll Brothers (TOL): 'The stock cannot be owned.' Lennar (LEN) K.B. Home (KBH)."

• Caterpillar Net Falls on Aluminum Costs, Engine Sales (Bloomberg, July 20th): "Caterpillar Inc., (CAT) the world's biggest maker of heavy-duty diesel engines and earth-moving equipment, said Q2 profit dropped 21% on rising costs and falling U.S. sales of truck motors and construction machinery... Net income decreased to $823 million, or $1.24/share, from $1.05b, or $1.52, a year earlier, missing analysts' estimates… [Full-year] revenue in North America is predicted to fall 12%, while international is forecast to climb 24%. Analysts, on average, estimate $5.57/share in profit and sales of $42.1b for the year. The company lowered its full-year forecast for U.S. housing starts to 1.4 million from 1.5 million."

• Market Remains Cautious Following American Standard's Miss (William Trent in Seeking Alpha, July 19th): "American Standard (ASD) updated its full-year guidance: "As one company, we would expect full-year GAAP net income of $3.21-$3.31/share (including $85-$88 million for separation costs, net of tax, and separation-related tax costs) and net income of $3.30-$3.40/share on an adjusted basis (an increase of 24-27% over adjusted 2006 net income per diluted share)." This compares with a consensus estimate of $3.37, and considering the $0.03 miss in Q2, the midpoint for the rest of the year is actually slightly higher than the previous consensus estimate. I think the market is taking a more cautious approach to the remainder of the year in light of Wednesday’s surprise."

• HNI Corporation Announces Results for Second Quarter Fiscal 2007 (Digital 50, July 19th): "HNI Corporation (HNI) today announced Q2 sales of $618.2 million and income from continuing operations of $26.4m for the quarter ending June 30, 2007. Net income per diluted share from continuing operations for the quarter was $0.56. CEO Stan Askren: "Consolidated sales and income for Q2 decreased from the same period last year due mainly to the dramatic decline in the hearth business. However, the office furniture business achieved a 16.2% increase in operating profit despite being challenged by the continued softness in the supplies driven channel."

Commercial Real Estate and REITs

• Commercial Real Estate A Good Investment (Delaware Online, July 23rd): "Peter Linneman, real estate professor at Wharton: If real estate is so attractive, why are so many publicly traded firms going private? A public-to-private move has often been a last resort for a company in trouble. Jay H. Mantz, managing director of Morgan Stanley's Direct Investing Group: "Private markets currently give many real estate holdings higher values than public markets do. Public markets tend to rely on appraised values which, because they are based on prices of previous sales, generally take some time to catch up to market changes. Since real estate prices have been rising, appraisals tend to value properties too cheaply."

• In Hotel Companies, Amenities for Investors (NY Times, July 22nd): "SNL Financial: So far this year there have been 10 announced REIT acquisitions, half involving hotel REITs. … Analysts say that the premium prices have… drive[n] up shares of other hotel companies — especially REITs that specialize in lodging — in anticipation of more takeovers. National Association of REITs: Lodging and resort REITs are among the top-performing REITs this year, returning an average of 6.58%, versus a 3.95% decline for REITs in all equity sectors… Lodging is the only commercial real estate sector that operates without long-term leases… dividends are typically higher, now averaging 4.5%... versus 4.1% for all other equity REITs."

• The Problem With REITs? They're Pricey (USA Today, July 21st): "Many of this year's top-performing real estate funds are boosting their returns by investing internationally or by investing in companies that are only tangentially related to real estate. Alpine International Real Estate (EGLRX), [has] benefited from a falling dollar, which boosts overseas gains for U.S. investors. Many foreign real estate markets are just starting their cycle, says Sam Lieber, manager of the Alpine fund. "If we're in the fifth inning of the business cycle, many markets abroad are in their second or third inning." You might also consider a closed-end real estate fund, which enables you to buy real estate securities cheaply. Morningstar: Cohen & Steers Dividend Majors (DVM), for example, has a 5.1% dividend yield."

• Denver REIT Buys Two Buildings In Silicon Valley (Denver Business Journal, July 20th): "Dividend Capital Total Realty Trust Inc. is buying a two-building office property in Silicon Valley for nearly $14 million.The Denver-based, privately held REIT is partnering with Westcore Properties LLC of San Diego in the deal. The two companies recently closed on a joint venture agreement… The Colorado real estate investor likes the Silicon Valley office market because of its low tenant vacancy rate and strong lease rates.

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