Housing Bubble and Real Estate Market Tracker

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 |  Includes: BAC, CFC, CORS, CTX, GS, HOV, JOE, KBH, LEN, LEV, PHM, PLD, R, SF, TOA
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"

"This is not a fire sale. We are not dumping stuff on the market and we are not going to make stupid decisions but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.'' - Homebuilder St. Joe's CEO Peter Rummell on the company's plan to fire workers, sell 100,000 acres of land and sell thousands of developments. (Bloomberg, Oct. 8th)

Real Estate Sales and House Prices

  • Long Slump In Housing Cuts Ranks Of Real Estate Agents (AJC.com, Oct. 9th): "South Carolina: Statewide, home sales for the first eight months of 2007 were off about 8% from the same period last year. The biggest declines were in Beaufort, Myrtle Beach, Conway and Georgetown, where sales were off more than 20%. In Charleston, sales trailed last year's by 15%. Areas such as Greenville show a slight drop in that August-to-August period, but that city, Columbia and other inland locales show small gains when viewing the first eight months of 2006 and the first eight months of 2007."

  • Prudential Georgia Realty: State of the Real Estate Market (RIS Media, Oct. 8th): "Atlanta did not experience a big run-up in prices and has great prospects for the long-term trends that will positively affect home values. In H1'07, the Atlanta real estate market was off slightly - running around 2004 to 2005 levels. Since June, there has been a significant drop. In August, Smart Numbers reports that closed sales were off 34.6% which is the largest decline on record since 1996. Pended sales and units were off even more."

  • Homes Sales Still Hot in Some Bay Area Cities (KCBS.com, Oct. 8th): "You might think the days of multiple offers were over in the slumping real estate market. But not in cities such as Cupertino, Saratoga and Palo Alto. Even as… foreclosures continue to mount locally, home sales are booming in areas where schools have high test scores. Ron Delan, a broker with Alain Pinel Realtors in Saratoga: "I just sold a property in Cupertino where we had 20 offers on the property and it sold for $200,000 more than the asking price." Another home he listed received 10 offers, he said. Currently, there are 79 listings in Cupertino."

  • D-FW Pre-Owned Home Sales Plunge 19% (Dallas News, Oct. 8th): "North Texas home sales plunged in September. The 19% drop in sales of pre-owned homes was the largest annual decline in more than seven years. But area home prices stayed positive – up 3% for the month. North Texas Real Estate Information System: Local real estate agents sold only 6,031 pre-owned homes last month. That's a big falloff from August's 8,480 sales and the lowest monthly total since February… At the end of September, almost 49,000 pre-owned single-family homes were for sale in North Texas, an increase of about 4% from a year earlier. That works out to about a 6.5-month supply. On average, it took 74 days to sell a house listed in the Realtors' multiple listing service."

  • Home Sales In Alabama Buck Nationwide Trend (Southwest Florida Herald Tribune, Oct. 8th): "Alabama Center for Real Estate: Though home sales in Alabama have experienced a modest decline, the state housing market remains ahead of national trends. As of July, sales of existing homes nationwide had declined by 9%, according to the National Association of Realtors. In contrast, year-to-date home sales in Alabama had dropped only 2.45%, according to the Alabama Center. Tuscaloosa was one of a handful of Alabama counties to post year-to-date gains in their local markets, with a 1.91% increase in existing home sales over 2006."

  • Today's Housing Bubble Post- From $630,000 to $285,000 (Seeing The Forest, Oct. 8th): "A San Francisco Bay Area homebuilder can't sell all the houses it built in a development in Manteca. Current residents paid up to $630,000 for a 3-hour round-trip commute. But now they're auctioning the remaining homes, starting at a more realistic price of $285,000. This [will] have a huge impact because it means every homeowner in the SF Bay Area who thinks they have a $630,000 property now will begin to realize that in the end, if they want - or need - to sell that house, they are going to be competing with $285,000 prices."

  • 'Betrayed By Our Builder' (Mercury News, Oct. 8th): "Central Valley, Northern California: One-third of the [newly-built] houses in Paseo West will go on the auction block Saturday… houses that wouldn't sell even though Anderson Homes cut prices by $100,000 and offered free granite countertops and big screen TVs with surround sound… On Sunday, Anderson is also auctioning 25 homes in a Los Banos subdivision… Swaths of subdivisions are being auctioned off in Florida, New York and Southern California, and in the coming weeks, Kennedy Wilson, the company conducting the Manteca and Los Banos auctions, is auctioning new condominiums in San Pablo and new homes in Pinole."

Real Estate Investing and Sentiment

  • Survey: Real Estate Still No. 1 Investment (Birmingham Business Journal, Oct. 8th): "Despite a slow national real estate market, a recent survey showed real estate is the No. 1 choice for self-directed investors. Guidant Financial Group conducted a survey of nearly 1,000 self-directed IRA holders and found that nearly 65% of the respondents said they were considering property as an investment for their retirement savings. Nearly 60% chose rental property, more than 36% chose foreclosures and preforeclosures and more than 28% chose raw land… Other choices [in] the survey included: tax liens and deeds, 29%; business/franchise, 22.8%; hard money lending, 22%; notes, 19.3%; vacation property, 19%; foreign investments, 10.4%; and securities, 7%."

Mortgates and Real Estate Lending

  • Lender's Woes Getting Wider And Wider (Trading Markets, Oct. 8th): "Countrywide (CFC) Chairman and CEO Angelo Mozilo caught flak in Q3 for cashing in $138 million in stock options during the past year as the housing market sank. [Now] a judge in Delaware ruled that [the] lender must turn over confidential details on how it grants stock options. The Louisiana Municipal Police Employees' Retirement System, a Countrywide investor [is suing] because it thinks there is something suspicious about stock grants to company executives… The company announced Friday that in accordance with the terms of a pre-arranged stock-trading plan, Mozilo would start selling more shares Monday and continue through Oct. 12."

Global Subprime Fallout

  • Sub-Prime Loans Blamed For 7,000 Lost Homes (Telegraph, Oct. 8th) UK: "Seven out of 10 homes repossessed in recent months were owned by people who bought them with the help of "sub-prime" mortgages… Research shows that sub-prime mortgage lenders are responsible for more than 70% of 7,000 homes repossessed in the last three months. There are no official figures for how large the sub-prime market is in the UK, but property experts estimate these loans account for less than 10% of the total number of outstanding mortgages."

Subprime Fallout

  • Merrill Should Have Taken Its Own Advice (Mark McQueen in Seeking Alpha, Oct. 8th): "Bulge bracket firms value their assets each nano-second… Dozens of people would have access to the values of Merrill’s CDO and subprime book, yet the timing of yesterday’s release would suggest that US$5.5 billion in lost value was only discovered during the internal process leading up to the quarterly results. Unlikely. Given that a US$1B profit was expected by the analysts, Merrill would know that a US$450 million loss is a material EPS miss. By a Country(wide) mile. Where was the profit warning? To pretend that no one in authority knew until this week that the firm’s CDO assets were wildly over-valued isn’t credible."

  • The Evidence Calls For A Reality Check (Hartford Courant, Oct. 9th): "Those who believe that yesterday's huge writedowns mean there are no more skeletons in the closet could be in for a rude surprise," Merrill Lynch chief North American economist David Rosenberg said in a note to clients. "After all, at the root of the market volatility and weakness this summer was the U.S. housing market, and everything from sales to starts to inventories to pricing has become much worse in recent months."

  • Bofa Looking At $1 Billion In Mortgage Write-Down (East Bay Business Times, Oct. 8th): "According to analysts at Sanford Bernstein, Bank of America Corp. (NYSE:BAC) is looking at a $1 billion write-down of mortgage securities and leveraged loans when it reports its third-quarter earnings next week… BofA's leveraged loan losses could be $700 million… and mortgage write-downs could be $300M… BofA has been out of the subprime loan business for years. But the Financial Times reports the bulk of its markdowns will come from leveraged loan commitments the bank had intended to syndicate, but on which it would take a loss if they were sold now."

Foreclosure Impact

  • Foreclosure Counselors Are Swamped (Delaware Online, Oct. 9th): "Foreclosure filings in Delaware continued to tick up in September, rising 15.5% last month compared with a year earlier, and bringing the total filings for the state up 32.7% for the first quarter of the fiscal year. Hardest hit was Sussex County, which saw a 75% increase in foreclosure filings for the quarter ending in September, from 97 last year to 170; Kent county's quarterly totals were up 47%, from 104 last year to 153 this year; while filings in New Castle County were up 21%, with 599 filings, up from 494 a year ago."

  • Credit Scar Left by Foreclosures Leave Many Without Homes (News 10, Oct. 9th): "Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure. That means thousands of homeowners, often with their children, are in a fix to find some place to live. Shelters in the area are showing the first signs that some in search of a new roof over their heads will be luckier than others. Michelle Steeb, the director of St. John's Shelter for women and children… says finding the families on the rebound from foreclosure a new permanent home won't be easy. "Their credit is affected. Their families won't be able to take care of them forever."

  • As Foreclosures Widen, A Neighborhood Erodes (Boston Globe, Oct. 7th): "Mario DeJesus struggled under crushing mortgage payments for two years. Now, about to lose his home to foreclosure, he [can't afford] to move his family into an apartment. Altagracia Portorreal sleeps uneasily since teenagers broke into the vacant [foreclosed] home next door... Bienvenido Chalas is cutting the hours of employees who clean carpets and refinish floors as foreclosures drag down the housing market that supports his business. DeJesus, Portorreal, and Chalas are three faces of the foreclosure crisis sweeping the north side of Lawrence, a crisis that is uprooting families, destabilizing neighborhoods and shaking a local economy only beginning to recover from the real estate crash of the 1990s."

Global Alternatives To The Housing Slump

  • London's Prime Property Heads South (UK Telegraph, Oct. 9th): "High-end estate agent Knight Frank has revealed that Southbank is the first area of central London to be added to its prime central London index, since the addition of Notting Hill in the mid-1990s… It said that rising demand from affluent residents and the creation of London's first contemporary urban quarter – thanks to attractions such as the Oxo Tower and the Tate Modern – has helped boost the returns from property in the area... Liam Bailey, head of residential research at Knight Frank: "Over the short to medium term this area will substantially outperform central London in terms of pricing growth."

  • Goldman's Simplex Bid Sends Real Estate Stocks Higher (Bloomberg, Oct. 9th): "Shares in Simplex Investment Advisors Inc., which manages about 200 properties in Japan, were set to rise by their daily limit after Goldman Sachs Group (NYSE:GS) offered a 43% premium in a takeover bid, sending real estate stocks higher… Investment banks, REITs and private equity firms are acquiring [real estate] assets… after Japanese property prices rose last year for the first time since 1991. Goldman spent 2 trillion yen since 1998 on office buildings, golf courses and resorts in the nation while Morgan Stanley… bought offices and hotels."

  • LIM Advisors Plans $200 Million Asia Property Fund (Reuters, Oct. 9th): "Lim Advisors plans to launch an Asia property fund initially worth up to $200 million and probably listed on a European exchange, according to veteran Hong Kong property analyst Peter Churchouse, who will run it… Churchouse said the fund was mostly aimed at European family offices and private banks keen to invest in residential development and offices in Asia's thriving property markets. He hoped the new fund, which could be listed on London's Alternative Investment Market or in Dublin or Luxembourg, would grow to $1 billion in 3-4 years from an initial US$100M-$200 million."

Macro-Economic Aspect, And Will The Housing Slump Cause A Recession?

  • When It Comes to Real Estate Job Loss, Commercial Sector Fares Better (Commercial Property News, Oct. 8th): "When it comes to job loss in the real estate market, the commercial sector is relatively unscathed compared to its residential twin. However, former residential agents may find the transition to working in the commercial sector a difficult one. Robert Vallera, a principal with Commercial Realty Advisers, tells the Voice of San Diego that many agents are "shuffling around" seeking jobs in the commercial sector, but that he expects many other agents to fall out of the profession entirely."

  • Long Slump In Housing Cuts Ranks Of Real Estate Agents (AJC.com, Oct. 9th): "South Carolina is adding 500 new real estate agents… a month, but the rate of y/y increase is declining. From 2002-2006, the number of new real estate licensees increased an average of 45.3% annually, but fell in the last year to an increase of 4.1%. The National Association of Realtors expects membership rolls to decline this year for the first time in a decade. The group finished 2006 with nearly 1.4 million members — almost double the roughly 716,000 it had in 1997 — but expects 2007 to close with 1.3 million."

  • Ryder Cuts Profit Forecast, Citing Slowing Economy (Reuters, Oct. 8th): "Truck leasing and logistics company Ryder System Inc (NYSE:R) cut its third-quarter and full-year profit forecast on Monday, saying "Economic conditions have softened considerably in more industries beyond those related to housing and construction." It cited softer-than-expected demand in its commercial rental product lines and lower prices for used vehicles. Ryder expects Q3 earnings of $1.12-$1.14/share… down from its earlier forecast of $1.20-$1.23. [It cited]… $12 million in restructuring charges related to the elimination of some 300 jobs. Ryder expects third-quarter profit of $1.09-$1.11/share. The company lowered its 2007 earnings forecast to $4.10-$4.15/share before special items, down from its prior view of $4.30-$4.35.

Homebuilders And Housing Stocks

  • Changes Loom For Home Builder (AZ Central, Oct. 9th): "Homebuilder TOUSA Inc (TOA) said it hired Lazard Freres & Co. to conduct a complete review of its capital structure. Last week, TOUSA withdrew its financial guidance for 2007 and 2008… TOUSA [says] operations in Arizona, Colorado and Nevada accounted for $47 million in red ink from continuing operations, compared with $42M in homebuilding losses in mid-Atlantic states and $15M in Florida. Texas operations showed a $14M profit… Morningstar analyst Eric Landry: "It's likely TOUSA will now have to turn more heavily toward asset sales in an effort to stave off a restructuring, a strategy we think has little chance of success."

  • Home Builders Trying To Design A Comeback (AJC.com, Oct. 9th): "Chris Lemley, assistant professor of marketing at Georgia State University: By connecting its brand to other established, high-profile companies with loyal followings [Disney, Martha Stewart], KB Home (NYSE:KBH) is positioning itself to capture sales from [young families who move state-to-state] … Barry Ritholtz of Fusion IQ: [Only] dramatic price reductions will reduce the massive inventory… across the country… Pulte Homes' (NYSE:PHM) Del Webb division, and Levitt Corp… have rolled out a strategy in metro Atlanta aimed at retirees… Caryn Klebba, Del Webb corporate communications manager: Sales in Del Webb communities as a whole outperform other Pulte communities."

  • A Bank Bet on Condos, but Buyers Want Out (NY Times, Oct. 9th): "Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans... If buyers do not close, and developers struggle, lenders like Corus Bankshares (CORS) may be left holding the bag… Today, developers owe Corus $4 billion, $3.7B of which, or 92%, is in condominiums… More than $2.15B of its outstanding loans are due by the end of this year. Marcus & Millichap RE Investment Services: Nationwide, the number of condos completed this year will be up 45%— 232,933 vs. 160,239 — from 2006… But sales have fallen 12% through August. And recent trends in Las Vegas and Miami, where at least six Corus-financed projects will be finished by next summer, are worse… About one-third of Corus' shares have been sold short, a strategy used by speculators to profit from falling stock prices."

  • Builders Reassess Their Supply Chains (Builder Online, Oct. 8th): "Over the past few years, Centex (CTX) has been… devising new operational and value engineering strategies that include making greater logistical use of CTX Builder Supply, [its] network of six distribution centers [for] lumber and structural components… [This] could save between 30%-50% by sourcing other [construction] products… from China. Luis Solis, president of supply-chain consultant Symbius: Many big builders out of necessity must alter how they purchase and receive building products as they reduce their starts dramatically. (Centex's distribution network in particular depends on volume to cover fixed costs, Solis notes.) Lennar's once strong regional supply chain management structure "has all been cut out."

  • Lennar Not Killing Anaheim, Irvine Projects (Orange County Business Journal, Oct. 8th): "Orange County: "Sales are slow at Lennar's (NYSE:LEN) 1,500-home Central Park West development in Irvine [and] Platinum Triangle’s A-Town in Anaheim and Irvine’s Great Park. Lennar’s Aliso Viejo office… has seen its share of layoffs... Emile Haddad Lennar CIO: The delays are… not due to financial problems or a lack of faith in OC… “Ownership of OC land sits largely in the hands of three companies, and none of them is under pressure to discount the land. The Irvine Co. doesn’t need to liquidate… Rancho Mission Viejo LLC isn’t going to do that, and we aren’t going to do that.”

  • Homebuilders Use Car Dealer Tactics On New-Home Lots (AZ Central, Oct. 8th): "Faced with a glut of unsold homes and canceled contracts, builders are now turning to tactics typical of car dealerships and department stores… Deals [with incentives] are often accompanied by deep price cuts, which builders had been reluctant to do up until now… Craftstar Homes recently had a "Luxury Home Clearance Sale!" where customers could win a vacation and up to $110,000 off an already-built house. Buy a Ryan Home and get "employee pricing," or 10% off the purchase price... Chris Longly, public affairs manager for the National Auctioneers Association: Such sales are the fastest-growing sector of the auction industry."

  • St. Joe to Cut 760 Jobs, Sell 100,000 Acres of Land (Bloomberg, Oct. 8th): "St. Joe Co. (NYSE:JOE), Florida's largest private landowner… [will] sell about 100,000 acres of land… [cut] 260 jobs and transfer 500 workers, about 75% of its workforce, to its development partners, and sell 190 homes and about 1,200 developed home sites. St. Joe [will take] a $30 million charge [this quarter and] have $7M in severance costs this year and next. St. Joe is shifting from building homes in Florida… to developing planned communities and handing off their management to… strategic partners… The restructuring will save about $10M in 2008, $18M in 2009 and $20M in later years… St. Joe will replace its dividend with a share buyback program."

  • Suit Puts Hovnanian Under Fire (NJ Biz, Oct. 8th): "K. Hovnanian (NYSE:HOV), NJ's largest homebuilder, was accused last week of violating a state environmental permit by failing to provide affordable housing units at Four Seasons at Historic Smithville, an active adult development encompassing 3,000 homes in Galloway Township. According to the lawsuit, which was filed by the Fair Share Housing Center in Atlantic County Superior Court, state environmental regulators had approved the development on the condition that 20% of the homes would be affordable for low- and moderate-income families… K. Hovnanian reportedly has not built affordable housing units on the development."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

  • Banker-Broker Stifel Avoids Mortgage Mess (CNN Money, Oct. 9th): "Stifel Financial (NYSE:SF) broke out of a cup-with-handle over 59.70. It cleared a handle Oct. 2, but volume so far is nowhere to be seen… The cup to this base, just 22% deep, shows how Stifel avoided the worst of the subprime-mortgage fallout… Stifel lifted its bottom line 118% in Q2... Sales swelled 106%... REIT operator ProLogis (NYSE:PLD) also broke out of a cup-with-handle on low volume. It's 6% above its 66.96 buy point, and 2% off its 52-week high, 72.08. ProLogis grew its funds from operations 91% two quarters ago, then cooled to 39% and 29% the next two periods. Revenue rose 45% to 67% the past three quarters, after a 10% rise in Q3'06."

  • Health Care REIT Invested $230M in 3Q (Forbes, Oct. 8th): "Real estate investment trust Health Care REIT Inc. said Monday that it made gross investments of $230 million during its Q3, including $112.8M in acquisitions. The company said that its asset sales and loan payoffs totaled $49.2M during the period, which led it to net new investments of $180.8M during the quarter. Health Care's acquisitions included six medical office buildings and a continuing care retirement community."

  • Report: Irvine Buys into SoCal Archstone Portfolio for $1.4B (Commercial Property News, Oct. 4th): "[As] part of the larger $15.2B buyout of Archstone-Smith (ASN) by the partnership of Tishman Speyer Properties and Lehman Bros… it now seems that the new owners of the Archstone portfolio will offload most of the interest in Archstone's Southern California properties to Irvine. WSJ reports Irvine will pay $1.4 billion for a 90% stake in the SoCal portfolio, with Tishman and Lehman retaining the remaining 10%... The portfolio consists of 18 properties and a total of 6,137 units. Privately-held Irvine Co. owns properties across all sectors in San Diego, Orange and Los Angeles counties and Silicon Valley."

Web Site of the Day

The Real Estate Investors Blog features interviews with real estate investors on a weekly basis. The site contains invaluable information for real estate investors and for market trackers alike. Today there's a blog about North Texas market prices and one about the rental market in various parts of Colorado. There's one about the hotel industry and of course, about foreclosures. You can comment or ask real estate questions and get answers. A great find.

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