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
- Gauging Where Housing Market Is Headed (Mortgage 101, Jan. 8th): "Ken Rosen, a noted real estate forecaster, predicts that it will take about three years for the San Francisco Bay Area housing market to turn around. Leslie Appleton Young, chief economist for the California Association of Realtors, thinks it will take 18 months for the California market to recover. But, in a recent survey conducted by WSJ.com, the Wall Street Journal's Web site, economists by a margin of 2 to 1 predicted that the worst was over for the housing market."
- Housing Values On Rise (Post Tribune, Jan. 7th) Indiana: "While much of the nation suffers from continued falling housing prices, Lake County will see 3.2 percent growth over past year in residential real estate value in 2007, according to a report by Fortune magazine. This places Lake fifth in the Midwest and 30th in the nation in a ranking of 100 real estate markets conducted by the magazine. And realtors here say the 3.2 percent is an average. Houses in some areas, such as St. John and Crown Point, could see even bigger increases in value."
- Some Boomtowns Face Rising Crime (CNN Money, Jan. 5th): "Youngstown's housing market is booming. The region ranks first in the Midwest in projected growth, with a 3.8 percent gain forecast for 2007, according to Moody's and Fortune. But the city's long-delayed real estate boom has brought with it rising crime… Burglary, larceny and car theft have shown the biggest increases in the region. Violent crime in Youngstown rose 10 percent in 2005, while property crimes jumped more than 20 percent from 2004 to 2005, according to the FBI… Syracuse is considered the second-hottest market in the Northeast but saw a 12.6 percent jump in property crime from 2005 to 2006."
- Make Your House A Super House (Businessweek, Jan. 4th): "If you're looking for smart ways to increase the value of your home, traditional remodeling projects like elegant bathrooms, state-of-the-art wine cellars, and high-design, high-tech media rooms have consistently demonstrated their return on investment—even in today's challenging housing market… Whether you spend $10,000 or $80,000 on a unique space like a bowling lane or a tree house, you're not likely to recoup a lot of that investment when you resell, but if it has lasting appeal, it could in lure potential buyers who might otherwise walk away."
Real Estate Investing and Sentiment
- Little House On The Drawing Board: A New Crop Of Inexpensive, Hip Homes Is Good News For Young Adults (The Journal Times Online, Jan. 7th): "A good number of mostly young, very inventive architects are working on designs for cheap, cool houses that could be replicated. Writer Karrie Jacobs calls them the "New Pragmatists." A generation of young adults are now luxuriating in loft-like apartments, which exude the essence of modern design. After a few years in downtown Nirvana, these urban dwellers can be expected to move to the suburbs, where schools and conveniences cater to families. Jacobs: "At some point, homebuilders will have to get hip. Someone, somewhere will have to reinvent the subdivision."
Deteriorating Housing Affordability Caused The Housing Crash?
- High Prices Blamed For Housing Slump (Monterey Herald, Jan. 8th): "Reduced affordability is one of the major reasons for the drop in home sales nationally over the last year, David Lereah, chief economist of the National Association of Realtors said… RT Strategies survey for the National Association of Home Builders: When asked to rate the importance of several factors that might affect their decisions to buy or not to buy a home, respondents put the home's price at the top of the list, with 80 percent citing its significance."
- Real Estate Analysts Take A Look At Crystal Ball For 2007 (Sun Sentinel.com, Jan. 8th): "David Lereah, NAR chief economist: There's a seven-month supply of existing homes for sale throughout the nation, but in some local markets -- South Florida, California -- there are double-digit months of home supplies for sale, and they will have a more prolonged correction… the other three-quarters of the country should be expanding in 2007. Price declines are encouraging some buyers to return to the market… Most contractions in the real estate market are due to recessions and job losses, but this one is due to affordability problems and investor flight."
- Making Housing Affordable (Recordnet, Jan. 8th): "San Joaquin County: Thousands of former Bay Area residents bought Valley property, driving up property values with their Bay Area earning power… For a decade, housing for poor working families has been built and sold by non-profits [like] Visionary Home Builders of California. Now they have to bid on the same land as large, profit-making developers… mostly losing out… Now property values have flattened out. There might never be a better time to purchase land that could be used by nonprofit builders to help house those who increasingly are being priced out of the market."
- Homebuilders: A Hard Slog Ahead (Businessweek, Jan. 4th): "Standard & Poor's maintains its negative outlook on homebuilders [due to continuing] deteriorating affordability for home buyers... Joint Center for Housing Studies of Harvard University: New single-family home prices rose by more than 20% from 2001-2005… The average home was selling at 3.3 times household income in the third quarter of 2006, down from 3.46 times in the prior-year period but still above the historical average of 2.65. This ratio has contributed to the affordability deterioration… S&P sees a total fall of 7% for the median existing home price on a national basis in 2006 and 2007… the first national drop in U.S. home prices since the 1930s."
Mortgates and Real Estate Lending
- Financing Honeymoon Is Over (Victorville Daily Press, Jan. 7th): "DataQuick Information Systems statistics showed San Bernardino County had 2,548 foreclosures in last year’s third quarter — up 100.8 percent from the 1,269 reported in the same period of 2005. Paula Hurst, a Shear Realty foreclosure specialist, isn’t optimistic. The 13 pre-foreclosure evaluations she’s done in the past two weeks have left her “scrambling.” Hurst handled five foreclosures in 2004 and about 72 in 2006. That tells her an “avalanche” is coming."
- Freddie Mac Estimates Third Quarter Loss (Washington Business Journal, Jan. 5th): "Freddie Mac, playing catch-up in filing quarterly financial reports as part of its accounting overhaul, says it lost $550 million in the third quarter of 2006 as falling interest rates hurt the value of volatile derivatives it uses to hedge against fluctuating rates. It also expects to report a loss for the fourth quarter. CEO Richard Syron: "While our quarterly results reflect the volatility we see quarter-to-quarter in response to movements in interest rates, we remain encouraged with the underlying progress of Freddie Mac's business… We face a challenging market environment due to continued tight spreads."
- Grand Jury Indicts 72 For Mortgage Schemes (CantonRep.com, Jan. 5th) Cleveland: "A grand jury has indicted 72 companies and individuals on 303 charges that they used false information to obtain more than $4 million in home loans… The charges of racketeering, forgery and theft target mortgage brokers and lenders accused of helping to push Cuyahoga County's foreclosure rate to among the highest in the nation…The cases are being handled by an assistant prosecutor hired last year to focus on crimes such as mortgage fraud and predatory lending, in which lenders and mortgage brokers push high-interest loans on home buyers who have bad credit or low incomes."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Construction, Retail, Hospitality Fuel City’s ’06 Economic Growth (The City Paper Online, Jan. 8th) Nashville: "According to early figures from the Tennessee Department of Labor and Workforce Development, more than 18,000 jobs were added to the city’s private sector this year – a 2.9 percent increase to 656,336 jobs compared to 2005’s 637,900… Mayor's Office: Construction work [made an] especially high contribution to the city’s job growth this year … The growth of retail and construction – are reflections of the increasing wages… The construction sector through November 2006 added almost 1,300 jobs, a 3.5 increase compared to last year’s 35,700."
- 2007 In a Nutshell (Caleb Sevian in Seeking Alpha, Jan. 8th): "I will devote today’s notes to reading my crystal ball for 2007... Housing will finally stabilize due to persistently low interest rates which still make owning a house a better alternative than renting. Those who called for an all out crash will scratch their heads a lot and wonder why pessimists usually don’t make money in the markets. The bad news is that growth and write-offs of the big builders will continue to offer up plenty of disheartening news through out the year."
- Economic Report Roundup: Labor Numbers Surprise (Tim Iacono in Seeking Alpha, Jan. 7th): "Construction spending fell 0.2 percent in November after an upwardly revised dip of 0.3 percent in October, the eighth consecutive month of declines for overall construction spending since early 2006. Private residential construction continued to lead the downturn, falling 1.6 percent, now down 11.1 percent on a year-over-year basis. Private nonresidential construction and public construction rose 1.4 percent and 1.0 percent respectively, continuing to provide support for construction spending overall. This may be short-lived, as there is normally a multi-month delay between peaks in residential and nonresidential construction where, new infrastructure build-out follows residential construction as neighborhoods expand."
- Buyers Vs. Homesellers: Standoff Could Lead To Recession (Boston Herald, Jan. 5th): "Wellesley College housing guru Karl Case: Suburban Boston's would-be sellers are opting to take their homes off the market rather than accept big markdowns… Average selling prices fell just 6.3 percent… This could help minimize the feared drop in the “wealth affect,” where a decline in home values puts a big dent in consumer spending… But the drop in home sales activity could be a more serious economic threat… leading to the loss of 1.4 million jobs by the end of 2008, pushing up the national unemployment rate to 5.8 percent… Real estate downturns have contributed to three prior recessions."
- Turnaround Expected For U.S. Home Builders (International Herald Tribune, Jan. 8th): "WASHINGTON: The home-building industry is about to stop hurting the U.S. economy… A December survey by the National Association of Home Builders/ Wells Fargo. showed an increase in the number of builders forecasting higher sales in six months' time. Behind the improving outlook: More people are able to afford homes. The rate on a 30-year fixed-rate mortgage has remained less than 6.2 percent since mid-November, down from 6.8 percent in July. Applications for mortgages to buy homes at the end of December were up 8.3 percent from their low for 2006, in October."
- John Dorfman: Home Builders Were A Glitch In Robot's Stock Picks (Asbury Park Press, Jan. 7th): "Home builders stock picks for 2007: Home-building stocks already have discounted a ton of bad news. Meritage, for example, peaked at $95.75 in August 2005 and now sells for about $47. Ryland shares reached $83.13 in July 2005 and now fetch about $55…The stock price of Georgia Gulf Corp., an Atlanta-based company that makes chemicals and plastic products, has fallen to less than $20 from more than $57 in late 2004. Among its biggest products are vinyl window frames, tied to — you guessed it — the housing market."
- Update On The Homebuilders (Right Side Advisors, Jan. 7th): "Avoid the Homebuilders." My model continues to show deteriorating fundamentals for the homebuilders, and Lennar (NYSE:LEN) and Pulte Homes (NYSE:PHM) have been downgraded to hold or sell according to ValuEngine, and are significantly overvalued. The weekly chart profiles have been positive and momentum readings are nearing overbought territory. There are very strong risky levels, which should limit any additional strength in this group. The Lennar and Pulte downgrades show how fast the profiles deteriorated in just three days."
- Time To Add More Money? (Motley Fool, Jan. 2nd): "Ron Muhlenkamp, stock-picker-in-chief of his namesake Muhlenkamp (MUTF:MUHLX) fund, hasn't thrown in the towel on housing stocks. Of the top 25 holdings in his fund -- which holds but 63 names in total -- three are homebuilders. NVR (NYSE:NVR), Centex (NYSE:CTX), and Toll Brothers (NYSE:TOL) make up nearly 7% of the fund's net assets... Construction-related businesses Cemex, Caterpillar (NYSE:CAT), and Terex (NYSE:TEX) constitute an additional 9%.This at a time when the homebuilders have fallen on hard times. The SPDR Homebuilders ETF, a reasonable proxy for the sector, has shed 18% of its value since it opened for business in February 2006."
Global Impact Of The Housing Slump
- It's A Double Whammy For Emerging Market Stocks (India Economic Times, Jan. 8th): "Emerging-Market stocks had their worst week in almost six months on falling commodity prices and US economic reports that fuelled concerns that global demand for building materials is slowing. ABN Amro Holding NV in Amsterdam: "A slowing US housing market… came as a negative surprise to a market that had a very strong run… Commodity stocks are the most exposed to signs of an economic slowdown." Copper prices in New York had the biggest weekly decline in a decade as slower US economic growth reduced demand for metals used in homes, appliances and cars."
- Copper, Zinc And Nickel Decline (Free Market News, Jan. 8th): "Copper, zinc and nickel dropped in London on speculation any rebound in U.S. house construction won't revive demand for metals until year-end, swelling global stockpiles. Builders still view current conditions as poor, according to a December survey by the National Association of Home Builders/Wells Fargo. The U.S. is the second-largest copper user, after China. Inventories tracked by the London Metal Exchange rose 0.5 percent to 195,775 metric tons, the LME said."
Web Site of the Day
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The site gives excellent, useful information to homebuyers and investors such as MLS-linked realty alerts and market summaries and reports.
Tracking the Housing Market and Homebuilder Stocks |
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It's simple to add -- just select "Housing Market" from the drop-down menu here.