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"

"You get to the point of how long do you want this to last? We're just going to see what kind of offers we get. I'm expecting some reasonable offers." - Joe Anfuso, president and CEO of Stockton-based Florsheim Homes, on the company's latest sales effort. Florsheim is having a "name your price" sale of homes with no minimum bid set. (Record Net, Oct. 21st)

Real Estate Sales and House Prices

• September Home Sales Fall 18.7% In Mass. As Summer Sting Lingers (Boston.com, Oct. 23rd): "Warren Group: Massachusetts house... sales in September plunge 18.7%. Single-family home sales were 3,735 last month, down from 4,593 in September 2006...That was the largest decline in 12 months, when sales slid 22% below the previous year. In contrast, home prices in September fell much less - 4.4%, to $304,000. The condominium market showed a similar pattern: Sales dropped 19.5% last month to 1,893, and the median price declined 3%, to $260,000... Massachusetts Association of Realtors: Home sales volume dropped 13.7%, but prices fell just 0.3%... Despite September's decline... overall Q3 sales were still the fourth highest in 27 years."

• Economists: Utah Home Sales Market Solid Despite Numerous Challenges (Salt Lake Tribune, Oct. 23rd): "Salt Lake Board of Realtors: After years of increases, home sales along the Wasatch Front were down sharply in Q3, compared with Q3'06, while prices increased at a slower pace. In Salt Lake County, 2,712 homes changed hands in Q3, down 33.8% from Q3'06... Median selling prices, which had been increasing in many areas along the Wasatch Front in excess of 20% in 2006 when compared with 2005, are rising at a lower rate this year. Price gains in Salt Lake County and its neighboring counties north and south, for example, did not top 10% in Q3."

• Latest Sale Item May Be New Home (Trading Markets, Oct. 22nd): "Builders in the Las Vegas Valley pulled more than 120,000 new-home construction permits from 2003-2005, and as those homes have come online from 2005-2007, new-home sales have dropped in almost every month since May 2005. Research firm Hanley Wood: The Las Vegas market had a standing inventory of 6,000 new homes at the end of August, the latest month with available statistics. Yet, builders sold just 998 homes in August, less than a quarter of the 4,400 units they moved at the market's peak in May 2005. That leaves builders with six months of inventory at current sales rates."

• The Manhattan Rental Market Report October 2007 (The Real Estate Group of NY, Oct. 22nd): "All average NY apartment rents decreased this month at the start of Q4'07... signifying the continuation of a cooling rental market typical in the fall... In an effort to keep rent rolls up and minimize vacancies, landlords are offering unconventional incentives ranging from free iPods and digital cameras at lease signing to overseas airline tickets and all-expense paid trips for brokers who close the most deals at Peter Cooper Village / Stuyvesant Town. Landlords have also increased offers to pay the tenant’s one month’s rent or their agent’s brokerage fee."

Mortgates and Real Estate Lending

• Analyst Actions: MGIC Investment, Dollar Tree Stores, Overstock.com, SanDisk, Fuel Tech (Business Week, Oct. 22nd): "Lehman Brothers reinstates underweight ratings on MGIC Investment (MTG) and Radian (RDN)... Lehman Analyst Bruce Harting: "The hefty expected losses in the mortgage sector cannot happen in a vacuum. It is just a matter of time before problems spill into other loan sectors in consumer finance." He downgrades Countrywide Financial (CFC) and IndyMac Bancorp (IMB) to underweight from equal-weight. He also downgrades Washington Mutual (WM), American Express (AXP), Capital One Financial (COF), Discover Financial Services (DFS), and PMI Group (PMI) to equal-weight from overweight."

Global Subprime Fallout

• EXCLUSIVE: More Job Losses Expected At Lehman Brothers (Mortgage Strategy, Oct. 23rd): "Up to 75 more UK jobs are expected to be at risk of redundancy at Lehman Brothers as the crisis in the credit market worsens. Simon Hinshelwood, CEO at the group: “When I announced we were going to resize on September 6 the sub-prime market looked like it was going to be off between 25%-40%... Now it looks like it's going to be off 50%... While I thought the impact would be 150 people, what I'm saying now is the impact is going to be between 175-225 people."

Subprime Fallout

• Countrywide Offers 'Unprecedented Remedies' to Struggling Mortgage Holders (Roy Mehta in Seeking Alpha, Oct. 23rd): "Countrywide Financial announced Tuesday it will begin contacting about 82,000 borrowers to offer refinancing or modifications for a total of $16 billion worth of loans. The U.S.'s largest lender is targeting home buyers who are facing higher payments on adjustable-rate mortgages before the end of 2008... Countrywide said it would refinance about $10B in loans and modify another $4B for borrowers who face resets next year. In addition, the company will reach out to borrowers owing about $2.2B, who are already late on their loans and are having trouble paying them because of a recent rate reset, and provide some... relief."

• Lenders Curb New Mortgages In Weaker Areas (Wall St. Journal, Oct. 23rd): "Lenders such as J.P. Morgan Chase & Co., Citigroup (C) and Wells Fargo (WFC) are [reassessing] appraisals [and] are cutting the maximum amount some borrowers can finance in counties or states where home prices are declining... [Such as] parts of California, Florida and Michigan. Lenders in the past have come under criticism for their failure to make loans in minority neighborhoods, a practice known as "redlining." The latest round of tightening... is aimed at markets where home prices are falling... Equifax Inc. and Moody's Economy.com: The national mortgage delinquency rate jumped to 3.3% in Q3'07 from 2.3% in Q3'06."

• Head Of Troubled Bofa Unit Leaves: Big 3rd-Quarter Losses For Structured Products (Trading Markets, Oct. 23rd): "Bank of America Corp. (BAC) on Monday confirmed that its head of structured products left the company Friday, a day after the bank reported dismal third-quarter results in its corporate and investment banking unit. Within this unit, Chris Hentemann had been in charge of products such as mortgage-backed and asset-backed securities and related trading... Bank of America chairman/CEO Ken Lewis: The corporate and investment bank helped depress overall third-quarter earnings by 32%: "There will be some scaling back."

• Mortgage Insurers' Pain Likely To Extend Into 2008 (CNN Money, Oct. 22nd): "Mortgage insurer MGIC Investment Corp. (MTG) Friday reported a net loss of $372.5 million. It said it will likely be 2009 before the company is able to report a profit... Old Republic International (ORI)... got an [analyst] downgrade in advance of its Q3 earnings report... S&P [said] it "probable" that all seven of the largest mortgage insurers will report underwriting losses next year... Claims to insurers can amount to as much as 35% of the loan's value... The ratings agency put both MGIC Investment and PMI Group Inc. (PMI) on credit watch with negative implications after both reported higher-than-expected losses."

Foreclosure Data

• Renters Caught In Foreclosure King's Fall (New Haven Independent, Oct. 23rd): "New Haven's Foreclosure King, controversial landlord Anthony Perrotti, is letting [more than] 50 houses fall back to the bank...An estimated 788 New Haven homes are currently in various states of foreclosure... The Warren Group: The number of legal proceedings filed against residential homeowners jumped 85.1%, from 121 in the Q2'06 to 224 in Q2'07... [Foreclosure] attorney Americo Carchia... said he's seeing investors... letting go of more and more homes lately. Many bought up properties in the last cycle of foreclosures in the early 1990s. As equity climbed, they took out second mortgages, freeing up money to buy more homes."

• Homeowners Turn to Bankruptcy to Stave Off Foreclosure (Eli Hoffmann in Seeking Alpha, Oct. 23rd): "Consumer bankruptcy filings jumped almost 23% in September as a growing number of homeowners looked toward bankruptcy as a way to stave off foreclosure on their homes. American Bankruptcy Institute: Nearly 69,000 people filed for personal bankruptcy in September. During the first nine months of 2007, it said, filings are up 44.8%. Chapter 7 bankruptcy provides only a temporary break in foreclosure proceedings, so an increasing number of homeowners are now filing Chapter 13 bankruptcy proceedings, which give homeowners 3-5 years to pay off debts... Forty percent of filings are now under Chapter 13, up from 30% in 2005."

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

• A Troubled 'Ownership Society' (Business Week, Oct. 22nd): "Federal Reserve Bank of Atlanta: The bulk of the increase [in homeownership] was caused by innovations in the mortgage market, in particular the explosion of "piggyback" or "combo" loans... Lenders aren't making many of those loans anymore... If the homeownership rate drifts back to where it was in 1995, the outlook for housing construction and home prices could [be] worse than the pessimistic projections. Jan Hatzius of Goldman Sachs: "Our current forecast calls for a decline in new home sales to a trough level of 650,000 by Q1'08... However, simple arithmetic suggests that this estimate could still prove much too optimistic."

• Two Cheers for Greenspan and the Housing Bubble (USA Today, Oct. 19th): "[This] housing boom dramatically increased the net worth of many Americans, who are still sitting on huge gains even with the bubble now deflating. And even after all the subprime defaults and foreclosures, homeownership is still likely to be higher than it otherwise would have been... Just as the Internet bubble left behind Google, eBay, and 90 million miles of fiber-optic cable, the credit bubble upgraded America's aging housing infrastructure and created a host of online services—Realtor.com, Zillow—that have permanently shifted the balance of power from real-estate agents to consumers."

Homebuilders And Housing Stocks

• Rohm and Haas Company Reports Third Quarter Results; Diversified Global Portfolio Drives Strong Overall Performance (CNN Money, Oct. 23rd): "Rohm and Haas Company (ROH) today reported Q3'07 sales of $2,204 million, a 7% increase over Q3'06, reflecting strong performance across all business segments and in all regions outside of North America... Sales for the Paint and Coatings Materials business were $570M, an increase of 4% over Q3'06. The higher sales reflect strong demand growth in Rapidly Developing Economies including China, Southeast Asia and India, where the company has been successful in launching new products specifically targeted for unique market needs. Volumes in the U.S. for this business were down 1% in Q3 compared with the prior-year period, reflecting weaker demand in the housing-related markets."

• Area Homebuilder Closes, Files For Bankruptcy (Herald News, Oct. 23rd): "Chicago-area homebuilder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees. Neumann, the Chicago area's ninth largest builder, blamed its predicament on a drop of more than 50% in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million... "Neumann CEO: The market downturn in the Chicago and Denver housing markets [is] now in excess of 50%, with home prices dropping from 10-25% in some submarkets."

• Housing Woes and Pain Avoidance (Seeking Alpha, Oct. 22nd): "Comstock Homes (CHCI), [last] Friday announced that net orders for Q3 were... 3. And net new order revenues were -$11.5 mln... For the entire month of September, CHCI managed to close on four units at The Eclipse project, which is becoming pretty much synonymous with the faith of the company. The “big enchilada” looms in January of 2008, when the already extended, limited-recourse $40M balance on The Eclipse loan comes due to Corus Bank (CORS). To pay that off CHCI will have to sell more than 100 of the remaining 145 units, not a likely event at the current pace."

• Home Construction Stocks Rebound From All-Time Lows (CNN Money, Oct. 22nd): "Homebuilding stocks rose sharply Monday, bouncing off all-time lows... The iShares Dow Jones (DJ) U.S. Home Construction ETF (ITB) rose 5.5% to $20.47... The SPDR S&P Homebuilders (XHB) jumped 5.8% to $22.11. NVR Inc. (NVR) led the advancers with a rise of more than 11% to $479.6. [On] Friday NVR reported Q3 earnings that were ahead of some analyst expectations... Data on U.S. existing and new homes sales [will be out] later this week: Existing home sales are expected to decline to 5.2 million in September from 5.5 million in August, while new home sales likely fell to 775,000 in September from 795,000 in the previous month."

• Latest Sale Item May Be New Home (Trading Markets, Oct. 22nd): "Lennar Corp. (LEN) and Pulte Homes (PHM) are offering price breaks of tens of thousands of dollars in seasonal sales events that run through Sunday. Lennar is lopping off as much as 20%, or up to $200,000, from asking prices on local inventory ready to close before the company's fiscal year ends Nov. 30. And with its nationwide "Monster Sale," Pulte is lowering prices 15% on homes in its Pulte division, and $55,000 on properties through its Del Webb subsidiary... Lennar cut prices on its local homes by as much as $100,000 in 2004; [which] resulted in lawsuits from several buyers who'd purchased homes at higher prices."

• Are the Homebuilders a Bargain? (Motley Fool, Oct. 22nd): "NVR is still profitable [and] the company... doesn't carry a lot of [land] relative to its size on the balance sheet... NVR still trades at... nearly twice book value. The company has a debt-to-equity ratio of about 27%. Land write-offs have come in at much lower rates than for the other companies. Shares outstanding have declined from 11 million in 1997 to about 5.5 million today. Chairman Dwight Schar owns more than 9.9% of the shares... He requested his salary be reduced to zero in 2007 and that executives are required to own stock equal to six to eight times their annual salary."

• Home Builder Shares Soar (Washington Post, Oct. 22nd): "Shares of home builders soared on Monday as a frenzy of short sellers bought stock to cover their positions... The Dow Jones U.S. Home Construction Index (.DJUSHB)... rose 8.1% in mid-afternoon trading. Alex Barron, Agency Trading Group analyst: "When you see this kind of move it's because the stocks are over-shorted..." Meritage Homes (MTH), Hovnanian (HOV) and Beazer (BZH) are all on the NYSE's threshold securities list. That means short sellers have had trouble finding enough of the stock to borrow over the last few weeks. That makes those stocks particularly vulnerable to short covering. Some investors to think that the stocks have reached a bottom."

• Nervous Buyers, Anxious Sellers (North Jersey.com, Oct. 21st): "The National Association of Homebuilders surveyed about 300 homebuilders... in October and found that nearly 60% of all builders and 75% of larger companies had recently cut prices [an] average of 8%. More than a third had dropped prices by more than 10%. But only half the builders said their price cuts had worked to increase sales or limit cancellations. Builders are... also trying to motivate real estate agents to motivate buyers by offering bonuses to agents... Developer American Properties is offering $25,000 bonuses to brokers whose buyers close on Bellaire luxury town homes in Demarest before the end of 2007."

• Middle Smithfield, Developers Negotiate Big Ridge's Fate (Pocono Record, Oct. 20th): "Residents are nervous as attorneys for Middle Smithfield Township, Toll Brothers (TOL) homebuilders and the Big Ridge development continue to negotiate the home project's future in private... At stake is the legal status of the north side of Big Ridge, which the township contends was illegally developed by Toll as a separate, unauthorized housing project. Toll insists that its development north of Tom X Road is just another construction phase for Big Ridge... under the planned residential development granted preliminary approval by the township in 1988. Big Ridge Developers LP, the current developer of Big Ridge, agrees with Toll."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

• Teacher’ Fund Buys Into Mall On Maui (Star Bulletin, Oct. 23rd): "Another small neighborhood shopping center on Maui was sold this month to a mainland real estate investment and development firm... Chicago-based M & J Wilkow Ltd. bought the fee-simple interest in the 40,974-square-foot Kukui Mall in Kihei on Oct. 1 for $18.7 million... The fund that acquired the mall, Wilcal Maui LLC, is operated by Wilkow and the California State Teachers' Retirement System.The recent sale is one of several large transactions involving Maui retail properties over the past month, part of a growing trend of mainland investors aggressively competing to acquire properties in Hawaii."

• SL Green Announces Sale of 470 Park Avenue South (PR Inside, Oct. 23rd): "SL Green Realty Corp. (SLG) announced today that it has entered into an agreement to sell 470 Park Avenue South in Manhattan for $157 million, or approximately $604/sf, to an undisclosed institutional owner of real estate. The 260,000-sf, 17-story plus penthouse office building, located on Park Avenue South between 31st and 32nd Streets, was contributed to the SL Green portfolio in 1997 in connection with the Company's initial public offering. It is currently 96% leased. The sale of 470 Park Avenue South will generate a gain of approximately $118.4M for SL Green."

• Principal Real Estate Investors and Miller Global Properties Enter Joint Venture Agreement (Business Wire, Oct. 22nd): "Principal Real Estate Investors, the fourth largest manager of real estate assets in the U.S. based on tax-exempt assets under management1 and Miller Global Properties, announced today that they have entered into a joint venture to develop the JW Marriott San Antonio Hill Country Resort and Spa, which is set to open Spring of 2010... The project consists of 12 structures totaling 1,153,055-sf. Complementing the resort facilities are two 18-hole championship TPC golf courses designed by Greg Norman and Pete Dye, including a clubhouse facility, practice facilities and other PGA quality golf amenities."

• Commercial Real Estate: Top Space At A High Price (Newsday, Oct. 22nd) Long Island, New York: "As the real estate market softens, many are sitting on their hands. But Beige, president of Richmond Hill-based Rubie's Costume Co., is going ahead with a project many in the industry say will require the highest rents ever asked in western Suffolk -- probably north of $40 per square foot."

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