Housing Bubble and Real Estate Market Tracker

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"

“This is one of the best quarters that we’ve ever had,” said Pamela Liebman, president of the Corcoran Group, on the rise in sales and prices in every category of Manhattan apartments. (NY Times, Oct. 2nd)

Real Estate Sales and House Prices

• Pre-Credit Crunch Apartment Prices Increase (NY Sun, Oct. 2nd): "The average price of an apartment in Manhattan climbed to more than $1.3 million in Q3, according to top [NYC] brokerage firms quarterly reports, released Monday… However, [the numbers] are based on sales negotiated between April-June, before the credit crunch… Prudential Douglas Elliman, Dorothy Herman: The city is largely immune to the [national housing] problems… because of foreign buyers, [wealthy] New Yorkers, and the prevalence of co-ops, which require stricter mortgages… Radar Logic's Jonathan Miller: The number of deals in Q3 shot up by 65.6% compared with Q3'06, to 3,939. If the Q4 number dips below 2,441, the number of deals in Q4'06, "we will know there is a problem."

• August Home, Condo Sales Nosedive In Santa Barbara County; Forecast Gloomier For Northern Part Of County (San Luis Obispo, Oct. 1st): "Santa Barbara Association of Realtors: Lompoc Valley… home sales plummet[ed] 22% last month compared to August last year. Yet the median price was down only about 6%to $417,000. California Economic Forecast: Sales of South Coast single-family homes [fell] 21%, but the median price rose 6% to more than $1.26 million, largely buoyed by sales of multimillion-dollar homes in Montecito and Hope Ranch… Condominium sales on the South Coast were unchanged from August a year ago. However, the median price dropped by a steep 21% to $549,000, with sales dominated by lower-priced units."

• Tahoe-Truckee Home Sales, Markets Differ (Nevada Appeal, Sept. 30th): "The slide in real estate sales and price levels continues through most of Lake Tahoe and Truckee… Chase International midyear report: [When] comparing H1'07 to H1'06, the median single-family home price in Truckee dropped 13% to $645,000. Meanwhile, volume and units sold rose modestly by 4% and 14% respectively. The number of Truckee homes sold for less than $1 million increased 31%, while the sale of homes over $1M dropped by 37%… The median sales price in Tahoe City was down this year to $679,000 from $885,000, according to Chase International, a 23% drop.

Real Estate Investing and Sentiment

• Housing Boom Seen As Possible For State (Charleston Gazette, Oct. 2nd): "Consultant Ken Auvil: “According to the 2000 U.S. Census, over 100,000 West Virginians are living in obsolete trailers, dilapidated shacks and depreciation-prone homes." Yet at the same time… West Virginia’s rate of homeownership above the national average of 67%... Auvil sees need… to replace shacks and dilapidated housing... National Association of Home Builders: The construction of 1,000 single-family homes generates 2,448 jobs in construction and related industries, $79.4 million in wages and more than $42.5 million in federal, state and local tax revenues… Auvil [envisions] a $1 billion homebuilding industry in the Mountain State."

• $40-Million Park: Bad Time, Bad Idea (St. Petersburg Times Op-Ed, Oct. 2nd): "Hillsborough County Commission chairman Jim Norman believes the area should promote sports tourism… The feasibility study [for the proposed $40-million amateur sports park] makes clear its findings were based on research dating to 2005. That was before the housing bubble [burst]. The study… warned that the park's success hinged on having hotels, restaurants, shops and entertainment built near the site "before" the complex was completed… No hotelier or development chain has expressed interest… On Wednesday… Florida Legislature convenes in special session to cut more than $1-billion from the state budget, thanks to a slowdown in the economy."

• Big Profits In Foreclosures? (Blogging Stocks, Oct. 1st): "With the subprime meltdown in full-swing and foreclosures hitting record highs, it's no surprise that more than a few investors are looking to the field as a way to make some money in the time-honored tradition of the vulture investors… NY Times: There are numerous pitfalls: Oftentimes, foreclosure investors buying homes at auction don't have time to do thorough due diligence on the properties, and can find much more serious structural problems than they had previously thought. The titles can also be murky, leaving buyers owing thousands on properties they thought they were buying free and clear."

• Consumer Reports Survey: More Than 90 Percent of Hagglers Scored Better Prices on Furniture, Electronics and Appliances, Medical Bills, and More (Broadcast Newsroom, Oct. 1st): "Consumer Reports National Research Center survey: Haggling over the cost of goods and services… can be successful in many cases. More than 90% of shoppers who tried to negotiate a better deal on goods and services including furniture, electronics and appliances, floor and demonstration models, and medical bills got one. The survey of 2,167 U.S. households revealed that most respondents who tried to talk their way to a better deal achieved some success. Of those who negotiated for lower prices on furniture, 94% were successful in scoring a lower price at least once during the past three years."

Mortgates and Real Estate Lending

• 'Red Flags' Seen In NJ Affordable Case (NJ Star Ledger, Oct. 2nd): "Regulators and bankruptcy attorneys have labeled NJ Affordable a massive fraud, alleging owner Wayne Puff and others took in more than $120 million from investors… NJ Affordable offered big returns to investors who allowed the company to use their credit and name to purchase properties. Even though properties were titled in those investors' names, the business agreed to pay all mortgage and other costs. However, the documentation used to obtain the mortgages -- many of them initially from First United – [allegedly] contained fake or inconsistent information. First United then resold the loans to institutional lenders such as Washington Mutual (WM) and Countrywide (CFC)."

Global Subprime Fallout

• Fall In The Number Of New Mortgages (IC Wales, Oct. 2nd): "Bank of England: The number of new [home] mortgages approved… fell to its lowest level since April during August... Only 109,000 home loans were approved… during the month, 5% fewer than in July... The figures add to growing evidence that the property market is beginning to cool down following five interest rate rises in just over a year. A total of 269,000 mortgages for all purposes were approved during August, 16,000 fewer than in July. There was also a fall in the number of people looking to remortgage, with 96,000 loans approved for those switching to a different deal, compared with 100,000 [in July]."

• U.K. Hometrack September House-Price Growth Stalls (Bloomberg, Oct. 1st): "Hometrack Ltd.research group: U.K. house prices were unchanged for a second month in September, suggesting five interest-rate increases in the past year and turmoil in financial markets have rattled buyers' confidence. The average cost of a home in England and Wales was unchanged in September at £176,300 ($358,000) from August… London and the southeast of England were the only regions to show gains, with prices rising 0.1% in both areas. The U.K.'s decade-long property boom is cooling as a credit-market slump threatens to raise the burden on Britons already shouldering a record £1.3 trillion in debt."

• U.S. Banks Still Need To Come Clean On Subprime (Phil Davis in Seeking Alpha, Oct. 1st): "Banks [need to] tell us just how much of the $2 Trillion drop in the value of US housing (so far) they are on the hook for... The Dutch ING Group announced Saturday that they would take over accounts at NetBank, WHICH WAS SHUT DOWN BY THE US GOVERNMENT FOLLOWING LOSSES ON "SUBPRIME MORTGAGES AND OTHER LOANS." Aside from $2.5Bn worth of people being dumb enough to give their real cash to a virtual bank… $109M in 1,500 accounts was in excess of the $100,000 FDIC insurance cap… NetBank has filed for bankruptcy. For $15M, ING will take on $1.5Bn of NetBank’s insured deposits and will buy out $724M in assets."

• Argentine Central Bank Boosts Liquidity on Subprime Concerns (Bloomberg, Oct. 1st): "Argentina's central bank doubled its repurchase agreements and cut their interest rates by a quarter point today… to boost liquidity and lower borrowing costs in South America's second-largest economy. The central bank lowered rates today on 7, 14, and 30-day repurchase agreements to 10.25%, 10.5% and 10.75%... The bank also doubled the supply of those agreements to 2 billion pesos ($635 million) "to avoid excessive fluctuations in interest rates, which aren't responding to the liquidity in the financial system but to precautionary attitudes deriving from uncertainty caused by the subprime crisis in the U.S," [The bank said]. Tightening credit threatens to slow almost five years of economic growth."

Subprime Fallout

• Housing's Toll Rises (Hartford Courant, Oct. 2nd): "Punk Ziegel & Co. analyst Richard Bove: "In Q3'87 during the Latin American debt crisis, Citigroup took a $1 billion writeoff to ostensibly clean its balance sheet - and four years later, the bank was still recording write-offs. [Bove said] banks could be facing a systemic debt problem. "Can [UBS and Citigroup] eliminate this with a one-stop write-off[?] Citigroup still holds debt related to the $26B sale of First Data Corp. to KKR. The deal's underwriters have sold about $9B of the $21B in loans; about 15-25% of the remaining $12B- or $1.8B-$3B- is still on Citigroup's books."

• UBS, Citigroup Rise on Speculation Worst May Be Over (Bloomberg, Oct. 1st): "UBS AG and Citigroup Inc., the biggest banks in Europe and the U.S., rose in stock market trading on investor optimism that their reports today on fixed-income losses may represent the low point for earnings…While the losses disclosed today exceed most estimates, investors are speculating that the writedowns mean earnings won't get any worse… UBS wrote down the value of debt securities by more than $3.4 billion… Citigroup said third-quarter profit dropped 60% because of $5.9B of credit and trading losses… UBS said today it still has more than $19B of subprime residential mortgage-backed securities and almost $4B of assets… that are backed by subprime loans."

• Defaults on Insured Mortgages Increase 30 Percent (Bloomberg, Sept. 28th): "Trade group Mortgage Insurance Companies of America: Defaults on privately insured home loans [were] up 30% last month from year-earlier levels… Borrowers more than 60 days behind rose to 58,441 in August… RealtyTrac: Last month lenders sent a record 108,716 notices of default, auction or repossession… Michael Darda, economist at equity trading firm MKM Partners LP: "These defaults are a lagging indicator, so they're probably going to get worse from here…" MGIC Investment Corp. (MTG), the largest U.S. mortgage insurer, lost about half its value this year. PMI Group (PMI), the second-largest, lost more than 30%. Third-ranked Radian Group (RDN) has fallen almost 60%."

Foreclosure Data

• County Foreclosures On Pace To Exceed 2006 Volume (Springfield Business Journal, Oct. 2nd) Missouri: "Home foreclosures continue to rise in Greene County and throughout the country, but local bank officials say they haven’t seen a parallel spike in mortgage loan defaults. Plenty of homeowners with adjustable-rate mortgages are, however, refinancing to sidestep higher monthly payments on the horizon when higher interest rates take effect. As of Sept. 26, Greene County has seen more than 500 home foreclosures, according to records maintained by the Recorder of Deeds office. After just nine months, the county is poised to surpass last year’s total of 513 foreclosures."

• A Remedy for Rising Foreclosures (West Bronx Blog, Oct. 1st): "Foreclosures in the Bronx jumped to an all-time high for Q3'07, according to Bronx nonprofit University Neighborhood Housing Program (UNHP). 441 one-to-four family homes went into foreclosure during the most recent quarter, topping the previous high of 438 set in Q1'07. While the majority of the foreclosures occurred in the East Bronx, both the Northwest Bronx and the South Bronx continue to display an alarming number of foreclosures, despite having fewer 1-4 family homes. In fact, the largest percent increase in the most recent quarter was in the Northwest Bronx, where filings jumped 39% to 74."

• Subprime Mortgages Contribute To Rise In Oshkosh Foreclosures (The Northwestern, Sept. 30th): "The norm for the sheriff's sales… was 6-10 properties for sale when consultant Steve Krueger started the job 18 months ago: "For November, we have over 30 sales [lined up] so far." Winnebago County Register of Deeds records indicate 2007 foreclosure filings could eclipse 600 this year, almost 120 more than the 486 filed in 2006. In 2005, banks filed to foreclose on just 362 properties. As of Aug. 31, 165 homes in the Oshkosh area, representing about $10.5 million in value or 0.5% of Oshkosh's residential property value, entered foreclosure in 2007… Oshkosh foreclosures filed this year have an average value of $84,000."

Global Impact and Alternatives To The Housing Slump

• Policies Fail To Curb Soaring Home Prices (China Daily, Oct. 2nd): "The National Development and Reform Commission (NDRC) admitted the country has failed to curb soaring real estate prices and will introduce stricter measures…. The State Council released a document last year requiring houses with an area of less than 90-sqm. must account for 70% or all the total homes being built… [But] the ratio was [only] raised from 21.16% last year to 24.73% in the January-August period. Investment in real estate development nationwide increased by 29% from January-August, [up 5% from] the previous year… From January-August, sales of houses had increased 30.9%, 21.6 percentage points higher than for the same period last year."

• Japan's Property Rebounds, but REITs Struggle (Wall St. Journal, Oct. 1st): "The recent pullback in [the Tokyo Stock Exchange's J-REIT index] presents some interesting bargains. UBS: Many J-REITs now trade at either a slight or no premium to their net asset values, and the spread between the 3.7% weighted-average dividend yield of the 41 listed J-REITs and a 10-year Japanese government bond was an attractive two percentage points at [the end] of September… Still, while commercial land prices managed a rise, residential prices actually fell nationally by 0.7%. [And] high-end Ginza [commercial] real estate may enjoy a new popularity, but… suburban shopping malls are [still] suffering from Japanese consumers' ongoing lack of spending power."

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

• Pending Home Sales Index Hits Record Low (Yahoo! Finance, Oct. 2nd): "The National Association of Realtors seasonally adjusted index of pending sales for existing homes fell 6.5% from July and 21.5% from a year ago. August's reading of 85.5 was below analysts' expectations and the lowest ever for the index, which started in January 2001. Analysts… had predicted the index would fall by 2% from July. The pending home sales index is designed to predict sales levels over the following two months… NAR chief economist Lawrence Yun: In expensive areas where borrowers have to take out "jumbo" home loans above $417,000… up to 30% of signed contracts had fallen through."

• Low Home Sales Could Impact Fall Furniture Market In High Point (Times and Democrat, Oct. 2nd): "With fewer people buying new homes, they have less need to buy furniture… analysts predict big furniture makers will suffer as they go into annual High Point Furniture Market [on] Monday. This is when exhibitors offer their latest home furnishings to buyers big and small… The Conference Board’s consumer confidence index, a standard gauge of the economy, fell in August and September. Furniture sales tend to drop further than the economy and often recover more quickly because buyers buy more on emotion than need… Continuing cheap imports from Asia are expected to undercut American companies, keeping their revenues down."

• U.S. Advertising Market Hit By Housing Slump, Study Says (Wall St. Journal, Oct. 1st): "Advertising forecaster ZenithOptimedia, a unit of Publicis Groupe S.A.: U.S. advertising spending is likely to slow for the remainder of 2007, with the current credit squeeze and housing market slump hitting budgets... ZenithOptimedia downgraded growth in the U.S. advertising market in 2007, to 2.5% growth from the 3.3% it previously forecast. "The continued slump in the U.S. housing market has led to a sharp drop in property and construction advertising, particularly in property classified in newspapers. This, and the recent credit squeeze, has led us to downgrade our forecast for growth in the U.S. this year," ZenithOptimedia said."

• Dollar Lifts Exporters, Blunting Housing Bust (Wall St. Journal, Oct. 1st): "Not long ago, the U.S. furniture manufacturing sector was in a free fall as domestic manufacturers shuttered factories and shifted work outside the U.S., especially to China. Business also migrated to Canada, which has abundant wood supplies and a thriving furniture sector. But over the past two months, RomWeber has seen a surge of business from distributors looking for alternatives to factories in Canada and other countries that have seen their currencies appreciate against the dollar."

Homebuilders And Housing Stocks

• Citigroup Ups 5 Top Homebuilders; Cuts 2 (Reuters, Oct. 1): "Citigroup upgraded the largest U.S. homebuilder D.R. Horton Inc (DHI) and… Lennar Corp (LEN), Pulte Homes Inc (PHM), Centex Corp (CTX) and Ryland Group Inc (RYL) to "buy". It downgraded MDC Holdings Inc (MDC) and Meritage Homes Corp (MTH)…Citigroup [said it] expects the larger-cap builders and those with the strongest balance sheets to benefit most from any near-term bounce… "Homebuilding stocks have an established history of rallying well before industry fears have finished transitioning into fact," said Citigroup analyst Stephen Kim."

• Citigroup Upgrades Four Homebuilders In Attempt To Call Bottom (Bespoke Investment Group in Seeking Alpha, Oct. 1st): "Citigroup [is credited] today for being the first firm to "try and call a bottom in the homebuilders." We don't think "trying" to call a bottom should account for much, and looking back at the firm's historical calls on the upgraded builders doesn't provide much relief either… Citigroup [see chart] had Buys on the stocks throughout their entire runup from 2003-2005, but they also had Buy ratings on them from their 2005 peaks to July 2007. To their credit, the stocks did decline quite a bit while they had a Hold rating on the stocks from July to now, but buying the builders because of these upgrades today is not a valid reason."

• Homebuilder C.P. Morgan Cuts Workforce (Indianapolis Business Journal, Oct. 1st): "C.P. Morgan Communities LP, the Indianapolis area’s largest home builder… made a “workforce reduction” as a result of the slowing housing market. The privately held company would not reveal how many jobs it cut or the types of positions eliminated. According to IBJ’s 2007 Book of Lists, C.P. Morgan filed 2,355 home permits and completed 2,426 closings in 2005, by far the most in the city... IBJ research: The homes average $135,000 and 2,400-sf. C.P. Morgan posted revenue of $510 million in 2006 and ranked 25th among private companies in the state."

• BUYINS.NET: CEA, USG, GLA, ASTI, FMDA, HNSN Have Been Added To Naked Short List Today (Trading Markets, Oct. 1st): "USG Corp. (USG) engages in the manufacture and distribution of building materials worldwide. The company manufactures and markets gypsum and related products in the U.S., Canada, and Mexico… Its gypsum products are used in various building applications to finish the interior walls, ceilings and floors in residential, commercial, and institutional construction, as well as in certain industrial applications… With 98.94 million shares outstanding and 16.2 million shares declared short as of August 2007, there is a failure to deliver in shares of USG."

• Homebuilder Stocks – Suckers (Seeing the Forest, Oct. 1st): "MarketWatch: "Home-builder stocks rose Monday after a Citigroup analyst raised his stock ratings on several of the sector's largest companies on signs the worst may be behind the embattled industry." Worst may be OVER? Let's see, highest housing inventory ever, difficult to get credit, mortgage rates rising in response to Fed bailout attempt, prices far, far, far above what an average person can afford, a huge wave of ARM resets coming next year... and some probably-23-year-old analyst sees a price bottom? Oh yes, go buy stocks based on a bottom - suckers."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

• Apple REIT To Acquire Richmond Marriott For $53 Million (CRE Feed, Oct. 2nd): "Apple REIT Seven Inc. is under contract to purchased the Marriott Richmond in Richmond, Va., for $53 million from an affiliate of The Procaccianti Group… It is located… in downtown Richmond. Completed in 1984, the 18-story property contains more than 36,000-sf of meeting and function space. Procaccianti acquired the hotel in July 2002. Apple REIT Seven is assuming $25.4M in debt as part of the transaction. Apple REIT Seven Inc., is a hotel REIT managed by David Lerner Associates Inc. The Procaccianti Group is a national hotel owner and manager based outside Providence, R.I."

• Third Time’s The Charm? Rocky Point Deal Inked (Projo.com, Oct. 2nd) Rhode Island: "Rocky Point Partners LLC — a consortium that includes James and Peter Leach of Leach Family Holdings, will pay $15.6 million… to buy 83 acres of the former Rocky Point Amusement Park property... The company plans to build as many as 225 townhouse-type condominiums with price tags in excess of $500,000... Failed prior attempts to redevelop the park property raise questions as to the certainty of this deal... Last winter, a consortium that included… homebuilder Toll Brothers, backed out when it failed to reach an agreement on the number of houses it would be allowed to build on the site."

• Darden, Rare Move Closer to Finalizing $1B Merger (Globe St., Oct. 1st): "Orlando-based Darden Restaurants Inc. has taken a step forward in acquiring Rare Hospitality International Inc. with the completion of its tender offer to acquire all outstanding shares of common stock of the locally based company. Darden paid $38.15 per share, cash… Darden will acquire all remaining Rare shares through a short-form merger under Georgia law at the same price per share paid in the tender offer… Rare will stop trading on the Nasdaq... The total $1.4-billion price tag included the assumption of outstanding debt and capital lease obligations."

• International Coal Group Sells Southern Illinois Coal Property to Arch Coal Subsidiary (CNN Money, Oct. 1st): "International Coal Group, Inc. today announced the sale of its Denmark Property in Southern Illinois to Ark Land Company, a subsidiary of Arch Coal, Inc. The Denmark Property is a 29,000 acre undeveloped mining area located in Perry and Washington Counties, Illinois. The Denmark Property was among the assets acquired by ICG in the 2004 Horizon bankruptcy sale. ICG received approximately $39 million in cash at closing on September 28. Under the terms of the transaction, Arch also is obligated to pay to ICG an overriding royalty totaling approximately $4 million on certain future production."

Web Site of the Day

The John A. Keith Boston Real Estate Blog offers information on a less-talked-about-but-nonetheless-bubble state. Boston prices rose dramatically in the recent boom years. Realtor John Keith will tell you all about what's going on now—something of a mixed bag depending upon the zip codes you are interested in. Keith's Boston Blog touches upon varied subjects. From Boston condos to New York City prices and mortgages. Worth a visit.

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