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 have 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"
"I assume AmericaBuilt is the first of many that are going to have to reorganize in order to stay in business." - Eric Slocum Sparks, company attorney for Tucson, Arizona-based homebuilder AmeriBuilt Communities and its construction arm, AmeriBuilt Construction. Despite $12 million in annual revenues, the company declared bankruptcy yesterday citing the housing slowdown. (AZ Starnet, Apr. 17th)
Real Estate Sales and House Prices
- Luxury Home Prices Tumble in New York's Long Island, Queens (Bloomberg, Apr. 18th): "Prudential Douglas Elliman Real Estate and Appraisal firm Miller Samuel report: Luxury home prices slid in New York's Long Island and Queens in Q1… The median sales price fell 5.3% to $900,000 from a year earlier and houses took 25% more time to lure a buyer… In Manhattan… the median apartment price rose 1.2% in Q1 to $835,000, the smallest quarterly gain in five years… In Q1. it took owners 121 days to sell their homes, compared with 97 days a year earlier… The weakness at the high end also hurt the overall housing market on Long Island… The median sales price for a home in Queens rose 3.8% to $492,900 compared with a year earlier. The number of houses sold gained 1.2% to 2,179."
- Hawaii Real Estate is Booming Due to Retirement of Baby Boomers (The Mature Market, Apr. 17th): "Hawaii Realtor Tony Kawaguchi with RE/MAX 808 Realty on Oahu states, “I get calls every day from people who want to buy their retirement home in Hawaii… It’s amazing how much money some of these boomers have, and how easily they will buy a million or $2 million house. I’ve sold a $2 million house sight unseen!” With a single family median home price of $643,500, Hawaii Real Estate isn’t exactly cheap, but extremely low property taxes and very high conforming loan limits are helping to propel home sales in Hawaii, despite a [national] slowdown in real estate."
- Oklahoma’s Housing Market Going Strong (KOTV, Apr. 16th): "Tulsa is near the top of the list for homeowners expected to make the most money off their investment in the coming year… Local Realtor Darryl Baskin: "Most years homes in Tulsa appreciate 3-5%. That's right in line with a new analysis that predicts Tulsa home values will go up 4.3% from this April to next April, the second best market in the nation..." Oklahoma City homeowners are expected to see their homes appreciate in value over the next year by 3.1%."
- Houston Home Sales Slide for First Time in Three Years (MSN Money, Apr. 17th): "Houston Association of Realtors: Houston single-family home sales were down in March -- the first back-step since 2004. Total property sales for the month were 7,267, which was a 9.6% decrease over March 2006. The real estate organization also reported a 14.1% increase in the number of active listings, which rose to 47,872 last month from 41,948 in March 2006. Inventory of single-family homes for March came in at 5.5 months, which is the first y/o/y decline in more than two years... The city's current median price of $150,590 is [a] monthly record for the Houston market."
- West Still Lags in Housing Starts (New West, Apr. 17th): "Commerce Department: Housing starts rose unexpectedly in March… But in the West, which has perhaps been one of the hardest hit areas, housing starts continued a month-to-month decline. The increase in housing starts was led by a 45% jump in the Midwest. Starts fell 7.7% in the West, 6.1% in the Northeast and 2.7% in the South."
Mortgates and Real Estate Lending
- MDMC Adds Reverse Mortgages to Due Diligence Review (Business Wire, Apr. 17th): "MDMC, a mortgage loan analysis firm that provides due diligence and agency delivery services to companies throughout the country, has added reverse mortgage loans to its due diligence review service offerings. The company reviews a variety of mortgage loans, including prime, subprime, Alt-A and home equity. The addition of reverse mortgage reviews is a direct response to the sharp increase in the volume of the loans in the mortgage industry and the interest of MDMC clients to purchase these loans in the secondary market. Doug Lackey, principal for MDMC: “Several of our Wall Street investment bank clients approached us about adding reverse mortgages to our review.”
- Court Gives Fed Oversight of Mortgage Lenders (Investment News, Apr. 17th): "The Supreme Court ruled today that Wachovia Corp.'s mortgage subsidiary is not subject to oversight by state regulators, thus supporting federal preemption for national banks and their operating subsidiaries… Wachovia Mortgage originally registered in Michigan to make mortgage loans, but deregistered with the state after it became a wholly-owned subsidiary of nationally-chartered Wachovia Bank in 2003. Washington-based financial services organizations, including the American Bankers Association, Consumer Bankers Association, Consumer Mortgage Coalition, the Financial Services Roundtable, as well as 40 state banking associations, took the position that the National Bank Act preempts state banking organization laws."
- Washington Mutual: Riskiest Portfolio in U.S. – WSJ (Seeking Alpha, Apr. 17th): "A Wall Street Journal study released today says Washington Mutual Inc. was the #1 U.S. lender to investors and second-home buyers -- which are considered riskier loans than loans to primary occupants. 15% of WaMu's loans were non-primary residence, vs. 13% for Countrywide, 11% at Wells Fargo, 9% at JP Morgan Chase, and 5% at Citigroup. Citigroup and WaMu had the highest concentrations of high interest-rate loans, generally associated with subprime borrowers. High interest-rate loans (over 7.72%) were 32% for Citigroup, 29% at WaMu, 25% at Countrywide and 19% at Chase and Wells Fargo."
- US Bancorp 1Q Profit Dips 2 Percent on Tighter Interest Margin (IN Forum, Apr. 17th): "U.S. Bancorp (NYSE:USB) said its Q1 profit declined 2% as the spread between what it pays in interest and what it charges for loans tightened. The results were below Wall Street expectations, and its shares fell… USB said its total bad loans declined from Q4, although net charge-offs increased by $22 million… USB reported $397m in [delinquent] loans… up from $349m in Q4 and $251m during Q1'06. And it reported $411m in restructured loans, up from $405m in Q4 and $371m during Q4'06. USB increased its provision for credit losses to $177m, or $62m higher than Q1'06."
- Restructuring Cuts Citi‘s 1Q Profit (Jackson News Tribune, Apr. 17th): "Q1 profit at Citigroup Inc. dropped 11%… [but] the results… beat Wall Street expectations: Revenue in Q1 was a record $25.5 billion, up 15% from $22.2b a year earlier… "Credit costs increased $1.26b, primarily driven by an increase in net credit losses of $509 million and a net charge of $597m to increase loan loss reserves… [vs.] a net reserve release of $154m in Q1'06. This included higher losses and reserves in the U.S. consumer division, reflecting "an increase in delinquencies in second mortgages and a change in estimate of loan losses inherent in the portfolio."
- GMAC Financial Services Announces Senior Leadership Changes at ResCap (PR Newswire, Apr. 17th): "GMAC Financial Services (GMAC) today announced several senior executive changes at its real estate finance operations, Residential Capital, LLC (ResCap). GMAC said today that ResCap's Chief Executive Officer Bruce Paradis will retire on June 1, 2007, capping a 24-year career at GMAC… Paradis will be succeeded by Jim Jones, currently ResCap COO and president of its U.S. Residential Finance Group. In addition, Craig Chapman, previously CEO of Aegis Mortgage Corporation, has joined GMAC ResCap as president of ResCap's U.S. Residential Finance Group, effective immediately, succeeding Jones in that capacity."
- Overcharges Run Rampant in Home Loans (Mortgage 101, Apr. 16th): "Excessive broker fees arise primarily from a lack of transparency in broker pricing. Most broker fees are paid by the lender as a rebate or "yield spread premium" [YSP]. For example, the wholesale lender who quotes a rate of 6% at zero points might pay a YSP of 1.6 points for a 6.375% mortgage. The borrower pays the higher interest rate but no cash out of pocket, and is either not aware of the YSP or becomes aware of it too late to do anything about it."
Subprime Fallout and Foreclosure Impact
- FDIC Conducts LTCM-Style Meeting Over Subprime Mortgages (Paul Kedrosky in Seeking Alpha, Apr. 18th): "Imagine this headline "[Banks, Regulators, and Execus] Trying to Keep Borrowers in Homes" rewritten to be about credit cards. Would it be different than what is being proposed by some to save home-owners in over their heads on subprime mortgages? From Yahoo biz: "A high-level group of federal officials, bankers and mortgage industry executives meeting Monday agreed on a goal of keeping deserving borrowers with high-risk mortgages in their homes at a time of rising foreclosures, a key banking regulator said. Bair organized the unusual seven-hour meeting at FDIC headquarters on the turmoil in the market for so-called subprime mortgages."
- Lenders Get in to Foreclosure Business, Particularly in West (Sign On San Diego, Apr. 17th): "Consumer advocates have begun criticizing major mortgage lenders, such as Countrywide Financial Corp. and GMAC Financial, that also have in-house foreclosure businesses. Ira Rheingold, general counsel, National Association of Consumer Advocates: "It is “mind-boggling” that in many states, people can lose their homes in foreclosure without any court hearing and that the foreclosure is done by a company with ties to the lender…" David Berenbaum, of housing advocacy group, the National Community Reinvestment Coalition: Many large lenders are trying to reduce costs by getting into parts of the mortgage business that have traditionally been run by third parties."
- Washington Mutual Net Falls 20 Percent on Home Loans (Bloomberg, Apr. 17th): "Washington Mutual Inc., the largest U.S. thrift, said Q1 profit dropped 20% as home-lending losses that began last year spilled into 2007… Net income fell to $784 million, or $0.86/share, from $985m, or $0.98, a year earlier… CEO Kerry Killinger: The bank was experiencing "unprecedented deterioration in the subprime mortgage business…" Report[ing] a $113m loss from the home loan group, mostly from subprime lending... Washington Mutual lost money selling subprime loans… and the value of loans held for sale also declined… Nonperforming assets… nearly doubled to $3.26 billion, or 1.02% of total assets, from Q1'06."
- The Short Case on Sovereign Bancorp (Thomas Kelly in Seeking Alpha, Apr. 17th): "Although Sovereign is less leveraged to the mortgage market than they were six months ago (thanks to the very wise decision to divest themselves of $10 billion in mortgage assets), I believe the hyper-growth in assets that the company has experienced… has created a bloated bank that is trying to restructure itself right into the teeth of a degrading mortgage market… SOV [has] been fairly active in the non-prime mortgage space such as Alt A and non-documented loans… Sovereign’s book is probably overvalued… It appears likely that the bank is going to take a hit for delinquent mortgages… [This is not a long term trade] given the potential for a buyout."
- Experian Sales Climb, Confident on Future (Reuters, Apr. 17th): "Credit-information firm Experian (EXPN) posted a 12% rise in second-half sales on Tuesday and said it was confident about the future, though it continued to face challenging conditions in some of its markets… In the Americas, where Experian makes more than half its revenue, sales rose 12%, though organic sales at its interactive division were hit by the impact on LowerMyBills of the turmoil in the U.S. subprime mortgage market. LowerMyBills, which gives advice on mortgages, loans, debt consolidation and debt relief, saw sales flat in Q3 but down 8% in Q4."
- Subprime Loans Can't Be Easily Rewritten: FDIC (MarketWatch, Apr. 17th): "Sheila Bair, Chairman, FDIC, testified at a hearing of the House Financial Services Committee on subprime foreclosures: About three-fourths of the $600 billion in subprime ARMs taken out in 2006 have been securitized, or sold in the secondary market… Reworking the terms of the loan after it's been securitized "can be very difficult and may require extraordinary actions… Once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower," Bair said.
Global Alternatives To The Housing Slump
- Jones LaSalle Sees 10 Listed German REITs (IPE Real Estate, Apr. 16th): "Jones Lang LaSalle, the US-based real estate broker: Between five and ten listed German property firms are to become… REIT's in the coming months... On March 30, Germany’s parliament… legalised G-REITs retroactively from the beginning of the year… Firms that have indicated their transformation into G-REITs or the launch of G-REIT subsidiaries include IVG Immobilien, Alstria and TAG AG... JLL [said] while the G-REIT law would create a vibrant new market, the government, by banning most residential property from the vehicles, “had missed the chance” to make Germany Europe’s largest REIT market."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Property Tax Rolls May Drop by $1B (Florida Today, Apr. 17th) Florida: "Brevard County's soft 2006 real estate market will shrink taxable property values… Property Appraiser Jim Ford: "We don't normally see a drop at all." He expects the tax rolls this year to drop by at least $1 billion, or 3.3%, to $38b, including the value of all new construction. Even with the decline, the figure is still more than double the total in 2001… In anticipation of state-imposed rollbacks in tax rates, County Manager Peggy Busacca has asked departments to detail by this week how they would cut up to 30% of their budgets."
- Kass: Mind the Mindless Speculation (The Street, Apr. 17th): "The Black & Decker (BDK) earnings release should be viewed negatively as it relates to the multiplier effect of the housing downturn. At $1.60/share, the company substantially beat Q1 estimates of $1.26, but BDK did not raise its full-year estimates. The company cautioned that it anticipates a "challenging economic environment" so only plans to increase its full-year guidance slightly when it reports Q2 results later this month. Earlier, I described a likely "slow-motion downturn in consumer spending." Black & Decker's release confirms my notion."
- Copper Gains, Raising Speculation It Will Break Year-Old Record (Bloomberg, Apr. 17th): "Catherine Virga, an analyst at CPM Group: Stronger-than-expected U.S. housing figures also helped support [copper] prices… Construction is a large portion of the fuel that is driving prices..." U.S. housing starts unexpectedly rose for a second month in March, bolstering expectations that the worst housing slump in 15 years may be easing. Builders broke ground on new homes at an annual rate of 1.5 million last month, an increase of 0.8% from February, the Commerce Department said today... Building permits, a sign of future construction, also rose 0.8%...The U.S. is the world's second-largest consumer of copper, and the housing sector is its biggest user."
Homebuilders And Housing Stocks
- New-home Builders Use Auctions as a Way to Spur Sales (RIS Media, Apr. 17th): "Inland builders in recent months have been cutting prices and throwing in extras such as free swimming pools to move their new houses in a slowing market… Recently, some are finding success with public auctions… Some of those builders are incorporating online elements into their auctions... On April 1, Mission Viejo-based builder Prosperity Homes held a live auction… for new condominiums available in its Bordeaux development in San Bernardino. Prosperity CFO Rob Wallstrom: "It was a good response. We auctioned 23 condos and sold 23 condos at an average discount of 15.3% off the original asking prices."
- Commercial Real Estate News Digest (Mercury News, Apr. 17th): "Fidelity Investments, the world's largest mutual-fund company, increased its holdings of KB Home. Fidelity raised its stake in the Los Angeles-based home builder to 15% from 7.5% at the end of December as shares of U.S. home builders plunged. Fidelity bought about 4.6 million shares of KB Home in Q1, according to a filing with the SEC. Shares of home builders have dropped as executives at companies including D.R. Horton, the second-largest, and Toll Brothers, the biggest luxury builder, backed away from predictions of a rebound in sales this year."
- Affordable Residential to Sell Real Estate Unit (Reuters, Apr. 17th): "Affordable Residential Communities Inc. (NYSE:ARC) said on Tuesday it would leave the real estate business and sell its manufactured home community arm, which represents the bulk of its assets, to hedge fund Farallon Capital Management LLC for about $1.8 billion in cash and assumed debt. The agreement sent Affordable shares down more than 6%... The home parks company, which traditionally made its money by collecting rent on lots at its home parks, said it would retain ownership of its recently acquired NLASCO insurance operations, and it would seek to make acquisitions with the proceeds from the manufactured home deal."
Commercial Real Estate and REITs
- Wells REIT Opens Door to Public Listing (Globe St., Apr. 17th): "Wells REIT has acquired its advisor companies, a move which makes the REIT self-advised and could lead to its shares being listed on a national stock exchange… Wells REIT… specializes in class A office properties… Under its charter, Wells REIT must list its shares on the national stock exchange or begin to liquidate its assets by Jan. 30, 2008… Wells REIT currently owns more than $5 billion in assets, including 82 buildings in 23 states… CEO Donald Miller: “We believe that this transaction will help position the REIT to advance to the next phase in its operations.”
- Will Loan Delinquencies Also Rise in the Commercial Real Estate Sector? (Multi-Housing News, Apr. 17th): "Sam Chandan, chief economist at commercial real estate research company Reis: There has been a significant amount of commercial real estate loans made at a time when property prices in the sector have been at their highest levels. “The run-up in commercial and multifamily mortgage concentrations at the peak of the current valuation and asset pricing cycle implies that a greater proportion of loans will come under stress over the next few years…Whereas only 1% of multifamily transactions in early 2004 had cap rates below 5%, over 30% of transactions today show sub-5% cap rates."
- Inland American Real Estate Buys Six Pines portfolio f (Reuters, Apr. 17th): "Inland Real Estate Acquisitions Inc. said it acquired Inland American Real Estate Trust Inc. retail and industrial portfolios, including Six Pines featuring 21 grocery-anchored properties of 1.47 million sf of prime retail space, for about $256.6 million. Inland also bought 20 industrial properties of 2.3 million sf from ProLogis (PLD in Tennessee, the company said... without giving the dollar amount for this deal."
- CB Richard Ellis Leads Country in Commercial Sales (Tampa Bay Business Journal, Apr. 16th): "National Real Estate Investor's [April issue] has ranked CB Richard Ellis Group Inc. No. 1 out of the 25 largest brokerage firms in the world for the fourth year in a row… CB Richard Ellis (CBG) was responsible for more than $224.6 billion of global sales and leasing transactions in 2006. This total was nearly three times that of the nearest competitor and more than the No. 2, No. 3 and No. 4 firms combined. The latest figures Include 2006 transaction activity for Trammell Crow Co., which CB Richard Ellis acquired in December 2006."
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.