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Real Estate Sales and House Prices
- Home Values Still Rising (Independent Mail, Feb. 19th) So. Carolina: "Anderson’s housing market is again bucking the national trend. Zillow.com reported this week that national Q4 median home prices were down 0.48% from 2005 to 2006 — the first year-over-year drop the site has seen since 1997. Median home prices also were down 4.77% from Q3 to Q4'06. But home values still seem to be rising in most Anderson County markets. The median price of homes in Anderson was up 5.75% from $88,348 in Q4'05 to $93,431 in Q4'06… In fact, median price of homes in Anderson County was up from $133,000 to $135,900 for the entire year."
- Housing Market Heats Up Again in New York City (NYTimes, Feb. 19th): "Real estate firms showed that increased activity, with open houses jammed and bidding wars taking place, has occurred in all price ranges — from tiny studios in the East Village to red-brick mansions on the Upper East Side… A week ago, one open house attracted 100 people to an Upper West Side one-bedroom; a $2.475 million house in Park Slope (Brooklyn) sold in a day. Miller Samuel appraisers: The number of contracts signed this January was 19.4% higher than in January 2006. Prices were up 14.4% in the same time period. Inventory… is shrinking fast... Realtor: There is "cautious exuberance."
- Falling House Prices Bypass the Northwest (Oregon Live, Feb. 16th): "The slump in housing nationally deepened in the final three months of last year… The Northwest again largely bucked the trend, with five metropolitan areas among the nation's top 20 cities in housing appreciation. The Portland-Vancouver area recorded an 11.2% gain in housing prices from Q4'05, at $285,400… From October-December 2006 vs. Oct.-Dec. 2005: Nevada was down 36.1%; Florida, down 30.8%; Arizona, down 26.9%; and California, down 21.3%."
- Existing Home Sales Sink Across Nation (Seeking Alpha, Feb. 16th): "Nat'l Ass'n of Realtors: Existing-home sales fell in 40 of the country's metropolitan areas in Q4… Sales across the country dropped more than 10% in the quarter versus Q4'05. The Western states sales were down 17.8% from the year-ago period. Florida was the worst-performing state in the country with a 30.8% drop in sales. Atlantic City, N.J. was the biggest gainer, with sales up 26%. The value of existing single-family homes declined across the country, with the median sales price down 2.7% to $219,300 at the end of Q4 against $225,300 a year earlier."
- Home Prices Fall in More Than Half of Nation’s Biggest Markets (NYTimes, Feb. 16th): "National Association of Realtors… NAR figures show the housing market weakened noticeably in many parts of the country at the end of last year and indicate that suggestions by some industry officials that the market has hit bottom could be premature. In the previous quarter, prices fell in one-third of all metropolitan areas."
Real Estate Investing and Sentiment
- Housing Sales Spike in New York (Daily India.com, Feb. 18th): "The three largest real estate companies in New York agree that in January, there was a double-digit increase over the same month in 2006, both in prices and the number of signed contracts. The increase is being attributed to factors including a strong regional economy, pent-up demand and higher year-end bonuses on Wall Street… Warburg Realty Partnership, said homebuyers' psychology has changed. "For almost two years, they've been scared that the market would plummet and they'd end up like fools who paid too much."
Mortgates, Real Estate Lending and Foreclosures
- Foreclosures up, Home Sales Down (Daily Tribune, Feb. 19th): "Housing foreclosures in some Oakland County communities outpacing home sales… Housing foreclosures countywide have jumped from 597 in 1998 to 4,855 last year… Communities with more foreclosures than home sales in 2004, the most recent year with comparison statistics, include Ferndale, Hazel Park, Pontiac, Southfield and Oak Park… County Commissioner Dave Coulter: "In some cases people took out mortgages that seemed too good to be true, and in fact they were."
- Subprime Subterfuge (Maine Today, Feb. 18th): "In 2000, Mainers lost more than $23 million in home equity to predatory lenders and the subprime lending market grew from $320 million in 2000 to $1.8 billion in 2005. In a one-year period ending in June 2006, 125 consumers filed written lending-related complaints with the state Office of Consumer Regulation... According to a study the agency released in December."
- Major Banks Try to Offload Subprime Portfolios (Seeking Alpha, Feb. 15th): "Many large banks now face a double problem: not only are they lumbered with bad loans accumulated during a buying spree over the past two years, but money they lent the mortgage originators is less likely to be paid back… The banks and brokerages are now hiring consultants like Clayton Holdings to help them comb through their subprime portfolios for loans that should be bought back. HSBC has sued several small lenders in federal court for refusing to buy back delinquent loans. Analysts expect repurchases to continue for another six months or so."
Global Alternatives To The Housing Slump
- Strong Outlook for European REITs - Barron's (Seeking Alpha, Feb. 18th): "Shares of top FTSE properties companies like British Land, Hammerson and Land Securities rose over 25% since mid-2006 on REIT conversion speculation. FTSE REITs offer 2.4% yields vs. 2.9% in the U.S, and they don't trade at premiums like those in the U.S. Large cap REITs offer value, but their diversity costs them a "conglomerate discount." Better value comes from specialty sector REITs like Brixton, invested in land around London's Heathrow airport. France's Unibail shares rose 300% between 2003-2005, when all 10 top REITs' values went from €11 to €18 billion. German REITs are promising as 75% of German conglomerates own the commercial properties they occupy. Deutsche Telekom (DT), for example, owns €8b worth of investable property.
- Affordable Housing Not Easy to Find in Ulster County (Daily Freeman, Feb. 18th): "Last year's annual Ulster County Housing survey showed not a single vacancy among the county's 1,936 subsidized housing units… A vacancy rate of 5% is considered "healthy" by housing experts because it allows for more competitive rents and greater selection. Ulster County has averaged 1.2% over the last five years… The median household income for Ulster County renters was $29,661…. A person would have to earn $14.46 an hour ($30,076 a year) to afford a one-bedroom apartment, not including utility costs. ($36,649 [for] a 2BR.)"
Macro Impact, And Will The Housing Slump Cause A Recession?
- Banking on Homes (Press Democrat, Feb. 18th): "Across the U.S., more Americans are banking on rising home values instead of the stock market and savings to pay for their retirement… This fundamental shift in the perception of a home, fueled by the eight-year run-up in housing prices that peaked in 2005, has prompted many families to change their investment strategies. Fed Consumer Finances Survey: Only 49% of U.S. families held stock in a retirement account or other managed asset account in 2004, down from 52% three years earlier… More families are buying homes and taking on larger amounts of debt to purchase real estate… 69% of American families owned a home in 2004, up from 67%."
- Local Economy Looks Good, but Clouds on Horizon (Ventura County Daily News, Feb. 17th): "The high cost of local housing will continue to drive away high-paying jobs… Bill Watkins, executive director of the UCSB Economic Forecast Project and a former Fed economist: As an example… Technicolor's recent announcement the company is moving hundreds of manufacturing jobs out of the county… Countrywide Financial's growth over the past real estate boom has greatly contributed to economic growth, so any decision it might make to relocate jobs or merge with another company could have serious economic consequences locally."
- That "Shocking" Housing Data (InvestorsInsight, Feb. 16th): "The decrease in mortgage equity withdrawal [MEW] accounted for over 2% of last year's GDP growth. Take away that and 1% for construction, and we would have been close to a recession… MEWs will be harder and harder to get... The Center for Responsible Lending estimates that as many as 20% of the subprime mortgages made in the last two years could go into foreclosure, or about 5% of the total homes sold. If just half of those homes come back onto the market, it will cause home prices to fall, limiting the ability of people to borrow, causing valuations to fall and a reduction in MEWs… Compound that with probable legislation… to tighten up lending standards and disclosure rules, and you could see loans at the lower end of the market dry up."
- Less to "Goldilocks" Than Meets The Eye (Michael Panzner in Seeking Alpha, Feb. 15th): "Joseph E. Stiglitz, Columbia University Economics professor: "One ingredient that helped drive the 1990s expansion is missing today: the explosion of productivity that took off in the mid-’90s and lasted for more than a decade, when the investments that firms began to make in technology in the 1980s started to pay off… The housing bubble has turned to bust, dragging residential investment down. Overall growth has been little affected so far, but many economists still expect household finances to weaken, cutting into consumer spending, the main bulwark of economic growth."
Homebuilders And Housing Stocks
- Home-building Issues Look Homelier (Wilmington News, Feb. 18th): "You can bet the house that home values will continue to fall and your brokerage's sunny consensus on the housing market is an appalling sham. Home prices have risen so high and so out of sight that -- according to my recent conversation with the CEO of a major home builder -- "it may take nine to a dozen years for homes to reach new inflation-adjusted highs." [Prices] still have enormous room to decline… Luxury homebuilder Toll Bros.' CEO Robert Toll, tells us that… "we… have the worst oversupply slump in 40 years."
PPI Report Shows Inflation Under Control; Housing Starts Decline Sharply
(Seeking Alpha, Feb. 16th): "January housing starts dropped 14.3% to a seasonally adjusted annual rate of 1.408 million - their lowest rate in a decade. Housing starts were down 37.8% versus the prior year period. The drop in housing starts was much worse than expected; economists were looking for a 2% drop to 1.60 million annualized units. Home builders likely scaled back new projects as they attempt to rectify the existing high housing inventory."
Commercial Real Estate and REITs
- GuruFocus: Chris Davis Buys and Sells (GuruFocus, Feb. 18th) :"Chris Davis buys… United Rentals Inc., United Rentals TRI… Vornado Realty Trust… sells… Simon Property Group Inc., Reckson Associates Realty Corp, Pennsylvania REIT, Maguire Properties Inc… Kilroy Realty Corp., Equity Office Properties Trust… during the 3-months ended 12/31/2006."
- Fewer Public-to-Private Real Estate Deals Expected (Daily Report, Feb. 19th): "EOP's Richard Kincaid… expects fewer public-to-private deals in 2007… Private groups bought REITs in 11 of the 23 merger and acquisition deals involving public real estate companies… M3 Capital Partners: Some private equity sponsors are increasing their investment funds’ capital… [Owning] $4b-$10b [in] real estate… A lot of private companies aggressively use leverage to finance their transactions… more than the public real estate companies. The ample liquidity in the debt markets and the relative competitive cost of debt financing allows private equity investors to be aggressive in purchasing large portfolios owned by publicly traded companies."
- Lawyers Ready for a Boom in Bankruptcy (Chicago Tribune, Feb. 18th): "Despite moderate growth in the overall economy, pockets of weakness remain in the auto, airline and housing sectors…. If defaults do rise, bankruptcy professionals expect to be very busy. The issuance of U.S. junk bonds, or high-yield corporate debt, has topped $100 billion in three of the last four years, levels not seen since the late 1990s… Buyout funds also are taking advantage of low borrowing rates to raise money for takeovers. About 40% of the junk bonds issued since 2004 are rated B- or below and have higher chances of default."
- Sorry, We’re Booked. But Just Across the River ... (NYTimes, Feb. 18th): "Just a short subway ride from Manhattan… a decades-long vision of urban planners to turn Long Island City into a business center is becoming a reality after a major rezoning about six years ago. Included in the mix of residential and commercial projects are several new hotels… on the East River waterfront as well as more moderately priced hotels. “A lot of hotels are going condo in Manhattan, so the supply of hotel rooms has been slowly diminishing in the city, and there was, and still is, huge demand."
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