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.

Quote of the Day- "From the House's Mouth"

"The unsolicited tender offer by entities controlled by Carl Icahn to purchase any and all outstanding shares of WCI's common stock is highly conditional, opportunistic and inadequate from a financial point of view to the Company's shareholders." - Luxury Homebuilder WCI Communities Inc. board rejecting billionaire investor activist Carl Icahn's $22-per-share, or $920.8 million takeover offer Thursday. (Florida Sun Herald, Apr. 6th)

Real Estate Sales and House Prices

  • Utah Avoids Housing Market Pinch (Daily Herald, Apr. 6th): "Mortgage Bankers Association: In Utah, 9.4% of subprime loans were delinquent in Q4'06... The national average is 14.3%... In some states… higher than 20%, said Jim Wood of the University of Utah. "I think it's a concern here, but I don't think that it's a crisis situation." It helps that Utah's housing market is still strong. The median sales price for a Utah County home was $213,200 in 2006, a 21.8% increase over the previous year. Wasatch Front home sales set a record in 2006 -- 30,000 homes sold at a value of $7 billion."
  • Home Sales Decline on Kauai, Big Island (Pacific Business News, Apr. 5th): "Hawaii Information Service: Condo sales on… Kauai [dropped] 61% from Q1'06… The Big Island dropped 48% from Q1'06 to Q1'7… Single-family home sales on Kauai were down more than 10%, 19% on the Big Island...from Q1'06 to Q1'07… The median price of a condo on Kauai was $481,500 during Q1'07, a 30% boost over the $370,000 median price for Q1'06… Big Island median condo prices fell 10.8% to $411,250, down from Q1'06's median price of $461,000. Single-family median home prices on the Big Island for Q1'07 was $432,475, less than 1% higher than last year's… $429,500. On Kauai, prices of single-family homes slipped 4% to a median price of $650,000, down from $679,000 in Q1'06."
  • For Sale Inventory Rises in the U.S. (The Real Deal, Apr. 5th): "Wall St. Journal: A survey of 18 major U.S. metropolitan markets conducted by ZipRealty Inc. found that the number of homes on the market was up, on average, 6.5% over last month. According to the Credit Suisse Group, the number of homes on the market nationally has traditionally increased less than 2% from February to March. The biggest rises in inventory were in markets that are perceived to have a condo glut, such as L.A., San Francisco and Washington, D.C. The survey did not include the New York metropolitan area."

Real Estate Investing and Sentiment

  • Another Hint at Google Real Estate (Future of Real Estate Marketing, Apr. 5th): "Google has been quietly rolling out improvements to its real estate search and Google Base platforms… They’ve been… methodically signing up brokers willing to feed their listings directly into the classifieds platform… and it looks like they’re taking baby steps towards providing a real consumer search interface or portal for those listings - something that’s been hinted at in the past by the Mountain View giant… Right now they’re holding up short of calling it Google Real Estate, rather opting for the more generic terms ‘Housing search’. But is it only a matter of time?"
  • Mini-Dorms A New Trend In College Housing? (Real Estate Bloggers, Apr. 5th): "College housing typically is fairly expensive, and if you live in a city that has high housing costs, it can be prohibitively so. There is a new trend on the horizon for properties near college campuses that have a shortage of housing on campus, mini-dorms. The idea is that you take a pre-existing single family home and remodel it so that it has many individual dorm style rooms with a common area. The resulting housing can accomodate more students at a lower cost near the university… According to NBC 7/39, the people [who started] this… are three recent college grads."

Mortgates and Real Estate Lending

  • NovaStar Cuts Off Credit Lines for Mortgage Bankers (Bloomberg, Apr. 5th): "NovaStar Financial Inc., the subprime home lender whose stock has plunged 80% this year, will stop financing independent mortgage bankers. WarehouseUSA Capital Corp., a unit of NovaStar, said... that… it's no longer accepting applications from mortgage bankers for credit lines and that the so-called warehouse lending business will close… Independent mortgage lenders including NovaStar rely on "warehouse'' credit lines from larger institutions to provide money for loans and keep them in business."

Subprime Fallout and Foreclosures

  • Top 15 Creditors to New Century (Barry Ritholtz in Seeking Alpha, Apr. 5th): "Goldman Sachs has emerged as the single biggest creditor of New Century, the American sub-prime mortgage lender, which filed for Chapter 11 bankruptcy last night, after writing $60 billion (£30.4 billion) of American home loans. Barclays, the British bank, is at No 15 in the list of top 50 creditors. HSBC, which is already directly exposed to turmoil in the sub-prime market through its US sub-prime lending subsidiary, is at No 22. Click here for a list of the top 15 creditors."
  • California Foreclosure Sales Near $2B in March (Yahoo! Finance, Apr. 5th): "Foreclosure Radar, a foreclosure listings and software company, today announced that 5,316 California foreclosures were sold at auction in March, representing a 27% increase from February and a 264% increase in the last 6 months. Of the $2B worth of properties sold in March, 4,796 went back to the lender after receiving no bids, representing $1.82B… Regional differences: San Diego County ranked 15th highest with one foreclosure for every 5,668 residents in March; Los Angeles easily ranks number one in volume each month, but adjusted for population, Los Angeles County ranks 38th with one foreclosure for every 12,182 residents."
  • U.S. Civic Groups Demand Subprime Foreclosure Freeze (Bloomberg, Apr. 5th): "A coalition of U.S. civil rights groups asked mortgage lenders to freeze foreclosures for borrowers with weak credit ratings, saying "reckless'' lending practices to minorities caused their predicament. Lenders, loan servicers and investors in mortgages should agree to a six-month foreclosure moratorium, said a group including the National Association for the Advancement of Colored People, the National Council of La Raza and the National Fair Housing Alliance, yesterday."

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

  • Shiller Warns on Housing (Barry Ritholtz in Seeking Alpha, Apr. 5th): "Yale professor Robert J. Shiller: Homeowners face substantial risk of much lower prices that could stay low for a long time after… The data show no long-term uptrend in Real Home prices… Shiller\\\'s Real Home Prices vs. RentHedging instruments are soon to be available to Home owners to protect against severe downturns in Housing values… While there does not seem to be a genuine long-term uptrend in real house prices, there does seem to be a genuine long-term downtrend in real rents… In practice… not only do real home and rent prices fail to track each other, but the rent-price ratio has shown a remarkable downtrend since 1913."
  • Housing Industry Job Cuts More Than Triple in 1Q (Asbury Park Press, Apr. 5th): "Challenger, Gray & Christmas Inc.: Job cuts in housing, including real estate, construction and mortgage lending, soared 346% to 21,245 in Q1, compared with 4,764 job cuts in Q1'06. The Q1'07 number barely trails the total number of job cuts in 2006 of 22,814. In 2005, the housing industry slashed only 13,656 jobs. Construction led the job cuts with 13,958, compared with only 115 in Q4'06. Mortgage lending rose to 6,138 from 3,497 the previous year. Only the real estate sector — which includes commercial and residential real estate agencies — saw a decline in job cuts to 1,149 from 1,152."
  • Building A Strong Foundation (Investors.com, Apr. 5th): "Robust spending on commercial and government construction projects has helped building materials suppliers thrive lately, despite a drop in new home construction… The top performers in the segment are mostly U.S. companies such as Martin Marietta Materials, (NYSE:MLM) Vulcan Materials (NYSE:VMC) and Texas Industries. (NYSE:TXI) They provide materials such as… concrete, aggregates, asphalt and other building materials used in the construction of highways, airports, commercial buildings and homes... Commerce Dept.: U.S. construction spending… is on pace to fall 2% this year to $1.17 trillion… [Mainly due to] housing construction declines… Public construction spending is on track to rise 6% this year to $286 billion."
  • Census: Immigration Helps Big Metros Grow (Builder Online, Apr. 5th): "Census Bureau: Without immigrants pouring into the nation's big metro areas…[they'd] be shrinking as native-born Americans move farther out. Many smaller areas, including Battle Creek, Mich., Ames, Iowa, and Corvallis, Ore., would shrink as well… Without immigration, the Los Angeles metro area would have lost more than 200,000, the San Francisco area would have lost 188,000 and the Boston area would have lost 101,000… William Frey, a demographer at the Brookings Institution: "A lot of cities rely on immigration to prop up their housing market and prop up their economies."
  • Pickup Trucks a Housing-Slump Casualty? (OC Register, Apr. 5th): "Ford Motor Co's light truck sales are off 5.6% in O.C. in 2007's first two months vs. a year ago… Reuters: Ford Motor Co. could take the biggest hit among automakers from weakness in the housing and credit markets, its North American operations head Mark Fields said, because of its dominance in the market for pickup trucks, the staple vehicle of the construction industry… Fields: "It's not so much the subprime, it's overall what's happening in the housing industry… We're not banking on any huge upticks in the industry."
  • Will Subprime Woes Seep Into the Economy? They Already Have (Jeffrey Saut in Seeking Alpha, Apr. 4th): "Real estate is not spilling over into the real economy? [Then] “Why has the Association of Home Appliance Manufacturers’ Index posted a roughly 10% decline in shipments?” Or, “Why is Circuit City laying off 3,400 of its best sales personnel and attempting to hire maladroit sales people at a much reduced compensation package?” Similarly, “Why is Citigroup cutting 15,000 financial-related jobs?” And, “Why is GMAC stating that its Residential Capital subsidiary is going to hurt profits?” "…Why are companies like ACC Capital closing their "call centers?" We think because… Mortgage Equity Withdrawals… have declined from $844 billion to $386 billion over the past nine quarters."

Commercial Real Estate and REITs

  • Microsoft Leases 1M SF in Two New Projects (Globe St., Apr. 6th)Washington: "Microsoft Corp. on Thursday said it has inked long-term leases for the entirety of two under-construction office developments here totaling 1.3 million sf. Headquartered in the neighboring Redmond, the public software company says it has leased the 740,000-sf Bravern Office Commons next to Meydenbauer Center in Downtown Bellevue and the 600,000-sf Advanta Office Commons adjacent to Interstate 90 in southeast Bellevue."
  • Non-Residential Construction Leads Boom (Star Bulletin, Apr. 6th): "UHERO predicts the total construction spending will rise by 13.4% to $7.9 billion in 2007. Nonresidential permits are expected to remain almost 40% higher than in the previous five years. Construction job levels are also expected to grow by 3% this year to 36,930, exceeding the previous record set in 1991. With residential construction past its peak in the current cycle, continued strength in nonresidential construction appears to be providing an economic silver lining for the state."
  • Manhattan Class A Market Stagnant (The Real Deal, Apr. 5th): "The market for Class A space in Manhattan slowed in Q1'07, according to a report from commercial brokerage Colliers ABR. The vacancy rate for the recently ultra-hot Class A market rose slightly to 6.1% from the 6.0% average at the end of December. Average asking rent rose 2.1% over the last quarter to $72.57/Sq.ft. Colliers projects Class A vacancy will decline in Q2 as a number of deals currently in the works close.
  • Subsidies Door May Slam on Developers (NY Sun, Apr. 5th): "Chairman Patrick Foye, of New York's Empire State Development Corporation: The state intends to lower the amount of subsidies offered and decrease the amount of tax breaks offered for development projects statewide… [This] comes on top of a pledge yesterday from Mayor Bloomberg not to give any special subsidies to developers downtown… The pledges about subsidies come as banking giants are scouting out new office space… including a plan by JPMorgan Chase to build a tower near ground zero… Rival Goldman Sachs was given the hundreds of millions in subsidies… for [its] new headquarters downtown."

Web Site of the Day

Speculative Bubble LogoSpeculative Bubble.com started out long ago as a stockbroker's blog about that first bubble, and has since evolved in to a site about all kinds of investments.

Rich, the sites owner, says he's going to be focused on real estate now because it's going to be an exciting year to watch RE. He's planning on building housing-related investment tools in to the site, and is off to a great start with today's website feature.
Taking US home prices, as per the Shiller index, and adjusting them for inflation, Rich has plotted the graph as a roller coaster. No words are necessary. A must see.

Tracking the Housing Market and Homebuilder Stocks

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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).

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