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"

"I've been doing this 20 years… I've never seen anything change this fast." – Dolly Lenz, vice chairman of high end NYC-based real estate brokerage Prudential Douglas Elliman, on the feeling that the New York City market-- which has stayed hot throughout the housing slump—is starting to falter. (NY Sun, Aug. 13th)

Real Estate Sales and House Prices

• Price Trumps Location In Current Housing Market (Newsday, Aug. 14th): "Multiple Listing Service of Long Island: Median prices for July contracts was as low as 70% of the median price for all properties for sale… In 2,807 closings on Long Island and Queens last month, the median price was $455,000, up from $452,300 a year ago. There's no question that the number of homes for sale is up, a market bellwether. There were 36,185 homes for sale in July, up from 33,724 a year ago.

• Ada Home Prices Rise Despite Sales Slump (Idaho Statesman, Aug. 14th): "Intermountain Multiple Listing Service: Ada County's median home price rose 2% in July despite the 12th consecutive month of slumping single-family home sales… Canyon County prices dipped 0.63%. The median price for an Ada County home stood at $239,804, up from $235,090 a month earlier. Canyon County's median price in July was $159,000, down from $160,000… The 958 home sales reported in the Treasure Valley last month represent a 26% drop from the 1,301 sales recorded in July 2004… The market has a glut of homes for sale — 7,833"

• San Diego County Home Sales Dip 13.3 Percent (Sign On San Diego, Aug. 13th): "DataQuick Information Systems: San Diego County... sales were off 13.3% [y/y] at 3,106 transactions… The overall median… was down 1.3% from June's $495,500 and off 2.2% from July 2006's $500,000. The median price for resale houses [was] $550,000, down from $565,000 in June and $560,000 a year ago on 1,711 transactions. For resale condos, the median stood at $377,250 on 771 sales, vs. $397,500 in June and $384,250 in July 2006. New homes and newly converted condos sold for a median $425,500, up from $400,000 in June and [flat] with June 2006. But the 624 monthly sales were the lowest… since January 2002.

• High-End N.Y. Real Estate Cools Along With Stocks (NY Sun, Aug. 13th): "With… a stock market increasingly [volatile], Wall Street bonuses, a major driver of the booming local housing market, could take a hit, especially when compared with the record awards at the end of 2006… Dolly Lenz, vice chairman at Prudential Douglas Elliman: Buyers feel far less rushed to snatch up apartments, and are taking a more cautious attitude toward buying homes of more than $10 million… [Recently], as a number of high-profile hedge funds have collapsed and interest rates for some loans have shot up, a chilling, cautious mood seems to have hit real estate… even in Manhattan."

• Manhattan Apartment Market On Shaky Ground (Stuff.co.nz, Aug. 13th): "At the end of July, Deanna Kory, senior VP of the Corcoran Group. had a bidding war… for a $4 million luxury apartment… On July 27, the end of a week when the S&P500 stock index suffer its worst one-week percentage drop since 2002, she [informed] the winning bidder. The next day he withdrew his bid… "I guess he called his mortgage person and found it wasn't going to be as easy as he thought for him to get what he wanted, [or that his] bonus was going to be hurt by the market's slide." The bidder, like much of her clientele, works in the financial industry."

• Charleston Home Sales, Prices Wane (Charleston Post and Courier, Aug. 11th): "Charleston Trident Association of Realtors' Multiple Listing Service: The number of homes sold in the Charleston area in July was down 7.4% from June and 12.6% from July 2006. For the year to date, sales totaled 7,912 houses, down 1,850, or nearly 19%, from the 9,762 sold in the same period last year. The median home price, $210,465, dropped, for the second time this year, from the $213,760 figure in July 2006. Homes stayed on the market 92 days [on average], up slightly from 88 days in June. A year earlier, sales were brisk, taking an average of 29 days."

Affordability Issues

• Looking For An Affordable Home In The Beach? Good Luck (Pilot Online, Aug. 13th) Virginia Beach: "Although the housing market has cooled… it still remains largely out of reach for some, said Mary Kay Horoszewski, executive director of the Virginia Beach Community Development Corp., a low/middle income housing non-profit… Andrew Friedman, the city's housing director: Housing assessments in the city have risen faster than incomes… As of May, the average sales price for a newly built home in the city was nearly $533,000, while the average for an existing house was almost $350,000. Both are well over the $213,000 that federal guidelines say a family of four could afford based on the area's median income."

Real Estate Investing and Sentiment

• State Plans To Sell Public Property On Ebay (Chicago Tribune, Aug. 14th): "Illinois is following the lead of several other states that have auctioned unclaimed property on eBay. In Massachusetts, for example, an average of 25 people attended the state's live auctions… Its latest eBay auction garnered 125,000 views and 6,200 bids."

Mortgates and Real Estate Lending

• Did Big Lenders Cross The Line? (Business Week, Aug. 20th): "Until now prosecutors and pundits have [mostly] blame[d independent mortgage brokers] for the recent surge in mortgage fraud... But a growing number of lawsuits and complaints suggest that some big lenders may have … colluded [with brokers] to falsify loan documents by beefing up income and lowballing outstanding debts. Some suits allege that lenders perpetrated the fraud on their own… [If so], mortgage woes battering the financial markets could get worse… FBI: Industry fraud hit a record $1 billion in 2006, with insiders—brokers and underwriters—accounting for 80% of it…. First American LoanPerformance research: "The true level of fraud [will be] closer to $6b."

• Mortgage Woes Take Toll on Lender With Roots in Faith (Wall St. Journal, Aug. 13th): "HomeBanc wasn't unique in its faith-focused business model. As the credit business boomed over the past decade… church and religiously-oriented lending became a hot niche, particularly in the Southeast. Big banks such as Wachovia Corp. and SunTrust Banks have operations devoted to serving faith-based organizations… Most of HomeBanc's 450 loan officers had no prior [business] experience... Many were local church leaders or family members and friends referred by HomeBanc staff… Industry analysts: HomeBanc was generally admired for making loans tailored to the customer's ability to pay… [But] when the housing market soured and investors turned against [mortgage] securities… HomeBanc's infrastructure proved too expensive."

• Group Fights Foreclosures (APP.com, Aug. 12th): "Alarmed by the high rate of foreclosures in a number of states, a consortium of mortgage bankers and community development organizations has initiated a public service campaign aimed at getting help for at-risk borrowers. The organizations include the Mortgage Bankers Association, NeighborWorks America and the Ad Council. Mortgage Bankers Association President and CEO Jonathan L. Kempner: People should call their servicer as soon as they sense there is a problem… Mortgage lenders are successful if borrowers are successful. The last thing a bank wants to do is take back a home and have to take a loss."

• Where- And When- Credit Is Due (Slatin Report, Aug. 10th): "SUSAN BRNACOMEQ, Triad Capital Advisors: There is over $40 billion in originated commercial mortgages yet to be securitized... Expected to come to market in August and September. Having been originated at significantly lower interest rates than current market, and underwritten more aggressively, these lenders will take losses… Conduits are quoting deals and rate locking, albeit at higher spreads and more conservative underwriting… Some conduits are not honoring the quoted spread and maintaining the spread through to closing is not guaranteed, and subject to "re-trading..." The "least-risky" is the one not selling, i.e., AAA and AA-- generally purchased by investors such as money managers and life insurance companies. Pricing volatility could force a "mark to market" value in a rising interest rate environment which these investors are not willing to take."

• Accredited Home Sues Lone Star (Judith Levy in Seeking Alpha, Aug. 14th): "Lone Star's move [to back out of its acquisition of Accredited] is viewed by some as a gambit to knock down the purchase price. Analyst Scott Valentin of Friedman, Billings, Ramsey (an advisor to Accredited): "The value of [Accredited's (LEND)] assets have come down a lot since the deal was announced. What does Lone Star have to lose?" Lone Star agreed in June to buy Accredited for $15.10/share... Accredited… said "industry conditions and the condition of the capital markets do not provide a basis for Lone Star to walk away from its obligations." Auditors have warned that if the deal is not completed, Accredited could collapse. The tender offer expires Tuesday night."

Subprime Fallout

• Good Old FHA Loans Make A Comeback (USA Today, Aug. 14th): "The collapse of the subprime mortgage business has revived interest in federally-backed Federal Housing Administration loans among low-income and first-time home buyers who have been shut out of the mortgage market. After a three-year slump, applications for FHA loans jumped from 41,530 in December 2006 to 73,444 in June — a 76.8% increase… [occurring] at a time when the overall housing market was slowing… While soaring defaults in subprime mortgages have led to an increase in FHA applications, approvals are climbing at a slower pace. It generally takes 90-120 days for an FHA loan approval, so some applications are still in the pipeline."

• US Subprime Demand Drops, Banks Tweak Norms (Business Standard, Aug. 14th): "The July 2007 Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices: "With regard to loans to households, a small net fraction of domestic institutions reported having tightened lending standards on prime residential mortgages over the past three months whereas considerable net fractions of these respondents indicated that they had further tightened lending standards on nontraditional and subprime mortgage loans." The report is based on responses from 53 domestic banks and 20 foreign banking institutions. "Moderate fractions of domestic banks, on balance, reportedly experienced weaker demand for prime and non-traditional residential mortgages over the past three months, but a notable net fraction of banks reported that they had seen weaker demand for subprime residential mortgages over the same period."

• Blankfein-Cayne Spread Widens to '01 High in Flight to Quality (Bloomberg, Aug. 14th): "Bear Stearns (BSC) is trading as if it were headed for liquidation. Bond buyers are treating the A+-rated debt… like it's scarcely better than junk... Jon Fisher, who helps oversee $22 billion at Fifth Third Asset Management... considers the securities industry overvalued because analysts haven't cut earnings estimates enough to reflect the loss of business from structured credit products such as collateralized debt obligations and leveraged buyouts: "Bear, just from a business mix standpoint, is going to trade at a discount to Goldman Sachs (GS). I'd say that gap probably has to close because I think Goldman has to come down more than Bear does.''

• Aegis Mortgage Files For Chapter 11 Bankruptcy (Reuters, Aug. 13th): "Aegis Mortgage Corp., a mortgage lender controlled by private equity firm Cerberus Capital Management, on Monday filed for Chapter 11 bankruptcy protection, a week after it stopped making home loans and fired 60% of its employees… Aegis has described itself as one of the 30 largest U.S. mortgage lenders. It made "prime" and "Alt-A" wholesale loans, and "subprime" retail and wholesale loans to residential borrowers who couldn't qualify for the best rates. In court papers, Aegis listed more than $100 million of assets, and estimated it owes more than $600m to creditors."

• Are We Living in Subprime Denial? (Markham Lee in Seeking Alpha, Aug. 13th): "Many retail banks and mortgage lenders [are] reporting quarterly losses within their prime portfolios (HELOCs especially), alt-a lenders are experiencing the same problems the subprime lenders had in March, and 1 in 3 homeowners whose initial teaser rate on their ARMs was under 4% will probably go into foreclosure, [for] all types of borrowers… Harvard lost $250 million dollars due to its investment in Sowood Capital Management, and the State of Massachusetts has lost approximately $80M so far this year… [Though] relatively small compared to Harvard’s $30 Billion endowment, and Massachusetts’ $50 billion pension fund… if we consider the 10s of billions that university endowments and pension funds poured into hedge funds, which were then poured into mortgage debt securities, the losses that Harvard and Massachusetts suffered are probably just the tip of the iceberg."

• Subprime Loans’ Big Chill: Freeze Hits Buyers With Good Credit, Wall St. (Boston Herald, Aug. 13th): "Westwood mortgage broker John Brodrick estimates 70% of first-time home buyers he worked with during the boom years used “piggybacking” to buy homes: The first loan for 80% of a home’s price, plus a second covering some or all of the remaining 20%. Today… banks require piggybackers to have sterling credit scores. Kevin Cuff of the Massachusetts Mortgage Bankers Association: People with weak credit will still get loans - just at higher interest rates. “Subprime lending is here to stay. The demand for it from consumers and the value of it for lenders are simply too high for it to go away."

• Mortgage Woes May Affect Ohio Pensions (Chronicle Telegram, Aug. 13th): "Count Ohio’s five public employee pension funds among those watching the volatile mortgage investment industry. The funds that provide retirement pay and health care for tens of thousands of teachers, police officers, firefighters and state workers have more than a half billion dollars invested in subprime mortgages, or home and property loans to people seen as credit risks. That’s less than 1% of the funds’ combined $184 billion in investments. Much more — about 10%— has been put into more secure mortgages, many of them guaranteed by the federal government."

• How E-Trade Mortgages Its Past, Future (MarketWatch, Aug. 12th): "The reinvigoration of E-Trade's stock in 2003, then again in 2005, would appear to coincide with an increase in purchasing mortgages, home-equity loans and other mortgage-related assets… Income from interest earned on those assets [has become] so important that in 2005 interest income shot ahead of brokerage fees as the top sales generator. [In] Q2, it accounted for 58% of revenue, up from 44% in all of 2004… Egan-Jones Ratings Co., an independent credit-ratings organization: "E-Trade is a broker, not an asset holder and therefore the rapid buildup is a concern. The company has moved out of its core expertise and is taking on some risky assets in the process."

• Crisis Spreads From US Lenders To UK Hedge Funds (The Independent, Aug. 11th): "Wall Street… won't touch any [subprime-backed] bonds… Lead[ing] to a slump in the value of all mortgage-backed bonds, especially collateralized debt obligations [CDOs]. Hedge funds… can no longer be sure what their CDOs are worth, so the banks that lend to them want more collateral or - worse - their money back. So hedge funds everywhere have been dumping other assets to raise cash, leading to a maelstrom of liquidations that have sent some of the most predictable trading strategies to produce horrific results. Computer trading programs at so-called "quant" funds (quantative) that were previously the most sought-after investments in the hedge fund industry have produced big losses this week."

Foreclosure Impact

• From Housing Haven To Foreclosure Leader (NY Times, Aug. 11th) California: "Once considered a safe alternative to the overheated Bay Area real estate market, Stockton and its streets are now filled with “For Sale” signs and evidence of foreclosures… RealtyTrac, a real estate data firm: Stockton has the highest foreclosure rate of any city in the country… California has the third-highest rate of foreclosures in the country… behind Nevada and Colorado. In July, DataQuick [another real estate firm], reported that California had its highest level of foreclosure in two decades, with nearly 54,000 notices of default sent to delinquent homeowners in Q2'07."

• Statistics Show Mortgage Squeeze In Area (Mankato Free Press, Aug. 13th) Minnesota: HousingLink [Minnesota affordable housing non-profit]: Sheriff’s foreclosures in Blue Earth County alone jumped 77% from 2005 to 2006… There were 57 foreclosures in 2005 compared to 101 in 2006 and that number is expected to go up again this year. There were 42 sheriff’s sales in Blue Earth County in just Q1'07. HousingLink [predicts] 200 mortgage foreclosures for the year… In Le Sueur County for example, HousingLink is predicting 110 sheriff’s sales in 2007. That would be 57% higher that the 70 sheriff’s sales in 2006 and nearly three times the 39 sheriff’s sales in 2005."

Global Impact and Alternatives To The Housing Slump

• U.K. July House Price Expectations Fall to Lowest Since 2005 (Bloomberg, Aug. 14th): "Royal Institution of Chartered Surveyors: Expectations for U.K. house prices fell to the lowest since 2005 last month after five interest-rate increases in the past year deterred homebuyers. The number of real-estate agents and surveyors saying they expect prices to decline over the next three months outnumbered those forecasting gains by 9 percentage points from 0.7 percentage point in June… A gauge of house-price inflation in July stayed close to the lowest since January 2006. The Bank of England this month signaled it's ready to raise its benchmark rate again… [which] would swell borrowing costs for Britons already laden with record debt of 1.3 trillion pounds ($2.7 trillion.)"

• Subprime Crisis Not A 'Direct Threat' (China Daily, Aug. 14th): "Experts are of the view that China may not be directly hit by the crisis as a result of its strong economic fundamentals, limited exposure to this particular variety of assets, and the mainland's restricted linkage with the international financial system. But they warn that… Chinese exports [could] be indirectly hurt in the longer term… In China, two of the Big Four banks have admitted to having been affected by the subprime crisis. Though neither Bank of China nor China Construction Bank has disclosed the extent of their exposure to the subprime market, Bank of China has said its losses could be "several million US dollars".

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

• Wal-Mart F2Q08 (Qtr End 7/31/07) Earnings Call Transcript (Seeking Alpha, Aug. 14th): "Eduardo Castro-Wright, EVP and President and CEO, Wal-Mart Stores Division: "As reported by other retailers, we’re experiencing similar trends in soft sales of home products driven by the slow down in housing. In addition, Wal-Mart’s softness in the home and apparel categories has been compounded by the difficulties we have had this past year and have shared with you… Home and apparel remain soft through Q2. We’re starting to see some improvement in certain home categories this month and we are pleased so far with the sales results and customer response to the test [pilot] of the New Home."

Homebuilders And Housing Stocks

• Accounting Problems Plague Beazer Homes (Jack Ciesielski in Seeking Alpha, Aug. 14th): "On Friday, Beazer Homes (BZH) filed a notice of late filing for its [Q2]. [Because]… its prior CFO may have stuffed its reserves and accrued liabilities for land development costs and costs to complete houses, "in excess of amounts that would have been appropriate under generally accepted accounting principles." Those reserves and other accrued liabilities would have lowered operating expenses if reversed in later periods - but it stopped short of saying that such reversals had occurred… The company "does not believe that the amounts at issue with respect to these reserves and accrued liabilities during the quarterly and nine month periods ended June 30, 2006 and 2007 are quantitatively material."

• Beazer Shares Slide After Homebuilder Delays Filing (Bloomberg, Aug. 13th): "Beazer Homes USA Inc.(BZH), under investigation by the FBI and securities regulators, led U.S. homebuilder stocks lower after the company delayed the filing of its fiscal third-quarter report to securities regulators. The Atlanta-based company's stock fell 19%, extending Friday's 9% drop. M/I Homes Inc. (MHO) slid 14%, the second-biggest slide among stocks in the Standard & Poor's homebuilder index, which fell 5.8%."

• Hovnanian Is Hurting (Forbes, Aug. 13th): "Hovnanian (HOV) shares fell $0.45, or 3.1%, to $14.25, after cautioning that plummeting home sale prices forced a write-down on the value of the company's land holdings. [Hovnanian] expects a Q3 charge of $90m- $110 million. Analysts polled by Thomson Financial had already expected a Q3 loss $8.6m, or $0.56/share. Hovnanian also announced preliminary Q3 home sales that declined sharply. The company's home deliveries for the period ending July 31 fell 31.2% to 3,179 homes from 4,623 a year ago."

• Seven Stocks to Watch in this Volatile Environment (Stockerblog in Seeking Alpha, Aug. 13th): "The residential real estate market will get far worse… A few major hedge funds will go under, and at least one major investment firm will experience severe problems causing either its collapse or a forced takeover… More mortgage companies will declare bankruptcy and at least one major homebuilder will go under. The stocks of investment brokers and investment banks will stagnate… probably for the rest of the year. The bank stocks will also languish despite their high yields. [But] many stocks which have nothing to do with mortgages or real estate with be significantly higher by year end, making all time highs."

Commercial Real Estate and REITs

• Buyer Loses Lenders for Mission West Purchase (Globe St., Aug. 13th): "Mission West Properties (MSW) said Monday that its previously announced $1.8-billion acquisition by an undisclosed private equity firm is unlikely to close because the buyer’s primary and second lenders have withdrawn from the market. The locally based REIT says it has been in touch with three other possible acquirers that have internal sources of financing… In its Q2 report MSW said the occupancy rate in its portfolio was 67.8%, down from 69.4% at the end of March, [and that] 375,000 sf of leases were set to expire before the end of the year and that renewal rates will be no higher, and may be lower, than expiring rates."

• U.S. Lending Woes Hit Commercial Real Estate Market (Reuters, Aug. 13th): "The havoc in the credit markets could reduce prices that office, industrial, apartment and shopping-center properties have commanded over the past few years. Robert Horowitz, of Cooper-Horowitz Inc, which arranges financing: "The sale prices of assets are going to decrease. Prices are a reflection of what people can borrow. The buyers can't get the level of financing that they were able to obtain six months ago." Wachovia Senior Analyst Brian Lancaster estimated that new loans in the CMBS pools have raised some borrowing costs 80 basis points to 180 basis points -- or as much as nearly 2 percentage points."

• Highwoods Buys Back $22.3M Worth Of Preferred Stock (Triangle Business Journal, Aug. 13th): "Highwoods Properties (HIW) has bought back $22.3 million worth of its preferred stock… As of June 30, Highwoods had about 105,000 shares of outstanding Series A stock, redeemable at $1,000 each. Preferred stock… like common stock, give holders an owning interest in a company, but like bonds, they pay out a fixed amount of money on a regular basis. In 2006, the amount of dividends paid to holders of preferred stock exceeded the amount of income that Highwoods, as a REIT, is obligated under federal law to return to shareholders. Thus, buying back the shares improves the company's balance sheet."

• Commercial Building Bolsters Cities (Wall St. Journal, Aug. 13th): "The volume of commercial construction in Phoenix may [explain] why some cities mired in a housing bust continue to enjoy strong economic growth? In Phoenix, the answer appears to be that commercial construction is helping to cushion the fall. Phoenix led the nation's major employment markets in job growth during 2005 and 2006. But job growth slowed in Q2'07 to a 1.2% annualized rate, dipping below the national average of 1.3%... The Census Bureau's latest report on construction outlays found that the value of private, nonresidential construction spending jumped 17% in June to $346.6 billion compared with a year earlier, led by hotels, office buildings, utilities and educational institutions."

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