Housing Bubble and Real Estate Market Tracker

by: Judy Weil

Judy Weil submits: 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"

"This essentially is a signal to financial institutions that we won't criticize you if you incur expenses or losses for providing assistance to borrowers." – Gilbert Schwartz, a former associate general counsel at the Fed. Schwartz said it is "extraordinarily unprecedented" for government regulators and the Fed to ask lenders to help reduce foreclosures. (Seeking Alpha, Sept. 5th)

Real Estate Sales and House Prices

  • Tiny Hawaii Real Estate Office Closes Over $40 Million In Sales -- Home Sales Data Shows Prices Still Rising in Hawaii (PR Web, Sept. 6th): "The Honolulu Board of Realtors: The August median sales price for single family homes in Oahu was up $10,000 from July to $650,000… Condo prices were down $10,000, but matched the third highest median price on record at $325,000. The average single family home in Oahu takes just 44 days to sell... Hawaii condos are taking just 38 days to sell. The lack of inventory is driving the price of homes upward. With only 4,245 properties on the market for an island of over 900,000 people, Hawaii real estate remains a seller's market in many areas."

  • Home Sales Down 8.6 Percent, But Prices Up Statewide (Arkansas Business, Sept. 5th): "Arkansas Realtors Association: Arkansas home sales were down 8.67% in July 2007 from July 2006, but average home prices were up more than 1%... The monthly report showed 2,728 home sales in July, down from 2,987 in July 2006. Among the state's top five markets, Benton County saw the biggest decline, with home sales down more than 28% [from] July 2006… Average home prices in Benton County, however, were up more than 2.9% from July 2006… But homes in Faulkner County saw the greatest increase, with average home prices up 11.1%."

  • Home Sellers Finally Flinch (Daily Press, Sept. 6th): "Virginia Association of Realtors: In July, stubborn Hampton Roads home sellers finally began to give in on price somewhat… From March-June, the number of homes sold had been down double digits from a year earlier as prices remained about 4% higher than in 2006. The supply of homes for sale and the number of days on the market throughout 2007 have been much higher than the same period in 2006… But… in July sellers dropped prices and made concessions to get deals done. The price increases were less than 3%, and the number of homes sold was down only 5%. [In] May: Sales were down 17% from 2006."

  • Even Realtors Are Rattled Now (Conde Nast, Sept. 5th): "National Association of Realtors said its pending home sales index fell 16.1% in July from July 2006. The biggest decline was in the West, where pending sales - homes under contract to be sold - declined by 21.8% from a year ago. The Midwest was down 15.8%, the South down 15.2%, and the Northeast down an even 10%… Lawrence Yun, NAR senior economist: The problem was most severe for people seeking so-called jumbo loans — those greater than $417,000 in the lower 48 states; 50% more in Alaska and Hawaii — and "subprime" borrowers who have poor or incomplete credit histories."

  • Pending Sales Slide Should Be No Surprise (Realty Times, Sept. 6th): "What surprised most economists was the extent of the pending sales index decline. Pending home sales, based on contracts signed in July, fell 12.2% to a reading of 89.9 in July from the June index of 102.4. That's 16.1% lower than July 2006 when it stood at 107.1. The index averaged 100 in 2001… and the lowest reading was in September 2001, immediately following the 9/11 attacks at 89.8, so the drop last month shows significant fears, problems with financing, and other barriers for homebuyers… The attention has been on risk, but affordability is really the greatest issue for buyers."

Affordability Still an Issue

  • New Houses Out Of Most Families' Reach (Detroit Free Press, Sept. 6th): "Michigan Association of Home Builders: Some 1.35 million Michigan households, or 35%, can afford only homes priced under $100,000, yet the average price was $139,155 in June… Lee Schwartz, executive VP for government relations for the homebuilders: When adding the second group of 907,000 state households that can afford a home priced between $100,000-$175,000, "you are talking close to 2.3 million Michigan households that are in a housing crunch… almost 60% of the state's households… In Detroit, 86% of new and existing homes that sold during Q2'07 were affordable to families earning the area's median household income of $53,800. The median home sales price was $92,000."

Mortgates and Real Estate Lending

  • Local Bank Ads Criticize Other Lenders (Boston Herald, Sept. 6th): "In North Andover, River Bank has been advertising rates of 6.75% on so-called jumbo mortgages - those for more than $417,000 - even as national lenders raise similar rates. River Bank CEO Gerald Mulligan said it is able to keep rates lower because it doesn't sell mortgages to third parties: "There's a hysteria out there that mortgage money isn't there, and that's not true. If you're creditworthy, the money is still there and at affordable levels." Massachusetts Bankers Association, the trade group that represents most of the community institutions, found that 72% of banks in Massachusetts had no foreclosures last year, while 99% had fewer than five foreclosures."

  • State Sues Real Estate Firms, Brokers, Alleging Predatory Lending (Hartford Courant, Sept. 5th): "The state has sued seven companies and individuals [for] mislead[ing and defrauding] low-income borrowers into taking on mortgages they could not afford… The firms and individuals enticed dozens of consumers with false promises of profits from investment rental properties and nonexistent management services, Attorney General Richard Blumenthal and Banking Commissioner Howard Pitkin said Wednesday… The state knows of three dozen or so borrowers in the alleged scam, which may have involved hundreds of thousands of dollars… Blumenthal: "These practices preyed on the most vulnerable citizens -- many of them first-time unsophisticated low-income home buyers who spoke little or no English."

Subprime Fallout

  • Countrywide Lays Off Another 900 (Jonathan Liss in Seeking Alpha, Sept. 6th): "Number one U.S. mortgage originator Countrywide Financial (CFC) is laying off an additional 900 employees as a result of decreased lending and increased defaults resulting from the worst U.S. housing slump in two decades. The cuts, representing approximately 1.5% of the company's total work force, come on top of 500 workers who were let go in August. The latest round of layoffs will come predominantly from Countrywide's mortgage production division. Countrywide: "Any further changes to the Countrywide organization will reflect our ongoing strategy to align our business to the marketplace." Its shares have fallen more than 55% YTD, including a loss of 5.1% Wednesday."

  • Credit Concerns Haven't Gone Away (Brett Steenbarger in Seeking Alpha, Sept. 6th): "Around the world, liquidity is still very much a problem. LIBOR rates are well above Fed Funds rates, and [that's] increasingly seen as a crisis in London… Asset backed commercial paper and lower-rated paper are commanding sizable spreads over AA financial and non-financial paper (and certainly above Treasury bills). When there is a loss of faith in the assets backing the paper, prices fall and yields rise. Nothing in the Fed's actions to this point has changed that situation. Meanwhile, 10-year Treasuries hit their lowest yield levels today since the stock market decline began. That flight-to-safety dynamic has also remained unchanged."

  • It's a Collateral Crunch, Not a Credit Crunch (Michael Shedlock in Seeking Alpha, Sept. 5th): "So far, people with good credit can still get a conventional mortgage or loan just as easily as they could two years ago… The number of corporations with good credit is not only shrinking, but the number of deals they want to do is shrinking as well. Competition is intense for new corporate leasing deals for customers with excellent credit. The risk is that the contagion spreads and morphs the collateral crunch into a full-blown credit crunch… So, no problem yet borrowing money or getting good lease terms if your credit rating is top notch, but… in regards to both mortgages and leasing, there is a dearth of customers with good credit risks that want to borrow… Evidence continues to mount that profits from financing and financial services have peaked."

  • Skeletons in the Closet: Credit Default Swaps and Housing (Investing in the Middle Way in Seeking Alpha, Sept. 4th): "NY Times: "Federal Reserve Z1 report: the total value of owner-occupied housing is about $23t… If it turns out that people have been paying way too much for real estate in recent years because money has been so cheap and lenders so lax… markets will revert to the mean… A 10% drop from that $23t total would be a loss of $2.3t in national real estate wealth - a 20% decline would result in almost a $5t hit… Consumer spending and ultimately the broader economy will suffer… Much of the Credit Default Swaps volume transfers through [a] few… big banks like Goldman Sachs (NYSE:GS), JP Morgan (NYSE:JPM), Morgan Stanley (NYSE:MS)… If hedge funds hold $100 billion of CDS protection and MS took the other side of the trade, [and] if that $100b of debt defaulted with no recovery, MS has to pay $100b to those hedge funds… Should MS be unable to pay its debts, holders of MS CDS would [suffer] -- suppose Lehman Brothers is on the short end of $50b of MS CDS[?]"

  • Former Fed Gov. Gramlich Dies; Warned of Subprime Excesses (MarketWatch, Sept. 5th): "Former Federal Reserve Gov. Edward "Ned" Gramlich, 68, has died from leukemia, a spokesman at the Urban Institute said Wednesday. Gramlich was a senior fellow at the think tank. Gramlich published a book in June, "Subprime Mortgages: America's Latest Boom and Bust," which details regulatory lapses by the Fed and others that helped fuel the boom. He was scheduled to deliver a paper at the Fed's retreat in Jackson Hole, Wyo., this past weekend. Gramlich served on the Fed from 1997 through 2005."

Foreclosure Impact

  • Government Sponsored Mortgage Placebos (Markham Lee in Seeking Alpha, Sept. 5th): "1) FHA is only going to guarantee an additional 80,000 mortgages (on top of the 160,000 they anticipate guaranteeing in 2008). 2) 179,599.00 homeowners went into foreclosure during the month of July and roughly 165,000 [in] June… We could estimate that an additional 900,000 households will face foreclosure by the end of 2007. 3) FDIC: There was roughly $27.5 billion worth of [delinquent] residential mortgage loans… at the close of Q2. If we estimate an average mortgage size of $300k… that’s approximately 91,667.00 total households. 4) [An] estimated 25-33% of ARMs will wind up in foreclosure. [With] roughly 2 million ARM mortgages scheduled to reset over the next eighteen months and we have 500k-700k worth of potential loan defaults and foreclosures."

  • Foreclosure Crisis Is Not Easing In North Minneapolis (Minnesota Public Radio, Sept. 6th): "Minneapolis, Minn. — There'll be 1500 foreclosures this year in Hawthorne and Jordan compared to about 700 last year, predicts Elizabeth Ryan, who chairs the group created by Minneapolis officials to try prevent foreclosures… The mortgage foreclosure crisis is creating some opportunity, too. Foreclosed homes are selling for as little as $40,000 in north Minneapolis. Investors are buying some for rental property. Housing non-profits including the Greater Minneapolis Housing Corporation and Project for Pride in Living are also buying foreclosed properties and rebuilding them."

  • Regulators to Lenders: Act Now to Prevent Foreclosures (Judith Levy in Seeking Alpha, Sept. 5th): "U.S. bank regulators, including the Federal Reserve, have asked mortgage lenders to take steps to identify at-risk borrowers and prevent foreclosures. The regulators advised lenders to find ways to refinance loans and even recommended that banks consider reducing the principal owed before foreclosing… Senate Banking Committee Chairman Christopher Dodd calls the regulators' recommendations late and inadequate. "Subprime homeowners deserve loans that are affordable in the long term," he said. "We cannot tolerate short-term modifications that put off the day of reckoning until a time when the press' attention is turned elsewhere."

  • The Mortgage Squeeze (Cincinatti Post, Sept. 4th): "President Bush said… government has only a limited role to play [in foreclosure and subprime solutions] and he was clear on what the government would not do… There are short-term solutions available - slashing interest rates, pumping up the money supply - but they tend to have nasty long-term consequences, familiar to those who endured the 1970s… Sometimes in cases of public confidence it's more important that the president appear to be doing something rather than what he actually does. This past week gave us a much-needed appearance of activity, and an equally needed measure of restraint.

Global Impact and Alternatives To The Housing Slump

  • Decline In Spanish Mortgages Gathers Pace; U.S. Subprime Cited (MarketWatch, Sept. 5th): "Bank of Spain data compiled by the country's mortgage association, the AHE: New home loans in Spain [fell] almost 12% in H1'07 to 760,482 from 861,417 [in H1'06], pressured by negative sentiment resulting from the meltdown of the U.S. subprime mortgage market…AHE: A recent survey… among Spanish mortgage lenders pointed to a further drop in mortgages in July and August… By volume, the mortgage pool in June was 19.7% bigger than a year earlier, down from a growth rate of 20.5% in May and 25.2% in June of 2006. The AHE forecasts growth to slow to 14% for the whole of 2007."

  • Japanese Homebuilder Looks Overseas For Sales (Int'l Herald Tribune, Sept. 5th): "Daiwa House Industry, the second-biggest Japanese homebuilder by market value, wants to cut local costs and expand in China as the developer is concerned a property "bubble" may burst, slashing land prices… Land prices are key for Japanese homebuilders like Daiwa House because declines in population are shrinking the residential construction market. Housing starts in H1'07 averaged about 23,000 a month fewer than they did 20 years ago. Daiwa wants to build condominiums in China and Vietnam and is increasing sales of cheaper steel-frame homes in Japan."

  • EU Commissioner Sees Little Subprime Impact On EU Growth (AFP, Sept. 4th): "The crisis in the US subprime mortgage market will not have a discernable effect on on EU growth in 2007, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said Monday… But he estimated that the fallout from the subprime lending crisis would slightly dent growth in 2008 "to the tune of a few percentage points." Almunia added that this year, growth was likely to remain similar to 2006 levels, when the figure for the eurozone was between 2.7%-2.8%."

  • China's Forex Reserves Not Invested In US Subprime Mortgages (India Economic Times, Sept. 4th): "None of China's $1.3 trillion in foreign reserves are invested in the US subprime mortgage industry which in recent weeks has bruised global markets, state press reported on Tuesday. The latest denial came after Liu Chunhang, a senior official with the China Banking Regulatory Commission, said last month that domestic commercial banks had limited exposure to US' subprime ills… Most of China's foreign exchange investment in the US is believed to be in treasury bonds, and the Asian giant is currently the world's second-biggest holder of such bonds after Japan."

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

  • Fed: Credit Crunch Is Hurting Housing Impact On Overall Economy Is Limited (Times Argus, Sept. 6th): "Fed's Survey of Business Conditions: In Wednesday's survey, the Fed said most banks reported that the recent developments in financial markets had led to more restrictive lending standards for people wanting to obtain home mortgages. That "was having a noticeable effect on housing activity… The reduction in credit availability added to uncertainty about when the housing market might turn around." The Fed said several banks noted that commercial real estate markets had experienced "somewhat tighter credit conditions." But some banks said "credit availability and credit quality remained good for most consumer and business borrowers."

  • Pending Home Sales Fell 12.2% in July; Steepest Drop on Record (Judith Levy in Seeking Alpha, Sept. 6th): "The NAR's pending home sales index fell 12.2% to 89.9, 16.1% below its year-ago level. The decline was over five times greater than the average 2.2% drop forecast by economists. Ian Shepherdson, chief U.S. economist with High Frequency Economics: "Note that this collapse in pending home sales predates the turmoil in the markets and the subsequent jump in jumbo mortgage rates, even for prime borrowers." All four regions fell, with the West dropping 21%, the Midwest 13%, the Northeast 12% and the South 6.6%. Stocks pulled back and Treasurys gained on speculation among traders that economic growth will continue to suffer."

  • Building Projects Fill Gap In Economy (USA Today, Sept. 5th): "State and local governments are in the middle of a building boom that's helped keep the economy afloat and offset job losses from the decline in home construction. Census data: The construction of sewer plants, schools, ball fields and other government facilities soared 11.1% in the first four months of the year to a record annual rate of $257 billion…The fuel for the building spree is the same as it was for the residential housing boom: borrowed money. Thomson Financial: State and local governments issued $228b in bonds during H1'07, up 28% from last year. Tax collections grew a modest 4.7% in H1'07.

  • The Multiplier Effect of the Subprime Mess (Michael Panzner in Seeking Alpha, Sept. 5th): "Rising defaults on subprime home loans are… cutting into housing-related revenues from building-permit fees, taxes on contracting and recording property transfers, and even sales taxes. Florida [projects a] $1.5 billion funding gap. California forecasts a shortfall of at least $5b in next year's budget. And Chicago faces a $217 million gap in its $5.6b budget for 2008… States are collecting less in sales tax -- which can account for as much as 15% to 20% of their total revenue… Their budget problems could worsen when property-tax assessments catch up with the rapid decline in housing prices over the past year."

  • Wealthy U.S. Investor Optimism Fell In August (Reuters, Sept. 5th): "The Spectrem Affluent Investor Index: Optimism among wealthy U.S. investors fell in August by the biggest margin in six months… as a slumping housing market and volatile financial markets took a toll on confidence. The index dropped 8 points to a reading of minus 1 in August from 7 in July, falling below zero for the first time in 12 months. The level indicates the investment outlook of households with at least $500,000 to invest has slipped deeper into "neutral territory," where it has been since June."

  • Housing Market Bad But No Longer Worsening (Bespoke Investment Group in Seeking Alpha, Sept. 5th): "A look at a number of the major indicators that track the housing sector shows that while things remain bad, the rate of decline appears to be slowing. Below we highlight the year-over-year changes in various housing indicators. Note that in each case, things are not as bad as they were a few months ago."

  • Study Explores Real Factors Behind Declining Housing Prices (Univ. of Wisconsin News, Sept. 4th): "Economic Commentary" [study] by the Federal Reserve Bank of Cleveland and co-authored by University of Wisconsin-Madison business faculty: House price appreciation outpaced incomes [when] credit constraints [were] unexpectedly relaxed for first-time homebuyers who are credit or down-payment constrained… the demand for starter homes increases, [pushing up] prices. Owners of starter homes enjoy capital gains, enabling them to trade up to a more expensive house. The increased demand for more expensive homes pushes up the prices of those homes. As private mortgage originators tighten credit standards… this will reduce the demand for starter homes, causing their prices to fall… which triggers a chain-reaction decline in the price of trade-up homes."

Homebuilders And Housing Stocks

  • Hovnanian Posts Third Quarter Loss (Reuters, Sept. 6th): "Upscale home builder Hovnanian Enterprises Inc (NYSE:HOV) reported a quarterly loss on Thursday… but its shares rose as the results met Wall Street expectations… Hovnanian reported a Q3 loss of $80.5 million, or $1.27/share, compared with a profit of $74.4m, or $1.15/share a year earlier. Sales tumbled 27% to $1.1 billion. Analysts, on average, expected Hovnanian to report a loss of $1.27/share on sales of $1.12b… The results include a charge of $108.6m related to land impairments and write-offs, within the $90m-$110m range it had forecast in August…The Q3 cancellation rate was 35%."

  • Homebuilder Plans Denver-Area Auction (Denver Post, Sept. 6th): "Chicago-based homebuilder Neumann Homes Inc. plans to auction 49 properties in suburban Denver on Oct. 3. The auction, to be conducted by the Auction Services Group of Benj. E. Sherman & Sons, will include the sale of 15 single-family homes, eight condominiums and 26 home sites. The three communities included in the auction are the Village at Harmony Park, 12901 Harmony Park Drive in Westminster; Mountain Shadows, 5850 Twilight Ave. in Fire stone; and Serenity Ridge, 7245 S. Millbrook Court in Aurora.

  • Toll Brothers To Build 311 Home Community In Atlanta Metropolitan (Forbes, Sept. 5th): "Toll Brothers Inc. said it will build a 311 home community in the Atlanta metropolitan area, marking its entry to the market. Toll Brothers (NYSE:TOL) said the community, Woodstock Knoll, will open for sales on September 22, with deliveries expected for summer next year. The houses will range in price from the low $400,000 to the upper $600,000."

  • Builders Meet With Fed to Discuss Mortgage Crisis (Builder Online, Sept. 5th): "Homebuilders reportedly met Wednesday behind closed doors with Federal Reserve chairman Ben Bernanke to discuss what can be done to prevent owners from losing their homes to foreclosure... CEOs from KB Home (NYSE:KBH), Pulte Homes (NYSE:PHM), and Hovnanian Enterprises (HOV) are among the builders at the meeting… CEO Ara Hovnanian wants the Fed to cut interest rates to stave off what he sees as the risk of a recession if the mortgage crisis isn't brought to heel, particularly in light of the estimated $2 billion in adjustable-rate loans that are will adjust into higher interest rates through 2008."

  • Champion Enterp Director Sells Stock (Forbes, Sept. 5th): "A director of Champion Enterprises Inc. (CHB), which makes prefabricated homes, sold 21,700 shares of common stock, according to a SEC filing. In a Form 4 filed with the SEC Tuesday, Selwyn Isakow reported selling the shares on Thursday and Friday for $11.30, $11.60 and $11.80 apiece. Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction."

  • Distressed Bonds Increase Most Since 2003, Led by WCI (Bloomberg, Sept. 5th): "The corporate bond market's favorite securities last year, so-called distressed debt, yield at least 10 percentage points more than Treasuries. Merrill Lynch & Co index: Since June, the amount of distressed bonds has risen more than fivefold to $24.8 billion… Moody's Investors Service expects the percentage of borrowers missing payments to double to 3.5% next year, as speculative-grade companies struggle to refinance about $22.7b of debt, up from $17b in 2007… Debt of mortgage lender Residential Capital LLC and homebuilder WCI Communities Inc. have lost as much as 19 cents on the dollar since June amid growing investor concern that they will fail to meet their payments."

  • Homebuilders Holding On (Forbes, Sept. 5th): "Gimme Credit analyst Vicki Bryan: As of June 30, M/I Homes (NYSE:MHO) repaid $226 million in debt since Q3'06, with another $160m to be repaid by the end of the year, [and] reduced its credit facility to $500m from $650m. Bryan forecasts free cash flow for M/I of $15m compared to most homebuilders which have negative free cash flow… Standard Pacific (SPF), repaid $370m in debt since Q3'06, with another $250mto be repaid by the end of the year. Bryan says SPF is working [on] a $200m reduction in its revolving credit agreement. She forecasts free cash flow for SPF of $135m, excluding tax benefits."

  • Be Wary Of Scary Headlines. Commentary: Buy Banks Now (MarketWatch, Sept. 4th): "A service that tracks insider buying says that the week ended Aug. 14 was the most bullish for insider buying of banks ever. Insiders are buying shares in their banks at the same time Wall Street analysts are downgrading the stocks… A director of Wachovia Bank (NASDAQ:WB) bought 95,000 shares on August 2, for $4.4 million. Earlier this year insiders at IndyMac bought millions of dollars worth of stock in the company. Obviously these insiders see their companies as great investments… I believe the best strategy today is to buy stocks -- especially the banks that Wall Street is downgrading."

  • Centex Pulls Plug On Freedom Place (Fauquier Times Democrat, Sept. 4th): "Because of "the severe and broad market downturn" in residential construction, Centex Homes last Friday abruptly abandoned its 349-unit Freedom Place project at Bealeton… Centex had promised the county tens of millions in cash to offset Freedom Place's demand for services, including public education, roads, public safety and the library. The 344-acre Freedom Place site lies within the Bealeton Service District at U.S. 17 and Route 28… Centex's decision to drop a high-profile project like Freedom Place also raises questions about it commitment to the 298-home, seniors-only Arrington Knolls proposal along Warrenton's southwestern edge."

  • Beazer Homes USA Picks Cornerstone Ondemand For Employee Training (Small Cap Investor, Sept. 4th): "Beazer Homes USA, Inc. (NYSE:BZH) announced Tuesday that it selected Cornerstone OnDemand, Inc. to support its employee training and development goals. Cornerstone said in a press release that Beazer “required a scalable talent management solution that could be rapidly deployed, easily integrated with existing applications, and offer advanced analytics and metrics tools for management… Through Cornerstone, Beazer will provide its workforce, approximately 2,700 employees, with 800 online courses and managers will be able to view course progress reports on employees."

Commercial Real Estate and REITs

  • Government Construction Spending Is Where It's At (Tim Iacono in Seeking Alpha, Sept. 6th): "It looks like a 1990s Japan-style construction shift is now underway here in the U.S. - after bubbles in residential and commercial building, the government becomes the only big spender left standing… Look for increased federal funding for all sorts of things in the years ahead as the economy slows. Not that infrastructure improvements would be such a bad thing - you just have to wonder where the money is going to come from. Property taxes have surely peaked and income taxes may soon follow. Rampant money creation by the federal government is one thing if you are net exporter and creditor nation like Japan, but when you are the world's largest debtor nation, it is quite another.

  • State and Developer Finish Deal for Resort in Catskills (NY Times, Sept. 5th): "New York State [will] allow an upstate entrepreneur to build a resort with two hotels, a golf course and 259 residences within 20 miles of two of New York City’s largest reservoirs. The $400 million project is substantially smaller than the developer’s original plan, which would have been one of the largest developments in the New York City watershed and sprawled over nearly 2,000 acres of prime Catskill woodlands… The developer has agreed to restrict all construction to 620 acres on the western side of his land… most of the eastern portion — more than 1,200 acres of pristine forest… would become protected forest preserve."

  • JV Airs Post-Sale Plan For $680M Hotel Deal (Globe St., Sept. 5th): "Eagle Hospitality Properties Trust Inc. (EHP) has closed on its $680-million sale to Apollo Real Estate Investment Fund V LP, Aimbridge Hospitality LP and JF Capital Advisors LLC. The plan calls for keeping Eagle's name [and 13-hotel portfolio] intact and maintaining the REIT status. Buyer AP Aimcap Holdings LLC… is investing another $37m to upgrade the hotels, all of which will be keeping their Marriott, Embassy Suites, Hilton and Hyatt flags through new long-term agreements… Aimbridge CEO David Johnson [said] the JV isn't planning to flip any of Eagle's real estate although would-be buyers are already knocking on the[ir] doors."

  • Real Estate Funds Fall May Have Plus Side (Associated Press, Sept. 5th): "Mike Kirby, director of research at Green Street Advisors: At the end of August, REITs were trading at about a 16% discount to the net asset value of their underlying real estate holdings. On average, REITs generally trade at a 5% premium to their asset value… "It's far from clear that the public market has been too hard on REITs, [but] it's not a bad time to buy REITs." For example, REITs that invest in malls generally hold higher-end properties where shoppers are less likely to be affected by a slowing economy. And with mortgage defaults on the rise, REITs that invest in apartment complexes will likely benefit from an expected increase in renters."

  • Real Estate Reclaimed Top Of Sectors In August (CNN Money, Sept. 5th): "Corporate Office Properties (NYSE:OFC) soared more than 16% in August. The REIT's properties cater mainly to government contractors in the Washington, D.C.-Baltimore corridor. Richard Imperiale, manager of the $51million Forward Progressive Real Estate Fund FFREX: "OFC's tenant base is high quality. And earlier this year they got oversold. But they have no negative operating issues." Apartment REITs lagged. Investors worried that homes and condominiums in or heading to foreclosure will wind up back on the market as rentals. That would dampen apartment rent levels."

  • Wells REIT II Declares 4th Quarter 2007 Distribution (Business Wire, Sept. 5th): "Wells Real Estate Investment Trust II Inc. announced today its Board of Directors has declared a quarterly distribution totaling $0.15/share for Q4'07... The distribution is unchanged from Q3. Currently, the Wells REIT II portfolio includes more than 16 million-sf of space in 63 Class-A office and industrial buildings in 19 states and Washington, D.C. The weighted-average credit rating of those tenants rated by Standard & Poor’s is BBB+, and the portfolio is 98% leased... Wells REIT II is a public, nontraded REIT focused primarily on Class-A office and industrial properties."

Web Site of the Day

The Mortgage Reports was created by Dan Green, a Certified Mortgage Planning Specialist at Mobium Mortgage. Green discusses a range of topics on the site, from Bankrate.com's Mortgage Trend Index to the effects of rising LIBOR rates on adjustable mortgages. Green is knowledgeable and a good source for the latest trends in mortgage markets. One recent post provides a persuasive argument that there's a return to liquidity in the mortgage markets. A recommended read.

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