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

  • Overall Slowdown In Real Estate Sales (Nantucket Independent, Dec. 27th) Nantucket: "Nothing lasts forever, including the off the charts real estate sales volume the island enjoyed for two consecutive years. While the end of 2004 saw a record $1 billion in property transactions, a record that was broken when 2005’s number topped $1.2 billion, the local buying trend this year somewhat reflected the nationwide slowdown with an estimated 29 percent dip in closings."
  • Report: West Sac Home Prices Fall 26 Percent In A Year (Sacramento Business Journal, Dec. 21st): "Existing-home sales fell 24.5 percent last month in the Sacramento area compared to November 2005, according to a Calif. Association of Realtor's report. The region's sales drop was one of the largest in the state. There is a mixed picture across the state, with more regions reporting year-to-year declines than increases at this point… Statewide, the median home price increased 1.4 percent to $555,290."
  • Destin Sees Real Estate Sales Activity For Caretta Dunes (The Walton Sun, December 26, 2006) Florida: "Another sign of positive movement in the luxury destination real estate market came as the developers of Caretta Dunes announced that late summer and fall sales activity has prompted them to secure a construction permit for the foundation at Caretta Dunes. Caretta Dunes is a residential community with 64 beachfront condominiums with an on-site concierge... The three- and four-bedroom condos are priced starting from $2.1 million."
  • Area Housing Market Still Active, But Continues To Soften (The Business Review, Dec. 26th) Albany Realtor Ass'n: "Sales of single-family homes in the Albany, N.Y., region fell 11 percent in November compared to Nov. '05 and the median price slipped 1 percent as the housing market continued to soften… From January to November 2006 a total of 9,523 homes sold through the Multiple Listing Service in the Albany region, a 1 percent decline from the same period in 2005... The highest sales total on record occurred in 2005, when 10,333 homes sold through the MLS."
  • North Carolina Real Estate Sees Slowing (Inman.com, Dec. 26th): "North Carolina Association of Realtors: Existing-home sales in North Carolina cooled for the third straight month in November while the average home price inched higher. There were 10,073 home sales recorded last month, off 4 percent from a year ago when 10,453 homes sold... The statewide average sales price gained 1 percent to $217,615 in November from $214,718 a year ago, and was up from $213,599 in October. The brunt of the real estate slowdown is occurring along the coast, according to NCAR, where sales in November were down considerably from their year-ago levels."
  • High-End Sales Pace Big Year For Real Estate (Aspen Daily News, Dec. 26th): "Aspen home sales survey: 63 sales have eclipsed the $5 million mark as of Dec. 1, up from the 37 recorded in 2005... The upper echelon of those sales has made perhaps the greatest leap -- at least one dozen sales of $10 million or more this year…Seven closings over $15 million in December… Health in the high-end market is going through the roof, [because of] dwindling supply and increasing demand, excessive liquidity in the world…Local realtor: If prices again triple from the beginning to the end of the decade the market will experience a doubling of the current price structure by 2010."
  • Massachusetts Housing Market Continues Its Decline In November (Boston.com, Dec. 26th): "Housing Report: The Massachusetts housing market continued its decline in November, with sales of single-family homes and condominiums dropping by double-digit percentages and sales of single-family homes reaching its lowest November tally since 1992. Yet, Timothy Warren, Jr., CEO of The Warren Group, which tracks real estate and financial data throughout New England, says: "We're still in a decline, but the slope is not as steep as it was in the summer and early fall, we're starting to see some signs of stabilization."
  • Talk Show Host Eyeballs O.C. Housing '07 (OCRegister.com, Dec. 26th): "Mike Roberts, Laguna Hills financial consultant: Minimal risk for a huge drop, unless a wave of panic selling starts… Nothing to suggest a burst in the housing market. Yes, prices are inflated, but with the continual increase in the number of new jobs in Orange County, the increased demand from the new jobs will stabilize the market… 2007 could be the year that the market just idles along in a holding pattern waiting for outside influences."
  • After Years Of Gains, Pa. Housing Market Slows Down (Centredaily.com, Dec. 25th): "In the third quarter, Pennsylvania single-family home and condominium annualized sales fell by 4.5 percent. [After] a decade-long housing boom, declining affordability has put a dent in the market... The hot demand for homes in northeastern Pennsylvania had been partly fueled by buyers who were shut out of the more expensive New Jersey and New York markets… "People are willing to travel, to commute a great distance in order to get cheaper housing. That has bolstered the northern part of Pennsylvania," said Celia Chen, director of housing economics at Moody's Economy.com in West Chester."
  • Wall St. Bonuses: So Much Money, Too Few Ferraris (NY Times, Dec. 25th): "In the last three weeks, the Corcoran Sunshine Marketing group sold the last four apartments in the Richard Meier apartments at 165 Charles Street in Greenwich Village. The last one to go: a two-bedroom, two-bathroom apartment with 2,350 square feet that sold for just under $7 million…. Corcoran Group, said that until recently, 2006 had been characterized by calmer, more informed buyers. “Now there’s a feeling, ‘I need to sign because I don’t want it snatched away."

Real Estate Investing and Tax Issues

  • eClosing Heralds Truly Paperless Transactions (Realty Times, Dec. 26th): "eClosing is a secure online transaction coordination and closing system that stores legally binding digital documents including all title, deed and loan instruments. All parties to the transaction can review and approve documents through a secure password-protected website. Once the transaction is closed, the entire document set is placed in a secure electronic "vault" where they can never be altered and only viewed with the appropriate password access. Originating lender and investors have immediate access to the complete set of loan documents without ever printing, scanning or storing the reams of paper typically associated with each loan transaction. The completed loan package is quicker and less likely to be incomplete, translating into lower loan rates and fees to the buyer because [lenders] don't have to lock the rate in for as long as otherwise would be required."
  • Clock Is Ticking For Real Estate Agents To Cut their 2006 Tax Bill (Financevisor.com, Dec. 26th): "Tax planning is an ongoing process. Even so, as a real estate professional, there's still time to save taxes for 2006, says FindAGoodCPA.com. "As a real estate agent or broker, consider paying all of your outstanding bills before the end of the year, since you can generally deduct your professional expenses directly against your commission income… Allowable expenses include anything that is "ordinary" and "necessary" in connection with being a real estate agent, including advertising costs, cell phones and internet access, gifts to clients, and professional dues and licenses."
  • What To Do About Fort Monmouth (NJ Report, Dec. 26th): "The Army will withdraw from Fort Monmouth by September 2011, ending nearly a century in which it became a major economic force in New Jersey… At stake is the future of a sprawling area that lies along one of the Jersey shore’s commercial corridors, Route 35, and touches scenic waterways. The fort is important to the state - its payroll for nearly 6,000 workers approaches $500 million - and its overall economic impact is estimated at $2.5 billion annually by the state. That includes money spent locally by workers, and support jobs that involve about 22,000 people."
  • Flipping Good (CurbedSF, Dec. 21st): " More last-minute gift advice: we're giving everyone on our list a copy of Roberts & Kraynack's stellar-but-a-few-years-too-late Flipping Houses for Dummies. So they can catch up on what they missed the first time around. Currently ranked at #665 on the Amazon list. Apparently the fun's not over yet."

Mortgates and Real Estate Lending

  • Homeowners Losses Are Others Gains (Denver Post, Dec. 26th): "Money can be made even from misery, and this year, profits from foreclosures have soared… Lawyers who initiate foreclosures, property managers who oversee troubled homes, service providers who maintain them and listing agents and auctioneers who sell them... Castle Meinhold and its predecessor firms represented lenders in 23,600 of 37,700 foreclosures… charging up to $800 a foreclosure… its revenues in those four counties from 2003-2006 were as much as $18.4 million… Foreclosure notices have proved to be a bright spot in an otherwise tough print advertising market, said Scott Perriman, publisher of MetroNorth Newspapers."

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

  • Real Estate Begins To Cool (Big Picture.com, Dec. 26th): "As the sector begins to further cool, we foresee several significant elements coming into play: 1) Housing related employment slows and reverses. Think real estate agents, mortgage brokers, durable goods manufacturers, home-builders and retailers. They could move from a hiring mode to laying off sometime over the next 18 months; 2) Major retailers (Home Depot, Lowes, Sears, Bed Bath & Beyond) will feel the pinch, as revenue and profits begin to slow; 3) Home builders, still cheap on a P/E basis, will begin to throttle back growth."
  • Real Estate Burst, Upcoming Recession, And Soaring Commodity Prices (Wisdom Financial, Dec. 26th): "I did not believe that the real estate bubble would last as long as it has. The longer a bubble lasts, the more dramatic and severe the [recession] burst will be… How can we have a recession that only lasts one quarter, especially after we just came off a major stock market bubble? Why would real estate prices continue to rise in a time of less spending and more saving? In either case, the recession that is to come will be a multi year recession that will serve to slow down this economy that has been wildly expanding over the last decade and a half."
  • Growth Or Recession In 2007? (USA Today, Dec. 26th): "The good news is that far more economists are in the optimist camp than the pessimist camp. Although a handful, are predicting the economy will slide into a housing-led recession next year, the majority anticipate the economy will continue to grow, albeit at the slowest pace in at least four years. Such a softening in the economy means the unemployment rate will likely edge higher, and inflation will ease. The Federal Reserve may be forced to cut interest rates to buoy the economy, meaning borrowing costs could fall for items such as mortgages and credit card debt."
  • Storms, Housing Hit Retail Sales: Report (Reuters.com, Dec. 26th): "Bad weather that kept shoppers away from the malls combined with a weak housing market to take some of the wind out of U.S. holiday sales, a private report showed. From the day after Thanksgiving through December 24, adjusted retail sales, excluding automobiles, grew about 3 percent, compared with last year's 5.2 percent growth, said a retail data service provider…The weak housing market, which prevented home owners from taking out home equity loans also dragged on retail sales, especially in furniture."
  • Economy “Temporarily Bolstered By An Irrational Buying Trend” (New Jersey Report, Dec. 26th): "The housing market is profoundly weak,” said Ken Mayland, president of Clearview Economics. “The economic slowdown really took hold in the third quarter, and, I think, it is going to basically continue through the first half of next year.”This underscores an important fact about the economy. It can be temporarily bolstered by an irrational buying trend, but eventually it returns to reality. 2007 appears to be headed for a reality check."
  • Softer Real Estate Market Leaving Cities In Hole (Miami Herald, Dec. 25th): "Thanks to the skyrocketing real estate market, city managers and commissioners have raked in hundreds of millions of dollars in new property-tax revenues… while saying, with a straight face, that they have kept taxes down. They have left tax rates the same or even cut them, knowing that the booming real estate market would raise tax bills anyway. 'If the city is very dependent on the property taxes, it's going to hurt,'' said Bill Hudnut, senior fellow at the Urban Land Institute and a former mayor of Indianapolis. "It's going to put them in a squeeze.''
  • Ticker Sense's 2007 Financial Blogger Outlook (Part 3): Macro Issues (TickerSense in Seeking Alpha, Dec. 22nd): "Sixty-two percent of those surveyed believe that there will NOT be a recession in the US in 2007... Bloggers are considerably more bearish on the housing market and the US dollar than they are bullish. However, the outlook for US Treasuries in 2007 is positive, which would be a big plus for the housing market."

Homebuilders And Housing Stocks

  • A Tsunami Is Coming-Colorado (Thehousingbubbleblog, Dec. 26th): "High foreclosure rates in several communities of one national builder, KB Home. In most cases, the loans for those homes came from KB’s mortgage branch. In a Northglenn neighborhood built by KB Home, 56 of the original buyers have been foreclosed. Fifty-one, or 91 percent, got their loans from KB’s mortgage company… About half were foreclosed on their original loans, which KB sold to other lenders, and half refinanced before their foreclosures... Nearly all the original loans were insured by the Federal Housing Administration, which collects fees from borrowers to cover losses.”
  • Housing Starts, Permits and Builder Confidence Stabilize In Recent Surveys (Mortgage News Daily, Dec. 26th): "The slight up tick in starts may reflect the monthly National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December which indicated that single family new home builders may believe that the worst of the downswing in home buying is over… Regionally, the HMI posted the biggest gain this time around in the Midwest, which has shown the greatest weakness in this measure for many months. That region posted a 7-point gain to 22 on the confidence scale, while the Northeast was unchanged at 37, the South dropped a point to 39 and the West declined four points to 31."
  • Investing In Foreign Real Estate Goes Mainstream (Kiplinger.com, Dec. 26th): "International real estate fund for individual investors: The most seasoned fund, Alpine International Real Estate Equity (MUTF:EGLRX) is run by Sam Lieber. Fidelity International Real Estate (MUTF:FIREX) has deeper research capabilities than Alpine, but lacks Lieber's lifetime of insights. You could easily make a case for splitting an investment between the Alpine and Fidelity funds. Northern Global Real Estate Index (MUTF:NGREX) tracks the FTSE-NAREIT and has half its assets outside of the US and Canada. DWS RREEF Global Real Estate Securities and Goldman Sachs International Real Estate Securities funds will both invest for growth and income and venture into stocks of some smaller property companies. I expect both to perform well. The same with the new Cohen & Steers Asia Pacific Real Estate Securities (APFAX), the only strictly Asian real estate fund as of now. Several analysts believe Asia's real estate markets hold the most promise for 2007."
  • Harvesting The Chaff (Marketwatch, Dec. 26th): "Janus contrarian David Decker favors St. Joe Co., the largest private landowner in Florida. Investors are valuing St. Joe's shares based on a $5,000 an acre valuation of its property. The land's value is "substantially greater", and this misperception has resulted in the shares being mispriced. When shares slid on concerns about a housing demand slump in Florida, Decker added to his stake as the stock touched the low $40 range. Shares of St. Joe, about a 6% fund position, closed Tuesday at $53.08, up 7 cents. "We have confidence in the value of that land."

Commercial Real Estate and REITs

  • Biggest Real Estate Deals of 2006 (Businessweek, com, Dec. 26th): "Commercial Real Estate Outlook report: Demand for billion-dollar complexes and towers is growing. Rising rents and occupancy rates in office and industrial buildings driven by rising employment and increased trade contributed to the boost…When the economy is good and employment growth is solid, businesses need office space. Real estate services provider Colliers International: Office space rents will increase in 2007, with central business district lease rates jumping 12% to 15%. In midtown Manhattan, San Francisco, Chicago, and Seattle, rents are expected to rise as much as 30% next year. Office construction is expected to increase 25% over 2006 levels. This bodes well for commercial property prices. Colliers exec: "I'm just waiting for the Chinese to arrive."

Web Site of the Day

Real Estate Zebra Investment The Real Estate Zebra, AKA the Charlottesville Area Real Estate Blog is written by Daniel Rothamel, a Virginia realtor and entrepreneur who started the site to "contribute his own unique perspective on the industry". That unique perspective involves a lot of psychology and storytelling about his work in real estate, but it can be very helpful to the individual investor.

We like the sales reports on Virginia townships and inventory analysis. Rothamel's anecdotes, though somewhat "stream of consciousness-like" and mixed in with a lot of basketball metaphors (Rothamel's a basketball coach too), are useful and help thresh out things like technology in real estate and ethical issues facing the industry.

And he certainly likes his wife-- who also happens to work with him-- but that just makes the blog more interesting and folksy.

Tracking the Housing Market and Homebuilder Stocks

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