Housing Bubble and Real Estate Market Tracker

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 |  Includes: CFC, CTX, DHI, DHOM, DIS, KBH, LEN, LOW, MAS, OHB, PHM, RYL, SLG, TOL
by: Judy Weil

Judy Weil submits: 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"

"We've been wrong to own them for the past year-and-a- half. But if we didn't own them now, we would be buying them like crazy.'' – Successful investor Bill Miller, who heads the Legg Mason Trust Funds, about homebuilder stocks. (Bloomberg, Sept. 28th)

Real Estate Sales and House Prices

  • Housing Prices Will Continue to Fall – Greenspan (Eli Hoffmann in Seeking Alpha, Oct. 1st): "Housing prices in the U.S. will continue to drop, as new home sales are barely even making a dent in overgrown inventories, former Federal Reserve Chairman Alan Greenspan said Monday. Greenspan conceded a global liquidity crisis may be showing signs of healing, but warned the speculative fever that drove the housing bubble must… run its course before a full recovery would be imminent… "There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery... The process of inventory adjustment has just started."

  • Jim Cramer's Interview with KB Homes CEO Causes Ruckus (Associated Content, Sept. 27th): "Here [in] southern Alabama, the real estate news and advertising is going gangbusters about how great the market is right now. But the statistics released for the month of August show an almost 60% percent drop in home sales over this time last year and the price of the same home sold last year for almost 2% higher. While 2% is not a large number the Alabama real estate market overall has not seen the giant leaps in value that many places have so this small decline in price is devastating to many homeowners who want to sell."

  • Housing Prices Mark Worst Decline in Sixteen Years (Markham Lee in Seeking Alpha, Sept. 26th): "The downturn in housing, stricter credit standards, etc, has effectively removed the speculators from the market. How can inventories do anything but continue to grow, now that somewhere between 25-33% of potential home buyers are effectively out of the market? Granted, there will always be some level of real estate speculation, but we’re not going to see 25-33% any time soon… Based on the speculation factor alone, the only logical conclusion is that housing inventories should continue to grow and prices continue to decline, well into 2008 and perhaps even into 2009."

  • Building Defies Trend (Indianapolis Star, Sept. 26th): "The Builders Association of Greater Indianapolis: Construction of new homes in Hendricks County fell by 34% during 2006 to about 1,284… Hendricks reported 731 new home permits through August, a further decline of 26% vs. August 2006… It could take up to five years to use up the supply of lots for new homes… Metropolitan Indianapolis Board of Realtors shows that the oversupply hasn't hurt the value of existing homes much… The average sale price of a home in the entire nine-county metro region increased to $155,899, up 0.6% in August, compared with August 2006. During 2007, the average sale prices are down about 1%."

  • Existing Home Sales Down (Myrtle Beach Online, Sept. 25th): "National Association of Realtors: Sales of existing single-family homes dropped by 4.3% in August, from July. Sales at a seasonally adjusted annual rate dropped to 5.5 million units, the slowest pace since August 2002… The median price of an existing home in August was $224,500, an increase of 0.2% from August 2006. The first y/y price increase in 12 months… In August, the West saw the biggest drop in sales, a decline of 9.8%, followed by declines of 5.2% in the Midwest, 2.7% in the South and 2% in the Northeast… Inventory of unsold homes to a record 4.58 million in August."

Real Estate Investing and Sentiment

  • Is Today's Housing Market Something to Celebrate? (First Coast News, Sept. 27th) Florida: "Almost 900 area housing professionals will gather at the annual realtor-builder tradeshow today at the Prime Osborn Convention Center… It's not record attendance, but leaders of the area builders and realtors groups say… their membership numbers remain strong and they are working hard to persuade consumers that this is a great time to buy a house. That's because there are lots of homes and condos on the market [and] interest rates are favorable at 6% or so. Area building permits and home sales continue to drop from 2005 -- a strong year."

Mortgates and Real Estate Lending

  • The Machiavellian Approach to Real Estate Banking (David Levin's Real Estate Focus, Sept. 27th): "Lenders will aggressively increase reserves and move properties into the "work out" departments [for this quarter]… The stock price has already been pummeled… But as investors… may have been overly pessimistic in bidding down stock prices. Aggressive moves now will show that bank management is asserting control of a bad situation. If things turn out to be as bad as these aggressive actions anticipate, then management was right on the money. If things turn out to be better than these aggressive moves, then management is in the enviable position of claiming credit for a job well done."

  • The FHA Loan’s Comeback Tour (NUWire Investor, Sept. 25th): "Mortgage Foundation: FHA loans [were] just 4% of all home loans in 2006 vs. 18% in 1990. A 2005 revision… raised FHA mortgage limits to comply with today’s home prices and eliminated several picky cosmetic requirements [for] FHA appraisals… FHA loans are currently available only to homes that fit under the specified mortgage limits. In high-cost areas such as New York and Los Angeles, there is a loan limit for single family homes of $362,790, while low-cost areas such as Iowa and Kentucky have a loan limit of $200,160… FHA loans [are] picking up the market share left by the fall of subprime loans."

Global Subprime Fallout

  • UBS Takes $3.4 Billion Hit, C. Suisse Hurt Too (Reuters, Oct. 1st): "Swiss bank UBS unveiled $3.4 billion in losses, mainly on securities linked to the U.S. subprime mortgage sector, swept out senior managers and slashed jobs, while Swiss bank Credit Suisse said its results would be "adversely impacted" by the market turmoil but it would remain profitable in the third quarter. European credit spreads widened as the UBS losses underlined concerns about tight credit markets after short-term lending rates jumped on Friday, dashing hopes from earlier last week that credit conditions were easing."

  • Nobel Biocare US Sales Hit By Subprime Crises, No Threat To Independence – CEO (Forbes, Sept. 30th): "Nobel Biocare AG's US sales have been hit by the subprime crisis and its share price has suffered, but the dental implant maker sees no threat to its independence, CEO Domenico Scala said… The group's share price has dropped by some 12% since Scala replaced Heliane Canepa as CEO in July this year. Scala sees the subprime market crisis weighing on sales in the US, where people spend less on 'more elaborate, expensive dental treatments.' However, overall, Scala expects the global dental implant market to grow by 18% annually over the next 3-5 years."

  • Subprime Reasons to be Thankful (Felix Salmon in Seeking Alpha, Sept. 25th): "In the last ten years… UK housing prices have risen by 211%, compared to just 120% in the US… In dollar terms, UK house prices have actually risen by 265% in the past ten years – more than double the rate of appreciation in the US (The Economist)… The US might be going through some nasty housing-related pain right now. But if this pain has prevented the bubble getting much, much bigger, then maybe it's not such a bad thing. Because if and when the bubble bursts in places like the UK and Ireland (251%) the aftermath there could be much worse than [here]."

Subprime Fallout

  • Wamu Feels Subprime Pain, But Not As Deeply (Chicago Tribune, Sept. 30th): "Washington Mutual (NYSE:WM) has a much larger deposit base (in Q2: $201 billion) than Countrywide (Q2: $60B), [and is] less dependent on short-term debt markets to finance its operations. Because WaMu originates its loans as a thrift, it has much broader access to Federal Home Loan Bank funds... Stuart Plesser, S&P equity analyst: WaMu's credit card division and retail banking division give it more diversified sources of revenue than Countrywide (CFC)… WaMu will likely face higher charge-offs [for substantial subprime/adjustable-rate mortgages in its portfolio] in the future… WaMu already… raised loan-loss provisions in 2007 to $2B-$2.2B, up from $1.5B-$1.7B. [This] will weigh on earnings."

  • Fortress Investment Group (NYSE:FIG) Shutters Its Subprime Operations (Blogging Stocks, Sept. 29th): "Alternative investment asset manager Fortress Investment Group's (FIG) [decided] to shutter its subprime mortgage division, Nationstar Mortgage, a leading U.S. subprime lender, [due to] substantial losses sustained by rising defaults and foreclosures. Nationstar said any approved mortgage applications in its pipeline would be honored. Nationstar will also continue to service the $10 billion in subprime loans in its portfolio… Wall Street appreciates all the candor and data it can get regarding the status of subprime loans and operations, and Fortress's announcement will help analysts compose a more-complete report on Fortress, one reason the Street did not punish FIG's shares [last] week."

  • Radian Group Removed From Negative Watch, Ratings Affirmed - S&P (Forbes, Sept. 26th): "S&P's Ratings Services said it removed Radian Group Inc. (NYSE:RDN) and its mortgage insurance subsidiary, Radian MI, from negative watch and affirmed its 'A' counterparty credit rating on Radian Group with negative outlook. At the same time, S&P affirmed its 'AA' counterparty credit and financial strength ratings on all the mortgage insurance companies. 'The affirmation reflects Radian MI's excellent capitalisation and Radian's very strong liquidity, which will enable the company to weather a very difficult period in the mortgage insurance industry.' S&P [expects] Radian MI's core business to generate underwriting profits in 2009."

Foreclosure Trends

  • Foreclosures Harass Hillsborough County (Nashua Telegraph, Sept. 30th): "Property foreclosures continued on a record pace in Hillsborough County through Q3'07, but while Nashua and most its neighbors are seeing sharp rises, towns farther west in the Souhegan Valley seem to be largely avoiding the problem. Overall, Hillsborough County is on pace to have some 550 foreclosures of homes and businesses this year, an increase of more than 80% from last year and five times the total of 2005, according to data through Sept. 24 from the Hillsborough County Register of Deeds… The number filed in Q3'07 was the same as were filed in the first two quarters."

  • Kansas Attorney General's New Task Force to Address Home Foreclosures (All American Patriots, Sept. 27th): "In an effort to confront the growing problem of home foreclosures in Kansas, Kansas Attorney General Paul Morrison announced the creation of a task force to address the reasons behind home foreclosures, including mortgage fraud and subprime lending."

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

  • NAR On "Temporary" Housing Problems (Barry Ritholtz in Seeking Alpha, Sept. 30th): "NY Times: "With sales of both new and existing homes down, more homes are now on the market than ever before — almost 4.5 million, a figure that is nearly double the number in early 2005… Of the 178,000 completed new homes that were available for sale at the end of July, fewer than 15% found buyers in August. That was the lowest rate in more than a decade." By late 2008, or even 2009, we should see housing more "normalized." But between now and then, we should expect to see prices drop more, until much of the huge inventory build gets worked off… Futures markets [home] prices aren't shown bottoming until 2010."

  • Consumer Spending Surpasses Forecasts (NY Times, Sept. 29th): "Two indications that the economy is still somewhat insulated from turmoil in the residential housing market… Commerce Dept.: Consumer spending rose a better-than-forecast 0.6% last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3%, down from a 0.5% rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July. Separately, construction spending increased 0.2% in August after a 0.5% decline the month before, surprising many analysts who had predicted another drop. Nonresidential construction offset a decline in home building."

  • Home Sales and Prices Fall Sharply (NY Times, Sept. 28th): "Sales of new homes plunged in August to their slowest pace in more than seven years as tighter credit and rising inventories continued to weigh down the housing industry. The grim statistics could foreshadow further economic weakness in Q4, analysts said… Commerce Dept.: New-home purchases fell to an annual pace of 795,000, an 8.3% decline from July, as the number of months needed to sell off builders’ inventories rose to the highest level since March…The median price for a new home was down 7.5% from a year earlier, to $225,700, the steepest monthly price drop since December 1970."

  • S&P/Case-Shiller Home Price Index Falls 3.9% in July (Bloomberg, Sept. 25th): "Home prices in 20 U.S. metropolitan areas fell the most on record in July, indicating the threat to consumer spending was rising even before credit markets seized up in August, a private survey showed today. Values dropped 3.9% in the 12 months through July, steeper than the 3.4% decrease in June, according to the S&P/Case-Shiller home-price index. The index declined in January for the first time since the group started the measure in 2001, and has receded every month since then. Stricter lending standards and reduced demand are prolonging the housing slump, now entering its third year."

Homebuilders And Housing Stocks

  • Promises Upfront, Deals On The Side (Charlotte Observer, Sept. 30th): "[Local realtor] Realty Place's marketing, sometimes subsidized by builders, regularly and dramatically understated the cost of buying a home. Its agents helped customers qualify for [homebuilder] loan programs... Realty Place collected millions of dollars in bonuses from builders [but] sometimes failed to ensure that those bonus payments appeared on settlement statements. Federal law requires bonus payments to be recorded [by lender and homebuilder]… Between 2002-2005, more than 420 Realty Place customers bought Beazer homes… In turn, Realty Place records show Beazer paid the company more than $2.2 million, including about $700,000 in bonuses… In Mecklenburg County, one-third of Beazer homes purchased through Realty Place in 2002 have been lost to foreclosure."

  • No End in Sight for Homebuilders' Problems - Barron's (Susan Lerner in Seeking Alpha, Sept. 30th): "Barron's speculates that the downward cycle may not end until some of the weakest [homebuilders] face bankruptcy. Many companies' share prices have already fallen anywhere from 15%-70%, so much of the bad news already may be priced into the shares, but one analyst believes that by Q4 many builders may not be generating enough cash flow to cover interest payments. For those interested in taking a chance on the sector, Barron's recommends sticking with those builders with the strongest balance sheets such as NVR (NYSE:NVR) and MDC Holdings (NYSE:MDC). Or [to] buy the industry's senior bonds. Barron's says they're safer than the shares."

  • Desperate Home Builders? (Indianapolis Business Journal, Sept. 29th): "To attract customers, many builders are using [incentives]… Some are even… assisting potential buyers with… disposing of their previous residence… A couple of production builders are trying to do guaranteed buyouts. If you buy one of their specs, they will put a price on your home, and if it doesn’t sell in a certain number of days, they’ll buy it back from you… One of the tough issues in this downturn market where builders are wanting to get rid of inventory but fear losing their backlog of [home orders].

  • Dominion Homes Defaults On Loan; Terms Modified (Reuters, Sept. 28th): "Dominion Homes Inc (DHOM) said on Friday it had defaulted on one of its credit agreements but the lenders had agreed to modify the financing terms. In a SEC filing, Dominion said the lenders, including Silver Oak Capital, had agreed to increase the amount they lend the company under a loan secured by mortgages on land it owns [and that] "certain unwaived events of default have occurred and are continuing to occur under the credit agreement." It said it had failed to comply with several of the loan's terms, including covenants related to its profitability and net worth."

  • Toll Brothers Is Having A Barbeque This Sunday (NJ.com, Sept. 28th) New Jersey: "Toll Brothers (NYSE:TOL) is holding a barbeque, condo tours and a silent auction to benefit the YMCA on Sunday, Sept. 30... Throughout the day, Toll Brothers City Living will be offering tours of a Hudson Tea model, Harborside Lofts showroom, Maxwell Place and will have shuttle services to tour 700 Grove in Jersey City. Interior design firm Mary Cook and Associates will offer continuous seminars throughout the day as well. Toll Brothers City Living "Advantage Day" will also host a gourmet barbeque, silent auction and music by a Frank Sinatra impersonator… All proceeds will go to the Hoboken-North Hudson YMCA."

  • New Home Permits Down In August (New Mexico Business Weekly, Sept. 28th): "Permits for construction of new homes in the Albuquerque metro area were down 42.8% in August compared with July. Permits fell from 472 in July to 272 in August, according to Datatraq's Albuquerque New Housing Market Letter. Some 443 permits were issued in August 2006. Pulte Homes led builders in the metro area in permits issued in August with 38, 13.9% of the total. Centex Homes followed with 27, or 9.9%, and Longford Homes with 23, or 8.46%."

  • Legg's Miller Buys Biggest Stocks to Boost Returns (Bloomberg, Sept. 28th): "Bill Miller's $19.2 billion Legg Mason Value Trust's… smaller bets include… Masco Corp. (NYSE:MAS), maker of home-improvement products with a capitalization of $8.6B… Miller has been hurt by falling housing-related stocks, which he started buying about 18 months ago, including mortgage- lender Countrywide Financial Corp. (CFC) and builders Pulte Homes Inc. (NYSE:PHM) and KB Home (NYSE:KBH) [whose shares have slumped 56%, 59% and 52% respectively.] Miller said he will keep buying housing and mortgage- related stocks through his $7.8B Legg Mason Opportunity Trust Fund, which has gained 10.4% this year."

  • Lennar Corporation Declares Quarterly Dividends (CNN Money, Sept. 27th): "Lennar Corporation , one of the nation's largest homebuilders, announced that its Board of Directors has declared a quarterly cash dividend of $0.16 per share for both Class A and Class B common stock payable on November 15, 2007 to holders of record at the close of business on November 5, 2007."

  • Standard Pacific's Convertible Offering Just Short of Death Spiral Financing (Michael Shedlock in Seeking Alpha, Sept. 27th): "Standard Pacific Corp. (SPF) said it would offer $100 million in convertible notes, and that its board of directors has eliminated the company's quarterly cash dividend. The company expects to save about $10M annually, with the funds to be used to pay down debt... Prof. Fil Zucchi: "Standard Pacific… one of the three horsemen of the housing apocalypse (at least based upon the current Credit Default Swap spreads), issued convertible debt which, short of a "death spiral financing", looks stunningly onerous. It also eliminated its $10M/year dividend. That's right… a publicly traded homebuilder is down to having to pull its skimpy dividend to make ends meet."

  • Housing Slump Leads To Creative Sales Ideas (NBC4.com, Sept. 27th): "New home sales dropped to their lowest level in seven years in August, and the slump is creating some opportunities for buyers… D.C. area developers are coming up with creative ways to sell houses. Ryland Homes (NYSE:RYL) will hold a silent auction on Saturday for more than 100 new homes in northern Virginia. The homes have been discounted to about 20% off their full price."

  • KB Home Posts Loss, Expects Things To Get Worse (LA Times, Sept. 27th): "KB Home (KBH), one of the nation's largest, reported a net loss of $35.6 million, or $0.46/share, compared with a profit of $153.2M, or $1.90, in the same period a year ago... The company took pretax charges of $690.1M and $107.9M to write down the value of unsold inventory and joint-venture holdings. The writedowns were partially offset by the sale of its French operations for $807.2M. Excluding the French sale, the company reported a loss of $478.6M, or $6.19/share, from continuing operations. Revenue fell 32% to $1.54 billion… In Q3, the average selling price of a KB home fell 7%, to $267,700, from a year earlier."

  • KB Homes to Feature Disney Designs (Wall St. Journal, Sept. 26th): "KB Home and Walt Disney Co (NYSE:DIS)… have agreed to offer "Disney inspired" flooring, window coverings and carpeting, including some that feature Disney characters, in new KB homes. Starting in 2008, the Disney products will be offered in KB Home design studios, where buyers select the fixtures and furnishings for their homes. The Los Angeles builder is collaborating with Disney Consumer Products, the business arm that sells merchandise, including toys, home décor and books. Two years ago, the builder started a successful program to design and market co-branded Martha Stewart homes."

  • A Mouse Trap for KB Home (Motley Fool, Sept. 26th): "KB Homes (KBH) newly announced partnership with Disney (DIS)… presages a far darker picture of housing… [Disney] trappings can quickly grow tiresome and annoying. Sure, you can switch out the accessories once your children outgrow them, but your higher mortgage payment will likely outlast any love for Disney... KBH/Martha Stewart homes account for less than 5% of KB's sales, and while they're expanding… I doubt the gimmick will ever become a meaningful source of revenues. A Disney collaboration seems even less compelling… KBH looks desperate."

  • Home Builders Sweeten Deals To Fight Sales Slump (Charlotte Observer, Sept. 26th): "The number and scope of [homebuilder] incentives may be unprecedented, local developers and real estate experts said… Homebuilders -- faced with competing against fellow developers and existing-home sellers -- seek to meet year-end sales quotas… Orleans Homebuilders (OHB) is offering up to $35,000 off certain higher-end homes in some local subdivisions and up to half off on options in some of its lower-end properties. The catch: Buyers have to secure mortgages through Orleans subsidiary Alambry Funding Inc. Builders' mortgage firms sometimes include higher interest rates, which can offset incentives."

  • U.S. Home Builder Horrors (Wall St. Journal, Sept. 26th): "Book values at the five largest home builders -- Centex (CTX), D.R. Horton (NYSE:DHI), Lennar (NYSE:LEN), Pulte (PHM) and Toll Brothers (TOL) -- have fallen from their peaks last year by as much as 15%. But that still leaves all of them with assets sporting higher valuations than before the housing boom… at the start of 2005. Returning to those levels would require a 20% fall in Lennar's book value, and double that for Toll… The big five's shares are trading at about the value of their assets 2½ years ago… [But] during the housing slump in the early 1990s, home builders' shares traded at 50% of book value. If they were to fall to that level now, based on their asset valuations in 2005, home-builder share prices would have to drop by half again."

  • Troubled Home Builders Turn To Layoffs (Business Week, Sept. 26th): "Lennar (LEN) slashed 35% of its work force amid the national mortgage crisis [and] indicated that more layoffs are in the pipeline... The latest cuts follow similar moves by other big builders. Pulte Homes Inc. cut 1,400 full-time jobs, or 10% of its work force, last year. Centex Corp. also slashed 10% of its salaried work force in 2006 to around 6,400… The industry added 518,000 jobs from January 2003 to February 2006, when employment hit its peak, according to Moody's Economy.com... Since the peak through the end of August, 142,500 have been lost, with the deepest layoffs occurring among construction workers."

  • Downturn Causes Sale Of 2 Projects (TriValley Central, Sept. 26th) Arizona: "The downturn in the local housing market continues, with Ryland Homes (RYL) selling two major subdivision projects to a private investment group after it was unable to complete them. No purchase price was given… but one city councilman said he believed it was at a much lower price than originally paid by Ryland. He also said he does not expect this to be the last failure among area developers and builders, many of who paid high land prices and put forward overly ambitious plans at the height of the boom."

  • Lean Times For Lennar (Forbes, Sept. 25th): "Homebuilder Lennar announced it swung to a third-quarter loss of $513.9 million, or $3.25/share, from a profit of $206.7M, or $1.30/share, a year ago. Analysts were looking for a loss of about $0.58/share. Lennar was dragged to the wider-than-expected loss after slashing prices on its homes and writing down the value of its land holdings. The company announced a loss on land sales of $344.7M during Q3."

  • US CREDIT-Lennar Spreads Still Have Downside (Reuters, Sept. 25th): "Seth Glasser, analyst at Barclays Capital: The cost to insure Lennar's (LEN) debt rose to around 318 basis points, or $318,000 per year for five years to insure $10M in debt, from 275 basis points at Monday's close. Centex Corp's (CTX) debt protection costs also rose around 30 basis points to 306 basis points, and Pulte Homes' (PHM) rose 10 basis points to 376 basis points. Bank of America analyst Christopher Brown: Lennar's credit metrics weakened significantly during the quarter, with debt to adjusted earnings before Ebidta and rent rising to 4.5 times from 2.5 times last quarter."

  • Homebuilders: Lennar's Loss Deepens the Pain (Business Week, Sept. 25th): "Lennar (LEN) was ahead of the curve when it began to aggressively price its homes to market to early in 2006 in order to dispose of inventory. The company has kept its focus on inventory, by holding off to some extent from building new homes before contracts are signed. CEO Stuart Miller: Construction starts were down 62% in Q3 from a year ago… Because of its efforts to reduce inventory and its stronger balance sheet – it has a total debt-to-capital ratio of 33,.5% -- Lennar doesn't need to join in the fire-sales that some of its competitors have opted for recently."

  • Lowe's Expansion On Track Despite Weaker Market (MarketWach, Sept. 25th): "Home-improvement retailer Lowe's (NYSE:LOW) said it planned to open 135-145 new stores domestically, with about 40 in the northeast. The company said it plans… to open its first Canadian store in the Toronto area later this year, with more than 20 stores in development and stores in Mexico in the works…Late Monday, the home-improvement retailer said that sales are trending below plan and warned that its fiscal 2007 earnings would come in at the low end of its previous expectations… attributed the slowing sales to drought conditions in the mid-Atlantic, southeastern and western regions, which hurt sales of outdoor products."

Housing-Related ETFs

  • A Bullish Call On Philly’s Housing Sector Index (Daniel Jones in Seeking Alpha, Sept. 28th): "Over the last six months, the Philadelphia Stock Exchange HGX [housing] index has tracked from as high as 240 all the way to the 158 level this week. At present, the index sits below its 50 and 200 day moving averages, which are at 173 and 216, respectively. We think all the bad news is priced in here. We believe that any snap back in this index could very well be quite rapid and profitable for call option holders. For the Record, the Philadelphia Exchange’s Housing Index is comprised of twenty companies that are active in the housing sector."

  • Buffett Sell Signal, Trading-Only ETF, Starbucks Call: Timshel (Bloomberg, Sept. 28th): "The SPDR S&P Homebuilders ETF only had about $40 million of assets as of Sept. 25, according to State Street's Web site. Yet the fund has been among the 10 most active industry- specific ETFs during the past three months, according to Bloomberg. On an average day, 5.2 million shares changed hands. It's quite a number, considering there were a mere 1.85 million shares outstanding three days ago. Every other fund in the top 10 is valued in the hundreds of millions of dollars, if not billions… The ETF's benchmark, the S&P Homebuilders Select Industry Index, has tumbled 42% this year."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

  • Thornberg: Looking for Value Among Mortgage REIT Preferred Stock (David Neubert in Seeking Alpha, Sept. 28th): "During the days of maximum fear around Thronburg Mortgage (TMA), I bought some of the common and some of the preferred of this mortgage REIT after hearing the CEO give what I thought was a very honest and detailed appraisal of their losses. He impressed me… I realized this company would survive and… that it was being run by someone who understood the portfolio. He had done his homework when he said what he thought the worst case liquidation value was and what the losses would be… This REIT buys the jumbo home mortgages that are too big for Fannie Mae and Freddie Mac guarantees.

  • Meatpacking Buildings Sell For $70M (Real Deal, Sept. 28th): "Two buildings in the Meatpacking District, 414-416 West 14th Street and 418 West 14th Street, were sold by the Icon Group for $70 million to Sitt Asset and The Carlyle Group. The $2,500 per square foot price was reportedly a record. The Icon Group bought the buildings in 2006 from a meatpacking family for $18.5M."

  • Building Sales Strong Despite Credit Woes (Real Deal, Sept. 28th): "About $40.1 billion worth of Manhattan buildings changed hands this year as of September 20, more than in any other previous full year. Some experts say the investment sales market is doing fine, though September's total sales figures may fall short of August's, which were lower than July's. Insiders say securing financing has gotten harder, though some creative investing has kept the market moving. SL Green paid $317 million for the ground underneath the Lipstick building at 885 Third Avenue, where Haim Revah inked a 70-year ground lease."

  • Down Low At The Dealmakers Summit (Slatin Report, Sept. 27th): "Brett Wilkerson of Property & Portfolio Research: Office-building leasing velocity has pretty much peaked, especially on the mortgage-business-heavy West Coast, and that while construction has been moderate during this cycle, new demand is slackening. Rental growth has also peaked in apartments, and retail is almost certain to be challenged by financial-market fallout. Industrial, he said, has been the most stable sector and is likely to remain so… The $22 billion Archstone/Lehman Brothers sale… will serve as a bellwether for the REIT market. REIT stocks… began to come back up in September. The final sale of Archstone will be a "vote of confidence" in the entire sector; conversely, the deal's failure could trigger a larger selloff... News on this is expected [this week]."

  • Heebner, Top Fund Manager, Sells New York Real Estate (Bloomberg, Sept. 25th): "Kenneth Heebner, manager of the top-ranked U.S. real-estate mutual fund, sold stakes in New York property owners because prices will decline…The $1.7 billion CGM Realty Fund divested SL Green Realty Corp. (NYSE:SLG), Manhattan's biggest office landlord, since the end of June. The manager, whose fund has returned an average of 40% a year since September 2002, cut stakes in REITs to a quarter of assets from 75% in December. Heebner: "You're seeing a retrenchment in the private-equity, hedge-fund and brokerage businesses, and there could be a lot of layoffs. That could have a devastating impact on high-end residential real estate in New York. Appetite for office space will also decline.''

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