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
- Sacramento Real Estate: As Well as Can be Expected (American Chronicle, Feb. 19th): "MLS data released earlier this week by the Sacramento Association of Realtors showed new listings in January up over 75% from December and an almost 20% growth in inventory. This is normal and expected as we move out of the holiday season and end of year rush. Compared to January 2005 there were less new listings (2.9%) and current inventory is down 4.8% from last year to 4,926. The median price paid in January is virtually the same as December but down 3.5% from 2005 to $355,000."
- Mountains of Homes Still Listed for Sale (Miami Herald, Feb. 18th): "For Miami-Dade and Broward County homes that sold in 2006, prices on the whole went up 8% to $280,000… However… for every home that sold in each month of 2006, an average of 14 did not. The number of homes on the market doubled to almost 66,000, as sales dropped to their lowest level in a decade. The backlog for houses runs all the way from the least-expensive fixer-upper to the luxury mansions. But it's most bloated in the middle range of $200,000 to $499,000… [Some] 60% of houses for sale in South Florida."
- Sellers' Market in Sight? End of 2006 saw Jump in Prices for New Homes (Herald Sun, Feb. 18th) North Carolina : "The median sale price of new homes sold in Durham County spiked an average of $21,000 in Q4'06 from Q3, according to Market Opportunity Research that tracks Triangle home sales. That's 11%-- from $196,500 to $217,500… In contrast, the median sale price of resold houses in Durham dropped from $167,500 in Q3 to $155,000 in Q4… That amounts to a 7% decline and is $15,000 below the median in Q4'05, according to MORE… Meanwhile, it seems clear that prices have dropped for existing homes in Durham because there are so many on the market."
- Vacant and Costly (Modesto Bee, Feb. 16th): "The glut of vacant houses is readily apparent throughout the Northern San Joaquin Valley, as bank foreclosures and former rental homes flood the for-sale market… Local Realtor: "The rental market is very soft and very tough right now ... and it's deteriorating… So many homes that have lingered on the sales market have started flooding the rental market… Conversely, since the oversupply of rental property has pushed down rents, many former rental-home owners are trying to sell instead... I would say more than half the vacant homes on the market are owned by banks that have repossessed them."
- A Money Pit? Maybe it's More Like a Pendulum (San Francisco Chronicle, Feb. 18th): "Bay Area housing market… is a buyer's market. So why can only 12% of Bay Area households afford to buy the median-priced home? Wells Fargo: "Over the decades, Bay Area home appreciation has consistently outpaced increases in incomes…" U.S. Census: In 1979 the Bay Area median home price of $99,600 was almost five times the median household income. In 2005, the median home price of $645,300 was almost 10 times the median income. Not only does this wider gap make it more challenging to buy a home, it has altered the social dynamics of towns."
Real Estate Investing and Sentiment
- Doomsday Pundits Are Wrong Again (Caleb Sevian in Seeking Alpha, Feb. 20th) "Housing is still weak, but it is becoming clearer every day that it is a supply demand problem and will likely be isolated to areas over built with supply… An article in the NY Times yesterday cited Manhattan’s increase in housing prices and strong demand… Last week’s 14.3% reduction in housing starts is good news; it shows that builders are slowing the supply side of the equation and allowing demand to catch up. Last week the Association of Home Builders released data that builder confidence was at its highest level in eight months. Apparently the builders’ agree."
- Economy Echoes Trend of the '90s (Rutland Herald, Feb. 19th): "The overall rate of growth has followed a trajectory almost identical to the first five years of the 1990s expansion... Few economic forecasters expect the current growth cycle to have the length and vigor of the 1990s boom… Yet fewer still expected strong growth in the mid-1990s. In early 1996, forecasters… predicted that the economy would grow merely 1.8% that year… [It grew at] twice that pace… Gallup: Last month 52% of Americans rated economic conditions as either excellent or good. In May 1996, at a similar moment in the previous expansion, only 30% did so."
- Sellers Dropping Prices to Move Homes (New Jersey Real Estate Report, Feb. 19th): "Nat'l Ass'n of Realtors: The median selling price for homes in the region that includes Monmouth and Ocean counties fell 4.2% in Q4'06.. That’s the biggest dropoff since 1991… In Monmouth County, the median home price fell 7%, from $445,000 to $416,750. The median home price dipped 6% in Ocean County, from $340,000 to $320,000… Those considering cashing out their homes and heading to more affordable parts of the country, waiting until 2008 for the return of a seller’s market… may have to seek consolation in rising stock prices, which have gained nearly 20% in value in the past seven months."
- Riverside Investor Backs up Hunch by Selling his Home (OC Register, Feb. 19th): "We’ve decided to sell now for two main reasons. I feel the tax law of $500,000 gain free every two years for a married couple will be history within a few years… I’m sure I can buy a lot and build a house that ends up having $500,000 of equity. By selling now and creating $500,000 of non-taxable profit, that saves me having to earn $1,000,000 to end up with $500,000. I also get to avoid most of the decline I see coming in price. It’s a million dollar positive decision no matter how you slice it."
- Defaults Hard on Housing Market (Recordnet, Feb. 17th): "Grupe Co. (realtors): "The sales market has been improving as many people are "getting off the fence" to buy, because they are realizing the slow housing market may have bottomed out or be close to it. "My concern is foreclosures… In San Joaquin County, pre-foreclosure notices are three times greater than at the end of 2005. This could translate into increased inventory as these hit the market." Gregory Group (real estate information service): "The percentage increases in mortgage defaults are significant, but the numbers started so low, there won't be a big enough impact to affect the sales market."
- Report Finds Residential Real Estate Underperforms Other Assets (Yahoo! Finance, Feb. 14th): "According to a Fidelity Investments study, home values underperformed stocks and bonds over every five- and 10-year period from 1963 to 2005. Home values have been slightly above the returns on treasury bills during the same time... Over the more than 40-year period, real compound returns on stocks outpaced that of residential real estate, with 5.95% average annual returns on stocks compared with 1.35% in realty. A dollar invested in stocks in 1963 would have compounded to $12.36 by 2006, while the same dollar would have grown to $1.79 in real estate."
Mortgates and Real Estate Lending
- After Subprime: Lax Lending Lurks Elsewhere (Wall St. Journal, Feb. 20th): "Mortgage lenders rely on FICO scores for conventional mortgages… Yields on junk bonds -- the debt of the least creditworthy companies -- have never been as low against comparable Treasury yields as now… emerging-market debt [too]. Defaults on these bonds are low, as they were in subprime a few years ago… Low returns on Treasury bonds have left investors clamoring for risky assets with higher returns. Subprime mortgages were only one area that fed the desire. Now, investors are forcing lenders to buy back some bad loans.... The risk many thought they had offset has returned to haunt them."
- Subprime Mortgages and Market Datapoints (Barry Ritholtz in Seeking Alpha, Feb. 20th): "1) Nearly 1.2 million foreclosure filings were reported last year, a 42% rise from 2005… [or] one in every 92 U.S. households… 2) About 80% of subprime mortgages today are adjustable-rate mortgages, or ARMs, that have… low fixed-interest payments in their first few years but then usually adjust to higher interest payments. 3) Creative new subprime loans… are now 47% of total loans issued last year… up from 2% of total mortgages in 2000. 4) Loan-to-value ratios, the loan amount expressed as a percent of the property value, have grown to 86.5% last year from 78% in 2000."
- Treasurer Talks Foreclosures—Numbers High for Clifton County (Wilmington News Journal, Feb. 20th): "Ohio state Treasurer Richard Cordray said there are three main factors for the upsurge in foreclosures around Ohio. One cause is the slow growth in the Ohio economy and job losses. A second key reason is that there's never been any real regulation of the mortgage lending industry in Ohio. And a third factor is an increase in the complexity of some mortgage products."
- Adjustable Rate Loan Resets, Skyrocketing Mortgage Payments for Homeowners (RIS Media, Feb. 20th): "Many households that took advantage of "teaser rate" loans-types of adjustable rate mortgages that hold down payments for an initial period, are facing resets of their interest rates that can cause monthly payments to balloon upward of 10% to 50%. A $1 million mortgage taken out 30 months ago that started at $2,528 per month, could jump to just under $7,000 per month… With California foreclosures up 160% since last year, and Marketwatch reporting $2 trillion coming up for adjustment this year alone, the demand for refinancing adjustable rate mortgages will be unprecedented."
- Investors in Mortgage-Backed Securities are Failing to React to the Plunge in the Mortgage Market (Int'l Herald Tribune, Feb. 18th): "Residential loans [went] to $1.1 trillion last year from $586 billion in 2003. Many of these loans have been packaged into collateralized debt obligations… 81% of the $249 billion in collateralized debt obligation pools in 2005 consisted of residential mortgage products… Mortgage loan pools have held up even as the subprime mortgage industry has collapsed [because] a wide array of debt obligations provides a margin of safety… Major rating agencies have issued relatively few downgrades. [For example,] Moody's [has] provided greater credit enhancement on the loans. But… the cushion can be additional mortgages or loans (not cash)."
Global Alternatives To The Housing Slump
- Development Fuels Staggering Growth in Tropics (Southwest Fla. Herald Tribune, Feb. 19th): "Caribbean nation-states, the Virgin Islands and parts of Central America -- think Costa Rica and Belize -- are undergoing staggering growth, fueled largely by high-end, coastal developments catering to wealthy Americans. Development in the Bahamas has helped yield nearly a 60% increase in cash assets at the country's commercial bank from 2002 to 2005 -- $66.3 billion to $105.8 billion. In the Dominican Republic, a 36.34% increase, from $161 billion to $220.6 billion during the same period... Local realtor: Three years ago, Americans accounted for only 15% of home buyers in the Dominican. The figure might be as high as 50% now."
- The Real World (Milwaukee Journal Sentinel, Feb. 17th): "Peter Shuttleworth is a multi-national property coach… [who travels] to countries like Armenia, Russia and Panama, helping real estate purveyors professionalize their trade… As many countries found freedom, they looked for systemic help in making things accountable. A housing market requires law and order - not always common in emerging economies… American business executives are only too happy to help: Among them: realty brokers; developers and appraisers affiliated with the International Real Property Foundation in Chicago… and private mortgage insurers like PMI Group… Joining them soon in the international arena will be mortgage insurer MGIC Investment Corp."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Plumb Creek Timber: Trees are Forever (Steve Sjuggerud in Seeking Alpha, Feb. 20th): "In less than five months, the five timberland stocks I've recommended at one time or another in my newsletters are up an average of 45%... Plum Creek is up by 1,300% since 1989… I bet that in 20 years from now, pension funds will own more timberland assets than anyone else. As this shift occurs… the price of timberland will go way up… Timberland stocks have another way to make big money... land sales to real estate developers. Plum Creek plans to grow land sales to $500 million a year. That's just land sales to developers – not even their core business."
- Vulcan Materials Buys Florida Rock for 45% Premium Over Current Price (Seeking Alpha, Feb. 20th): "Vulcan Materials Co. announced yesterday it had agreed to acquire Florida Rock Industries Inc. for $4.6 billion in a cash and stock offer that provides a 45% premium to Florida Rock's current closing price. Already the biggest producer of highway construction materials in the U.S., the acquisition allows Vulcan to expand into a Florida building market that has been one of the nation's most profitable in recent years - and also one of the hardest hit in the housing downturn of the last year… Shares in Florida Rock jumped $15.04, or 32.03%, to $62.00 on the news."
- Stewart Earnings Tumble 51% (Inman News, Feb. 19th): "Stewart Information Services [real estate information and transaction management] reported net earnings for 2006 fell to $43.3 million, down 51% from $88.8 million in 2005… Revenues for 2006 set a record at $2.5 billion, up 1.7% from 2005. Despite the growth, the increased revenue from acquisitions, new agencies, commercial transactions and international operations was substantially offset by a decline in transaction volume... in certain major markets of the country along with rising interest rates… The softening of the national housing market hurt title orders in Q4, as orders fell 13.4% from Q4'05."
- Housing is 'Wild Card' for Fed (Inman News, Feb. 19th): "In Bernanke's risk assessment… qualifying the growth and inflation forecast: "The risks to this outlook are significant. To the downside ... housing. To the upside, output may expand more quickly than expected..." Housing is a wild card. There isn't anything for the Fed to do about it, as the global dollar-recycling machine has suppressed mortgage rates at least a percentage point, way below their normal growth-cycle position above the Fed's cost of money. What better housing safety net could there be?"
Homebuilders And Housing Stocks
- Homebuilders: Earnings & Price Analysis (Barry Ritholtz in Seeking Alpha, Feb. 20th): "The Real-Estate-has-bottomed crowd [claim] the move off of the lows by the homebuilders as proof.... [But] a short-term stock move up after a sector gets shellacked is hardly proof that this economic sector has bottomed; with the homebuilders, it's more likely proof that they have been a crowded short… And the Homies have not only had a huge run in share prices, their earnings went through the roof also, peaking in 2005. Now, we are on the other side of that mountain… major builders earnings are right back to where they were before the big run up. [But] in 2002-03, rates were down and heading towards 46 year lows. Now, they are elevated and likely heading higher."
- New Communities Needed, say Builders (The Reporter, Feb. 17th): "Calif. Building Industry Association: Sales at the state's major new home communities fell by 29% to under 86,300 homes during 2006, the median asking price still rose by nearly 4% to $450,990… Keusder Homes: The fact new-home pricing remains strong, even with builder incentives being offered, demonstrates that California's housing affordability crisis will only be solved by producing enough new homes and condos to meet the need… Although builders have drastically curtailed pulling building permits during the last few months, unsold inventory continued to rise by about 53% to nearly 16,800 homes between the end of 2005 and 2006."
- Homing in on WCI Communities (Alex Garcia in Seeking Alpha, Feb. 16th): "WCI Communities (WCI) hired Goldman Sachs to explore options to increase shareholder value… including stock repurchase and the possible sale of the company: WCI's last 10-Q shows a 9 to 1 short term asset to liabilities ratio. Long term, it’s not as strong but shouldn’t be a problem… The company is trading at 8 P/E… in line with the industry's below market average. WCI is trading below its book value ($25)… has a backlog of 1296 units (mostly on rich Florida land) worth just over $1 billion… The company’s market cap is $968 million… [And Carl] Icahn is buying the stock."
Commercial Real Estate and REITs
- Medical Properties Bringing Out 12M Shares (Globe St. Feb. 17th): "Medical Properties Trust Inc. is making a public offering of 12 million shares, with $91 million of the proceeds ticketed to finance deals for its Prime Healthcare Services Inc. affiliates. The REIT recently has completed $62 million of new healthcare real estate and expects to close on $29 million within the next month… Part of a sales agreement between Medical Properties and affiliates of underwriters UBS Securities LLC and Wachovia Capital Markets LLC… Medical Properties noted that if the forward purchasers can't borrow and deliver the entire allocation, then it will take over issuing and selling the balance."
Web Site of the Day
Much has been written in the media about identifying the bottom of the housing slump. It's impossible to predict, but at least one website tries. Housing Predictor is a website started by Florida internet developer Mike Colpitts. The site partners with Home Gain, a national real estate listing service, and Foreclosure.com another listing service with an emphasis on foreclosed properties, to provide real estate listings and housing market forecasts. More than 250 local housing market forecasts are provided on Housing Predictor in all 50 states.
The site was set up to tap in to the growing group of investors who are increasingly using the internet for their real estate research.
Some good news: Investors hear mostly about the price declines facing so many of the nations metropolises, but Housing Predictor also provides data about "at least ten states in which local housing prices are appreciating." At least ten?
If you have a blog or website of your own, you can track developments in the sector and provide great content for your readers with our Housing Market widget (left).
It's simple to add -- just select "Housing Market" from the drop-down menu here.