Housing Market Tracker - Housing Stocks

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

"I've been advising builders, in general, (to) do whatever it takes to get rid of inventory now because the prospects for house prices in the coming year don't look good. I'm afraid that '08 may be a year of pretty systematic price erosion, at least in many markets." – National Association of Home Builders.chief economist David Seiders. (BusinessWeek, Nov. 16th)

Mortgage/Credit Related Stocks

• Fannie Mae Looks Like Hell (Barry Ritholtz in Seeking Alpha, Nov. 19th): "Fortune: "Fannie Mae has changed [the way it] discloses its bad loans -- a move that could mask that credit losses that are rising above levels that the company predicted just three months ago. Without the change in disclosure [Fannie's] financials would have looked much worse... last week... Fannie Mae was severely penalized last year for overstating earnings and for a lack of oversight." Friday, Fannie Mae stock closed... down 5.5%. The charts looks eerily similar to Tyco (TYC) back in the days pre-disaster - and where there is smoke, there is often fire."

• Fannie Mae Datapoint of the Day (Felix Salmon in Seeking Alpha, Nov. 18th): "Peter Eavis, who started the Fannie Mae ball rolling: "Using fair value accounting, Fannie Mae's capital -- the company's net worth -- has declined sharply this year. According to a fair value version of its balance sheet contained in a recent filing, Fannie Mae's capital was $34 billion on Sept. 30, a 20% drop from the end of last year." Now, $34B in capital is still a lot of capital. But $8.5B is an enormous amount of capital to lose in less than one year – especially when you don't seem to be making any effort to be particularly aggressive in terms of accounting."

• Market News (Kansas City Star, Nov. 17th): "MGIC Investment Corp. (MTG), the largest U.S. mortgage insurer, cut its quarterly dividend 90% to $0.2.5 a share."

• Fannie Down 20% in Two Days: Strong Chance of Recovery (Bespoke Investment in Seeking Alpha, Nov. 16th): "Fannie Mae (FNM) is down over 20% in the last two days as questions over its accounting for delinquent mortgages have caused investor unease. If the stock closes around its current levels of $37.62, this will mark the worst two-day decline in the stock's history. Going forward, should investors buy the stock? We looked at prior two-day declines of 15% or more in FNM's stock, and found that over the next week and month, the stock's performance is mixed. However, over a three month period, the stock has been up three out of four times for an average gain of 9.47%."

Homebuilders, Housing Stocks and Housing-Related Stocks

• Lowe's Profit Falls; Earnings Forecast Is Reduced (Bloomberg, Nov. 19th): "Lowe's Cos. (LOW), the second-largest home-improvement retailer, said third-quarter profit declined 10% and reduced its annual profit forecast for the second time in two months because of the U.S. housing slump. Net income fell to $643 million, or $0.43/share, from $716M, or $0.46, a year ago... Revenue rose to $11.6 billion, trailing analysts' estimates. Sales in stores open at least 13 months fell for the fifth straight quarter. Lowe's trimmed its full-year earnings forecast in September.

• Jim Cramer's Mad Money In-Depth, 11/16/07: Hey Jude (Miriam Metzinger in Seeking Alpha, Nov. 19th): "Cramer said he feels uneasy suggesting specific stocks in a volatile market, and added financials are a no-go area, especially since WFC CEO John Stumpf commented the housing market is the worst since the Great Depression. He would stay away from Countrywide Financial (CFC), Washington Mutual (WM), Downey Financial (DSL), E Trade (ETFC), Centx (CTX), Beazer Homes (BZH), Pulte Homes (PHM), Standard Pacific (SPF), Ambac ABK, MBIA (MBI), PMI Group (PMI), and MGIC Investment (MTG). Cramer recommended defensive stocks AVP, CL, MO, CLX, KO and MHs. Since the economy is in crisis, Cramer predicts the Fed will cut rates again."

• Housing Hurts Williams-Sonoma (Forbes, Nov. 19th): "Shares of tony home-furnishings retailer Williams-Sonoma (WSM) fell... Thursday after the company told investors its fourth-quarter earnings are likely to come in at the low end of guidance because of weaker-than-expected customer traffic in its stores. The company’s forecast ranges between $1.20-$1.26/share, on an adjusted basis, with earnings between $1.39B-$1.42 billion. Analysts polled by Thomson Financial expect a profit of $1.22/share on sales of $1.4B. CEO Howard Lester: The home furnishings environment in Q3 continued to be very challenging, particularly in the areas of the country where housing-related macro issues have had the greatest impact."

• Builders Offer Cuts Of As Much As $150,000 On Some Housing Units (San Francisco Chronicle, Nov. 18th): "Developers are now offering... deep discounts... Home Builders Association of Northern California: Home prices in the Bay Area [are] down by as much as 20% from their highs two years ago... Shea Homes has listed markdowns on at least 23 Oakley homes... A five-bedroom Shea house... in Oakley, for example, is being offered for $657,581, an 18.6% discount from it's nearly $800,0000 price... in September. Builders - from national publicly traded companies to smaller regional players – [are] dangling price cuts of as much as $150,000 on some projects in the far reaches of the Bay Area."

• Ongoing Housing Slump Leads WCI To Cut 575 Jobs (News Press, Nov. 17th): "A wave of job losses have hit the home-building industry in Southwest Florida since the real-estate boom fizzled: First Home Builders in Fort Myers, which two years ago was Lee County's biggest residential contractor with almost 1,200 employees, will be down to about 50 following its layoffs... of 200 workers effective Dec. 28. The Bonita Bay Group has trimmed about 60 jobs since May. On Sept. 4, Lennar Homes announced the layoff of 72 people from its Southwest Florida division... In March, Centex Homes (CTX) laid off 141 Florida employees... WCI cut about 600 jobs in July 2006."

• Larger Homes Appealing To Variety Of Buyers (Daily Herald, Nov. 17th) Chicago: "While the typical home in 2007 measures 1,840 square feet, a growing number of homes top the 3,000-square-foot mark, according to the National Association of Realtors. Recent data shows 12% of homes today measure over 3,000-sf, compared with 9% in 2004. That comes as no surprise to several Chicago-area builders who say their largest floor plans consistently appeal to a broad spectrum of home buyers, from families to empty nesters."

• NYSE To Suspend Trading In Tousa Securities Monday (MarketWatch, Nov. 16th): "Tousa Inc. (TOA) said late Friday it was informed by NYSE Regulation Inc. that its stock and debt securities will be suspended before market opening on Monday. Tousa is making arrangements for its stock and debt securities to be traded on alternate markets. The homebuilder still plans to appeal the decision by requesting a review by the NYSE Regulation but noted that it may not be successful in its efforts."

• Not Nibbling at Homebuilders Yet (David Merkel in Seeking Alpha, Nov. 16th): "[Over-leveraged] TOUSA is (TOA) staring at bankruptcy... [Expect] more bankruptcies among homebuilders... Signs [of a bottom:] Surviving builders [will] trade at 50-75% of written-down book value. Earnings are negative, but no longer getting worse. Early value investors will have given up on the sector. Bond managers will reinstate the “no homebuilder bonds” rule. Leverage will be similar to today, but on smaller companies... Old standards will return for loan underwriting. Financial magazines will talk about prudence in borrowing against residential real estate... Inventory levels decline 20% from their peak levels... I would probably buy two of the best capitalized homebuilders."

• Union Files Proposals With Lennar, TOUSA (South Florida Business Journal, Nov. 16th): "A pension fund for a construction workers union, [the] Laborers' International Union of North America (LIUNA), which manages $32 billion for 500,000 members said it has filed shareholders proposals with 28 companies, including Lennar Corp. (LEN) and TOUSA... The first, filed with financial service and mortgage holding companies including Washington Mutual and the Bear Stearns Cos., would require disclosure of the types of mortgages bought and sold and their value. The second would limit and disclose conflict of interest between credit rating agencies and the mortgage buyers and sellers who pay for those agencies' services."

• Homebuilders Rethink Price Reductions (BusinessWeek, Nov. 16th): "In California, Meritage Homes Corp. (MTH) has made cuts of up to 40%... Meritage has seen sales prices slip to levels not seen since before 2004, and prices are at or below acceptable margins... CEO Steven J. Hilton: "If [potential buyers] hear the deal today is better than the deal was two weeks ago or a month ago, they're not going to buy." After seeing its average order price fall 16% in Q3, Pulte Homes Inc. (PHM)... said it is holding off on reductions and incentives." Centex Corp. (CTX) has said it is offering "record" discounts and, last weekend, Ryland Group Inc. (RYL) coughed up savings as high as 25% nationwide."

• Construction Industry Continues Slowdown, Looks To 2009 (The Tribune, Nov. 15th): "Northern Colorado: Building permits for remodels and new construction in the region are down about 50%. Sales taxes for Greeley building permits are down about half... BMC West lumberyard in Greeley closed its roofing truss company more than a year ago... Tim Swanson, chief building official for Greeley. "We issued 14 single-family dwelling permits in October. We projected that we'd do 175 for the year and we're still on track. But, in 2005, we did 750." Homebuilders Association of Northern Colorado: KB Homes (KBH)... hasn't pulled a permit in northern Colorado in quite some time... Union Colony Bank in Greeley construction loans are down 48%."

• Some Homebuilders Could End Up Bankrupt (BusinessWeek, Nov. 14th): "In Virginia last month, 30 condominiums were auctioned off in an hour for average prices of $300,000-$350,000, a discount of around 10% from pre-auction prices... In California, Kennedy Wilson Auction Group typically fetched bids 40% below the asking price on houses they sold in about a dozen auctions of residential developments this year... And in Baltimore, new townhouses... that commanded $600,000 or more two years ago were advertised in October for as low as $480,000 during Pulte's Halloween-themed "Monster Sale." Nationwide, Pulte cut prices $10,000-$50,000 during the sales event."

• M/I Homes Announces Quarterly Cash Dividend on Common and Preferred Shares (CNN Money, Nov. 14th): "M/I Homes (MHO), Inc. announced... a cash dividend of $0.025/share for Q1'08. The dividend is payable on January 17, 2008 to shareholders of record at the close of business on January 2, 2008. The Board of Directors also declared a $0.609375 per depository share cash dividend on its 9.75% Series A Preferred Shares for Q1'08. The dividend is payable on December 17, 2007 to shareholders of record at the close of business on December 3, 2007."

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