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"
"Everyone has a new word in their vocabularies, and that's subprime. The bigger question is: Will credit tighten up everywhere and will the housing slowdown be more dramatic?"- Morningstar analyst John Coumarianos, referring to the increase in mortgage defaults for people who struggle to qualify for loans. (Asbury Park Press, Apr. 8th)
Real Estate Sales and House Prices
- Even in Sky-High Market, Buying Beats Renting (Boston.com, Apr. 8th): "It still pays to buy, not rent… [you'll] enjoy higher lifetime consumption with homeownership compared to renting, even though renting costs far less to start… When [the] mortgage is paid off, [the] cost of shelter is less than renting -- and [the] income tax bill is still lower than [a rental's]. [Also,] rent rises with inflation while the mortgage is fixed and shrinks in real value each year… Over a lifetime... if renters accumulate $1,284,016 in investment assets from saving (not home equity), then homeowners... save less every year but accumulate investments of $1,060,870. Homeowners enjoy a higher net worth in every year due to rising home equity… If the house loses value at a 2% real annual rate… homeowners will benefit by 2.4%... from declining real estate taxes and insurance."
- Realtors See Slight Uptick in Business (Oakland Press, Apr.7th): "Farmington Hills-based Realcomp II: Existing-home sales dropped 8.5% in Oakland County in Q1'07, compared to Q1'06… Oakland's used-home sales declined to 2,442 in Q1'07, versus 2,671 in Q1'06… The median sale price for homes that sold in the county in Q1 was $180,250, down 5.7% from the median sale price of $191,233 in Q1'06... Oakland County homes sat on the market for 140 days, on average, in Q1'07, compared to 113.3 days in Q1'06. At the end of Q1, there were 19,027 for-sale homes on the market, versus 16,795 homes for sale at the end of Q1'06."
- Metro Home Sales Improve (Denver Post, Apr. 6th): "Metro Denver's… home sales and prices rose last month, compared with February. The number of homes sold was up 38% to 4,274, but down 3% from February '06. The number of homes on the market was 26,430, compared with 27,309 last year… During Q1, about 11,000 units sold for $2.9 billion, said independent real estate analyst Gary Bauer. The median price for a single- family home was up to $240,000, compared with $235,000 in February, but still down from $247,500 in March last year. Median condo prices increased to $153,000, up from $144,950 in February. The price was still down from $159,900 during March 2006."
- After a 2-Month Lull, Home Prices Take Off (Seattle Times, Apr. 6th): "King County's median single-family home price rose 6% to a record $454,950 last month. Snohomish County's single-family home price, which also hesitated, moved up 7.4%, reaching a median $382,500 in March. In Kitsap County, the median single-family house price was up 2.2% to $291,250. Only Pierce County's… median single-family house price declined 2.4% to $280,000 last month… Thursday's news that Microsoft is leasing 1.3 million sf of Bellevue office space, enough to house 4,000 employees, is a near guarantee that… more workers in Bellevue may create more competition."
- Huge, $1B Portfolio Set to Sell (The Real Deal, Apr. 6th): "A massive portfolio of 4,000 Upper Manhattan apartments is set to trade hands in a sale that could top $1 billion. Jerome Belson Associates will sell the buildings -- most of them in Harlem -- which were originally built as part of the Mitchell-Lama program, according to sources. The buildings have recently been taken out of the affordable housing program, subjecting all units to market-value rents and greatly increasing their investment value. The anticipated sale price will make the transaction one of the biggest real estate deals in Manhattan this year."
- Home Prices, Sales Fell in March (The Gazette, Apr. 6th) Colorado: "Pikes Peak Association of Realtors: In Colorado Springs and the Pikes Peak region, the median price of homes sold in March fell to $208,000, a 1.9% drop from $212,000 in the same month last year… In March, the area’s average price rose 1.4%, to $254,809. Last month, the supply of homes for sale swelled to nearly 5,700, a 26.1% increase over March 2006... March home sales fell to less than 900 from the same time last year, a 14.1% decline… New-home construction during Q1'07 is down nearly 45% compared with Q1'06."
- Even a Realtor Will Tell You- Glut is Huge (St. Petersburg Times, Apr. 6th): "So many for-sale homes continue to bloat the area real estate market - nearly 41,000 - that sales as a share of total home listings are at their lowest point in recent memory… In February… about one home of every 20 on the market found buyers… That's 2,225 out of 40,896 single-family homes and condominiums… The current supply of homes on the market in Pinellas, Pasco and Hillsborough counties stands at 18 months… Florida Association of Realtors: Tampa area home prices fell 2% in the past year to a median of $213,300, declines have exceeded 10% in many neighborhoods."
Real Estate Investing and Sentiment
- Real Estate Pros Not Getting Blogged Down By Negative Industry Trends (San Diego Business Journal, Apr. 9th): "Blogs such as Rich Toscano's… creator of Professor Piggington’s Econo-Almanac for the Landed Poor… are steadily emerging as a media tool for the real estate industry. Global Research Center survey: 68% of real estate agents said they would be focusing on blogs as a marketing tool in 2007… California Association of Realtors: 63% of home buyers found their Realtor through an Internet search… The number of home buyers who used the Internet as an integral part of the home buying process increased significantly in the past six years from 28% of all buyers in 2000 to 70% in 2006."
- Yahoo Helping Investors Capitalize On Home Foreclosures (KGO.TV, Apr. 5th): "The recent flood of home foreclosures is creating hardships for a lot of people, and opportunities for others, and Yahoo is hoping to help investors capitalize on that. With a click of the mouse, Yahoo allows anyone to pinpoint, by cities, or zip codes, the locations of foreclosed homes, some thousands of dollars below market price. Yahoo's section also provides buying tips and other real estate trends… While basic foreclosure information on the site is free, specific addresses of troubled properties require a subscription to Realty-Trac, which contributes articles to the section."
Mortgates and Real Estate Lending
- American Home Mortgage Expects Reduced Earnings in the First Quarter and Full Year 2007 (Business Wire, Apr. 6th): "American Home Mortgage Investment Corp. (AHM) CEO Michael Strauss: “During March, conditions in the secondary mortgage and mortgage securities markets changed sharply… Characterized by far few buyers offering materially lower prices, both for loan pools and for “AA”, “A”, “BBB” and residual mortgage securities... reducing our gain on sale revenue and causing mark-to- market losses in our portfolio… We will attempt to restore our gain on sale margins by raising interest rates charged to consumers, [but] our working assumption must be that current market conditions will persist and that our gain on sale margins will not recover through the balance of the year."
- Lifting the Lid: Auditor's Subprime Exits Show Risks (Reuters.com, Apr. 6th): "On Monday, Grant Thornton resigned as auditor for Fremont General Corp. (FMT) and Accredited Home Lenders Holding Co., (LEND) saying the two companies that make loans to home buyers with poor credit histories "no longer meet our requirements for client acceptance." The resignations came just eight months after the firm had wrested Fremont from Ernst, its auditor of 33 years, and less than two years after it had taken over Accredited from Deloitte."
Subprime Fallout and Foreclosures
- Subprime Loan Worries Hit Funds (Asbury Park Press, Apr. 8th): "U.S. equity mutual funds rose 2.7% in Q1, less than half the pace of the previous three months, as the worst housing slump in more than a decade eroded stock-market increases. Money managers are generating lower returns after producing the biggest gains in three years during 2006, when the industry's assets topped $10 trillion for the first time. Stock funds climbed an average of 7.8% in Q4. Funds that invest in the financial industry dropped 1.2% as home foreclosures climbed, hurting shares of banks and mortgage companies… The average fixed-income fund was up 1.3% this year, led by high-yield bond funds."
- Subprime Troubles Hit Home (Columbus Dispatch, Apr. 8th): "Ace Mortgage Funding, a mortgage company based in Indianapolis, closed its Dublin office March 1... Last month, National City wrote off $11 million in losses related to its $8 billion portfolio of subprime mortgages. The Cleveland-based bank is considering adding $50m to reserves to cover additional losses. The problems stem from loans originated by First Franklin, National City's subprime-mortgage unit, which the company sold to Morgan Stanley in December for $1.3b. National City kept some First Franklin loans and is having trouble collecting the mortgage insurance on those that have defaulted. It also can't sell about $1.6b worth of the loans, as it originally had anticipated."
- Northeast Not Immune From Foreclosures (Seacoast Online, Apr. 7th): "At Consumer Credit Counseling Service of NH-VT, a nonprofit credit counseling and education organization, housing-related financial counseling has doubled in the past 12 months. "We're seeing a significant increase in families that are unable to keep up with payments on their subprime mortgages" said Kerry York, executive director of CCCS NH-VT."
- More Wisconsin Homeowners Face Foreclosures (WKBT, Apr. 7th) Milwaukee, Wisconsin: "Creditors filed foreclosure actions against almost 1600 Wisconsinites last month. That's an increase of about 6% from the same time last year, according to the Web site Foreclosures-W-I-dot-com. Overall, foreclosure filings are up 19% this year. Last year, they increased by 34%. And homeowners may not have seen the worst of it yet. Gary Zimmermann, national director of Federal Housing Administration lending for C-F-I-C Home Mortgage… expects a number of foreclosures this month, when interest rates on subprime loans issued three years ago go up."
- New Century Receives Court Approval of DIP Financing (PR Newswire, Apr. 6th): "New Century Financial Corporation (OTC:NEWC) announced today that the [Delaware] U.S. Bankruptcy Court… has approved… NEWC access [to] up to $50 million of the $150 million debtor-in-possession (DIP) financing… by The CIT Group and Greenwich Capital Financial Products… The Court also approved NEWC's other "first day" motions… as it pursues the sale of its assets and operations through the chapter 11 process. Among the relief granted by the Court is a motion permitting New Century to continue… a customer restitution plan and the funding of manufactured home loans under a program regulated by the Federal Housing Authority."
- Soaring Foreclosures Threaten Home Values (Dallas News, Apr. 6th): "In 2006, almost 39,000 Dallas-Fort Worth area homes were posted for foreclosure. An additional 14,000 foreclosure postings have been recorded so far in 2007 in Dallas, Tarrant, Collin, Denton and Rockwall counties. The thousands of homes that lenders have repossessed are now being resold – many at a discount. Real estate economists and sales agents warn that the record number of foreclosure sales could put a dent in housing values in some neighborhoods. "These foreclosed homes are in different price ranges and all over the place," said real estate agent Connie Zetterlund."
- Foreclosures: 15% of California Home Sales in March (Calculated Risk, Apr. 6th): "Foreclosure Radar: Of the $2B worth of properties sold in March, 4,796 [of 5,316] went back to the lender after receiving no bids, representing $1.82B… "Foreclosures sold at auction now account for 15% of all home sales in California and continue to rise," said Sean O'Toole, CEO and Founder of Foreclosure Radar. "This isn't just a story about failing subprime lenders and their customers. At the current pace, foreclosures will be a significant part of the real estate economy. A fact which bears close scrutiny even in areas that are not yet affected."
- Foreclosures Hitting Upscale Areas As Well (KDKA, Apr. 5th) Pittsburgh: "The number of foreclosures in our region has doubled in the past five years and is already on pace this year to hit an all time mark… KDKA Investigator Andy Sheehan: Shaler Township has long been a stable, upper middle class community... In Shaler, we found a half dozen houses recently foreclosed upon… In Allegheny County, foreclosures have doubled from 2,400 in 2000 to 4,800 last year and already this year foreclosures are on a pace to exceed 6,000… Most… have been in lower-middle class towns like Wilkinsburg and in the Mon Valley, they're spreading to the more affluent suburbs."
Global Alternatives To The Housing Slump
- Manufacturers Predict Soft, Stable Landing for World Economy (Battle Creek Enquirer, Apr. 7th): "MAPI Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: Q2'07-Q4'08: Economist Cliff Waldman concludes that the impact of the housing downturn in the United States and the near-term path of the embryonic investment slowdown in China are the two key variables that will determine the strength and stability of the world economy during 2007 and 2008… The report projects only a modest slowing in the annual growth of total U.S. goods and services exports from 8.9% during 2006 to 8.6% during 2007, as slower global growth partially offsets the stimulative impact of the weaker dollar."
- Global Real Estate Investment and Performance 2006 and 2007 (National Association of Residential Real Estate Investment Advisors, Apr. 5th): "Global real estate investment volume has increased threefold since 2001, reaching another record during 2006, with US$ 580 billion of transactions, up 20% on the previous year. Investment activity remains concentrated on a small number of countries, with the US accounting for 53% of turnover, and the UK a further 16%... Although the US contineus to dominate investment activity, the greatest percentage increases have been in Asia and Europe reflecting the increasing maturity and liquidity of these markets."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Housing Slump Pinches States in Pocketbook (NY Times, Apr. 8th): "State tax revenues around the country are growing far more slowly this year and in some cases falling below projections, a result of the housing market slowdown… In Florida… tax revenue is projected to drop this year for the first time since the energy crisis of the 1970s… New Jersey could face a $2.5 billion shortfall by mid-2008… and may lease its turnpike or its lottery to a private company to raise money. In California, income tax receipts in January were $1 billion less than forecast."
- Study Shows Garrett County Home Sales Down Some, but Real Estate Economy Sound (Cumberland Times, Apr. 7th): "Garrett County Board of Realtors report: Home sales are down this year, but remain steady within the county… Real property provides more than $3.2 billion in assessable tax base and more than 24% of the county government’s total revenue. In 2006, there were 500 brokered property sales in Garrett County, down 63 from 2005, and 287 single-family homes constructed… This number dropped from 334 the previous year… New home construction allowed for an estimated $28.4 million in local wages and nearly $15.2 million paid in federal, state and local taxes."
- Jobless Rate Falls; 180,000 Jobs Added (International Business Times, Apr. 7th): "Some soft spots… include people looking for work at factories, where jobs in March were cut for the ninth straight month. Makers of autos, furniture, clothing and textiles all eliminated jobs last month. Another soft spot: residential construction, a casualty of the housing slump. But there were many more job winners than losers. Construction jobs led the way, especially for contractors and for commercial building."
- A Short Run Forecast for the U.S. Market (Robert Craig-Stephenson in Seeking Alpha, Apr. 7th): "On the 17th… Housing Starts is forecast to slightly weaken after a very strong unexpected number last month - in the dead of the winter!!! Currently, the housing market headlines and local real estate offered a very strong clue that the Spring selling season has failed. This is not different from forecasts by homebuilder officials earlier in March. If a "rescue" from lower Fed rate is ruled out by fear of accelerating inflation in other non-housing sector, then I could imagine an even weaker consumer confidence because of wealth reduction from the asset side in the consumer balance sheet.
- Are Property Taxes in Subprime Soup? (OC Register, Apr. 7th): "Chriss Street, OC county's tax collector is concerned that some ailing [subprime] lenders may be unable to get borrowers' payments to their rightful place, such as prepaid property tax payments… property owners are still liable for a tax bill – even it goes unpaid due to a lender's failure to forward your cash to the tax collector… O.C.'s overall late tax payments are already running at an 11-year high… Wall Street banker UBS sued New Century Financial, [for] failing to forward $3.8 million in borrowers' payments – plus $1.7 million in escrow payments for house expenses – to UBS-sponsored owners of certain mortgages."
- Happy Times Are Here Once Again (Barry Ritholtz in Seeking Alpha, Apr. 7th): "It's safe to say that with construction employment on the upswing, the bottom in real estate must be here! And I guess with all this hiring, we best brace ourselves for the following: 1) Big upswing in consumer spending 2) Large decrease in foreclosures… 3) Deceleration in personal bankruptcy filings 4) Large increase in new home sales, permits and starts 5) Significant gains in existing home sales and prices… Yeah! It's a soft landing! The business cycle has been revoked! The worst is behind us! It turns out that Greenspan is a financial genius after all."
- The Impact of Housing Problems: Doom-and-Gloom Scenario Overstated (Jeff Miller in Seeking Alpha, Apr. 5th): "Anecdotal evidence… that housing demand won't fall by 50%: A young couple that waited for a price reduction on a home in Madison, Wisconsin… can now qualify for a suitable mortgage. My home construction contacts in the Chicago suburbs continue to find new work. My real estate contact in Minneapolis reports a brisk business in the 300K to 700K range, with prices down 5-10% from last year. While we like to use macro-level quantification, sometimes the individual cases help to see the economy at work…Taken together, this is all evidence that the doom-and-gloom scenario for mortgages and housing is overstated."
Homebuilders And Housing Stocks
- Holding on to Hovnanian With Some Trepidation (Dan Carty in Seeking Alpha, Apr. 8th): "Hovnanian (NYSE:HOV) [is] looking at improving cancellation rates and better traffic… Earnings are not exactly arguing for stability and they still have a very large exposure to the hot markets (though… in the Northeast – no Massachusetts or New England exposure – a positive)... The earnings dive lower is [leveling out]. Inventory and cancellations are down… the lowest first quarter cancellation rate (as a % of gross contracts) since Q405 and the best Q1 cancellation rate since Q105 (27%)… … With great risk involved, I added to my position in HOV on Thursday. [It's long but] the risk rewards is worth it at this point."
- Interface Carpet Tiles Lay the Foundation for Growth - Barron's (Seeking Alpha, Apr. 8th): "Aside from commercial and high end retailers carpet tile-maker Interface's (IFSIA) is increasingly attracting mass market retailers like Lowe's (NYSE:LOW) and other commercial businesses like education facilities and medical centers… Traditional competitors like Mohawk Industries (NYSE:MHK) and Shaw Industries are more exposed to slumping residential markets. But other high-end office furnishers like Herman Miller (NASDAQ:MLHR), Knoll (NYSE:KNL) and Hubbell (HUB), trade at 9 P/E to IFSIA's group-relative 8 P/E. IFSIA's estimated 2007 41% earnings growth beats the group's 23%... IFSIA's primarily commercial renovations tile market should offset the residential housing's downturn. Shares could climb 25%-37.5%."
- Dominion Homes 1Q Home Sales Down (Chron.com, Apr. 6th): "Dominion Homes… reporting a 54% drop in homes sold during Q1'07… The Dublin, Ohio-based company sold 218 homes in Q1, for a total sales value of $43.5 million, down from 475 homes, or $89.3m, a year earlier. Dominion… noted that this was its best sales performance since Q2'06... Dominion delivered 48% fewer homes during the quarter, for a total of 165 homes. The backlog as of March 31 was 319 contracts, with a sales value of $64.9m, compared with 590 contracts, with a sales value of $118.2m, a year ago."
- Catellus, Lennar Urban to Partner on Alameda Point (East Bay Business Times, Apr. 5th): "Catellus Development Group and Lennar Urban will… redevelop the 700-acre [former Air Force base] Alameda Point… Catellus is part of the international REIT ProLogis of Denver, and Lennar Urban is a division of Miami-based national home builder Lennar Corp…Catellus [and] Lennar… [are to] create a mixed-use development including 1,700 homes, 325,000 sf of retail space, 1.65 million sf of office and R&D space and 149 acres of parks and open space… Last fall… the original master developer withdrew [saying] the housing market downturn and the cost of hazardous waste cleanup, among other problems, made the $108.5 million price too risky."
Commercial Real Estate and REITs
- Indian Luxury Hotel Chain to Buy Union Square Property (SF Gate, Apr. 7th): "Taj Hotels Resorts and Palaces, a Mumbai, India, operator of luxury hotels, has agreed to buy San Francisco's Campton Place Hotel from Kor Hotel Group of Los Angeles for $58 million, the buyer and seller said Friday. Campton Place will become the third U.S. property for Taj, which plans to take control of the 101-room property near Union Square on April 30. Taj, which is expanding internationally, manages the Pierre, on New York's Central Park, and owns the Taj Boston, which it bought in January."
- Camden Positions for $250M Stock Buyback (Globe St., Apr. 6th): "Camden Property Trust's plan to buy back up to $250 million of its common shares didn't surprise analysts… Richard Anderson, senior REIT analyst with BMO Capital Markets: Buybacks haven't been common because REITs, by and large, have done well on the market. But aftereffects from the sub-prime lending business are having a psychological impact on stocks, which is indirectly lowering investor confidence on anything connected with housing. An opportunity surfaced for the company to sell assets and buy back stock in recognition they believe their shares are no longer too expensive to warrant acquiring them."
- REIT Buys Santa Clara Tech Center Complex for $70 Million (San Jose Business Journal, Apr. 6th): "A REIT manager has purchased the Santa Clara Tech Center industrial complex adjacent to the San Jose Mineta International Airport for $70 million, according to a filing with the SEC. The pending sale of the 456,000 sf complex would be the second substantial Silicon Valley acquisition by a REIT affiliated with the Addison, Tex.-based Behringer Harvard property investment operation."
- Penn REIT Shares Hit Life-High on Sale Speculation (Reuters, Apr. 5th): "Shares of Pennsylvania REIT (NYSE:PEI) hit a lifetime-high on speculation that the company had put itself up for sale, but retreated after it denied any such move. The company's shares rose about 8% to $50.39 in morning trade after a trade publication said, "Penn REIT is quietly (or not so quietly depending on whom one talks with) shopping itself…" The trade publication, The REIT Newshound, said CBL & Associates Properties (NYSE:CBL) has been talking to Penn REIT for some time."
Tracking the Housing Market and Homebuilder Stocks |
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.