Housing Bubble and Real Estate Market Tracker

by: Judy Weil

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 get this sent to your blackberry or desktop email by signing up for our no-spam free email subscription service.

Real Estate Sales and House Prices

  • Exising Home Sales Continue To Slump (WSB in Seeking Alpha, Nov. 21st): "Existing home sales in the third quarter fell 12.7% from a year ago, with declines greatest in once-booming Nevada (-38%), Arizona (-36%), Florida (-34.2%) and California (-28.6%). 45 of 148 metropolitan areas surveyed also showed sales weakness."
  • Home sales plunge in Dane County (Wisconsin State Journal, Nov. 21st) Dane County: "The south-central region's 15.1 percent decline in third- quarter sales was deeper than every area of the state except northern Wisconsin. In Dane County, existing home sales plunged 18 percent to 1,991, down from 2,427 during the same quarter last year… Dane County's decline in sales is unusual because the county continues to have low unemployment and strong job growth."
  • Existing Home Sales And Prices Continue To Fall (Barry Ritholtz in Seeking Alpha, Nov. 20th): "The NAR also noted weakness in sales in 148 metropolitan areas... where the median -- or midpoint -- price for an existing home sold in the third quarter dipped to $224,900, down 1.2% from a year earlier. The reported median sale drop of 1.2% simply does not accurately reflect reality; I suspect it is being biased upwards by "trophy" property prices prices and other adjustments... Prices continue to drop rapidly and a lot more than the 1.2% the NAR is revealing due to what can be euphemistically described as "motivated" sellers."
  • Prestige Home Index California Luxury Home Values Rise Modestly in Third Quarter of 2006 (First Republic Bank, Nov. 20th) San Francisco: "Luxury home values posted slight gains in Los Angeles, San Diego and San Francisco in the third quarter of 2006. “In the coastal market of Orange County, at $3 million and above, homes are still selling fairly well... Generally, sales volume has been down 30% to 35%, but pricing has gone up as much 8% or 9%." San Diego: The market is somewhat strong in the coastal communities. “From $2 million to $4 million, the market is hot in Del Mar and La Jolla.”
  • Hometrack Dragon Warning On House Prices (In2Perspective, Nov. 20th): "UK house prices will rise by 4% next year. [Low] growth will be supported by low levels of housing turnover and prices largely being set by the "haves " already on the housing market. London and the South East will lead. "Low growth/low turnover not seen since the 1950s." Expect 5.5% of private housing to change hands next year. "Low levels of liquidity in what is an already illiquid market are likely to increase the short term volatility in house prices. This is likely to impact on asking prices more than underlying values."

Real Estate Investing and Sentiment

  • Housing: The Riddle Of Rates And Prices (Business Week, Nov. 21st): "Which way the housing market goes depends on which matters more to buyers: falling interest rates [a big positive] or fear of falling prices [a big negative]... The housing slump is far from over, but the conditions for an eventual recovery are in place: Builders are sharply cutting back, and buyers are cautiously continuing to buy... The backlog of unsold homes should begin to diminish. The welcome decline in mortgage rates may seem small compared to the reversal in price trends, from soaring to sinking. But it appears enough to put at least some people back in a buying mood."

Mortgates and Real Estate Lending

  • Housing Starts Tumble, Foreclosures Soar/Recession Draws Near (OpEdNews.com, Nov. 21st): "Third quarter home sales tumbled in 38 states down 12.7 % from the same period a year ago. Nationwide foreclosures have increased 42% from October of last year... The Fed no longer reports E3 money supply figures and it's been pumping money, like air, into a real estate balloon that is about too burst … Greenspan's free money policy where mortgage-debt in 2000 was a trifling $4.8 trillion while in 2006 it has skyrocketed to a whopping $9.3 trillion."
  • Foreclosures Hit New High In October (Central Valley Business Times, Nov. 17th): "So far this year more than 1 million properties have entered some stage of foreclosure nationwide. Colorado had the nation's highest state foreclosure rate -- a 25 percent month-over-month increase. Nevada: a 16% increase and Georgia: a 33 percent month-over-month increase. Among the nation's 10 highest were Michigan, Illinois, Florida, Ohio, Tennessee, New Jersey and Utah... The Detroit metropolitan area registered the nation's second highest metro foreclosure rate -- one new foreclosure filing for every 196 households."
  • Foreclosures In State Triple Last Year's Level (San Francisco Chronicle, Nov. 17th): "California reported 16,000 properties in some stage of foreclosure in October -- the highest of any state. The state's foreclosure activity in October was three times higher than it was a year ago, noted RealtyTrac, a firm that tracks foreclosure activity from notice of default to repossession. The slump in the housing market has seen investors caught up in highly leveraged deals and homeowners stuck with unconventional loans."
  • Lee Foreclosures Spike (Newspress.com, Nov. 17th) Southwest Florida: "Foreclosures in Lee County jumped sharply last month for speculators and homeowners. October foreclosures were up 48.5 percent from September... almost three times as much as October 2005. Coldwell Properties: "Due to a plethora of 100 percent financing for entry-level homes... we expect to see an increase in foreclosures over the next six to 12 months.” The auction business is [expecting] a repeat of the early 1990s when large numbers of Florida condominiums went on the block as prices plunged. “We’re preparing for a whole new business."

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

  • Worst Of U.S. Housing Slowdown Over: WSJ Poll (Reuters.com, Nov. 21st): "The worst of the United States' housing market slowdown is over, economists forecast by nearly 2-to-1 in a WSJ survey... but [they] still predict that the average selling price of a house will fall somewhat next year. Home prices, measured by the government index are expected to fall by 0.5 percent next year. That contrasted with a 13.4 percent increase in 2005... There are signs that the most drastic part of the downturn, marked by a sharp pullback in demand and new construction, have run their course."
  • Copper Drops As U.S. Housing Slowdown Seen Creating Oversupply (Bloomberg, Nov. 21st): "Copper declined on speculation a U.S. housing slowdown has created an oversupply of the metal used in wires and pipes. Copper production exceeded demand by 84,000 metric tons in the first eight months of the year. China, the world's largest copper user, used 6.9 percent less copper in the first eight months... Codelco, the world's largest copper producer, raised the surcharge it's seeking from Chinese copper buyers by $5 a ton to $130. "The small rise reflects Codelcoàs expectations that China's demand will remain strong."
  • Ebb Tide For Real Estate Prices Means "What Hot Economy?" (Watchingthewatchers.com, Nov. 21st): "The White House on Tuesday lowered its forecast for economic growth this year and into 2008, reflecting the drag from the housing slump... Gross domestic product will grow 3.1%, this year, down from an earlier projection of 3.6%… In 2007, the economy will grow 2.9% -- also lower than its previous forecast for 3.3% growth. In 2008, a 3.1% growth rate forecast vs. the old forecast for 3.2% growth… Moody's: prices for existing homes will drop by 3.7 percent in 2007, the first decline for a full year since the Great Depression."
  • White House Lowers Economic Projections(MSN Money, Nov. 21st): "Even with the downgrade for economic growth, the Bush administration says the unemployment rate is expected to dip to 4.6 percent this year -- a slight improvement from the previous forecast for an unemployment rate of 4.7 percent this year. The new forecast would represent decent growth, especially given the strain on overall economic activity from the housing slump, and would match last year's performance. Consumer prices this year are now projected to rise by 2.3 percent, a sizable moderation from the administration's earlier forecast for a 3 percent increase."
  • Sterling Rises After Upbeat Housing Market Data (Reuters.co.uk, Nov. 20th): "Sterling rose against the dollar and euro on Monday after data showed a robust housing market in England and Wales and a rise in UK mortgage lending. House prices in England and Wales rose between October and November to a record high. British Bankers' Association: underlying UK net mortgage lending rose by 5.5 billion pounds in October... "Both figures indicated higher interest rates have yet to dent the robust housing market and reinforced the case for an interest rate hike next year."

Hedging Your House Price By Shorting Stocks

  • REITs vs. Homebuilders -- Not What You Think (Roger Nusbaum in Seeking Alpha, Nov. 21st): "EQR InvestmentA lot of REITs are lifting in response [to EOP acquisition]. Some commentaries lump REITs in with the homebuilder stocks. I think there's a fundamental difference (judge for yourself-- see chart) and also a difference in sentiment. Hot money seems to love to chase the homebuilders while REITs attract more staid capital. REITs, kind of like the Canadian income trusts, can create a false sense of security... REITs have utility but they will have rough runs in the future."
  • Lowes Reports 3Q Profit Increase But Lowers 4Q Forecast (WSB in Seeking Alpha, Nov. 21st): "Lowe's announced an 11% increase in 3Q profits, but projected a fourth quarter decline of 4% from last year's $10.8 billion. Nevertheless, its shares rose 19 cents to $30.67, an indication that many investors have confidence in the second-largest home improvement retailer for the long-term, in spite of a sluggish housing market."

Commercial Real Estate and REITs

  • Sam Zell: A Question of Timing: Is He Cashing Out Too Early? (Business Week, Nov. 20th): "If white-collar job growth stalls next year, eroding the value of office buildings, then Zell will have cashed out near the top of the red-hot REIT market, adding to his reputation for seeing trends that others miss. The small premium he accepted for his company—just 8.5% above its Nov. 17 trading price of $44.72 per share—seems to indicate that he was eager to get out. But commercial real-estate analysts are predicting rising rents and tighter vacancy rates in the near future. Investor demand for commercial property is growing, as pension funds and other institutions look for holdings that pay better returns than government bonds but aren't as volatile as stocks... Blackstone says it has $13 billion for more real estate purchases".
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