Housing Bubble and Real Estate Market Tracker

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Includes: BRP, CAA, CAT, CFC, HOV, PSA, SWK, WFC, WHR
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"

“We are not running any fuel to the construction companies for new home sites, the guys that put in the sewer lines and the utilities."- Tex Pitfield, who owns a petroleum distributing business outside Atlanta, on the wider effects of the housing slowdown. (NY Times, Sept. 14th)

Real Estate Sales and House Prices

  • Real Estate Inventory Still Building(Barry Ritholtz in Seeking Alpha, Sept. 17th): "The N.A.R. [is] now predicting a drop of 8.6% in existing home sales versus last year… New-home sales will fall a whopping 24% to 801,000 this year, and to 741,000 next year… Prices have failed to come down enough to jump start more activity… [This] reminds me of the investors, who when having missed selling Amazon (NASDAQ:AMZN) at $400 and Yahoo (YHOO)… refused to take 10% less… So they held onto stocks… all the while prices fell. One can imagine home sellers doing something similar... Oh, and the NAR forecasts a price drop of "only" 1.7% this year…"

  • What’s Your Home Worth Today? Median Price of Existing Homes up 42% (RIS Media, Sept. 17th): "The median price of an existing single family home in the U.S. has risen from $158,100 to $223,800 in the past five years, a 42% increase. This includes a decrease of $3,300 in the national median price in the past 12 months. The Northeast Region is setting the pace in median price appreciation with an increase of 82% since 2002… The West Region gained 63%. The South Region is up 26%. The Midwest Region [gained] 20%."

  • Where the Deals Are (NY Times, Sept. 16th): "Real estate agents and market watchers throughout the [suburban Manhattan] region report that house [sale] prices 5-18% lower than a year ago. Westchester-Putnam Multiple Listing Service: In Putnam County, the median sale price of a single-family home dropped 9%, to $398,500, during Q2'07 compared with Q2'06… Judi Lovecchio, of Coach Realtors’ Manhasset office: On Long Island, the median sale price on single-family homes in Manhasset, on the North Shore in Nassau County, is also down about 6%… Miller Samuel appraisal company, showed declines in median sale prices of 10-18% in many North Shore localities in H1'07 vs. H1'06."

  • The Most Expensive Zip Codes (Forbes, Sept. 15th): "Jupiter Island, Fla.'s median home price came in at $5.6 million. Jupiter Island is a winter escape for some of the U.S.'s oldest and richest families… The five-mile-long Sea Island, Ga., also meets the requirement for the most expensive ZIP codes… Centre Island, N.Y. (11771), where Billy Joel reportedly bought a $22M mansion last year… Old Brookville, N.Y. (11545), also on Long Island, ties with Rancho Santa Fe, Calif. (92067), with a median home price of $1.7M. Although the list is dominated by California ZIP codes, the Gold Coast of Chicago (60611), where the median home price is $1.39M, was a close runner-up."

  • County Home Values Continue Slide (The Columbian, Sept. 15th): "Clark County home values slipped [again] in August below 2006 levels, as y/y sales dropped 21.67%. At $262,400, the median price of new and existing homes sold here last month was 3.2% lower than the median price of $271,000 during August 2006, according to "benchmarks," a service of Riley & Marks appraisers… Sales of new homes… dropp[ed] by more than 52% from 2006 with a total of only 82 transactions out of 730 total sales... Clark County Department of Community Development: In August, local home builders sought 50% fewer permits to build homes in unincorporated parts of the county."

  • Home Sales Hit 15-Year Low For August (San Jose Mercury News, Sept. 14th): "DataQuick Information Systems: The median price of the resale houses sold in Santa Clara County was $805,000, flat from July and up 11% from August 2006. But… far fewer homes than normal are selling in the lower-priced parts of the county… Median prices [are] seemingly strong in the most expensive counties, such as Santa Clara, San Mateo and San Francisco, but dropping in more affordable areas. Solano and Sonoma counties saw their median home prices fall more than 10% last month vs. August 2006… Last month, 7,299 new and resale houses and condos sold in the nine-county region in August, [down] 1.7% from July, and of 24.9% from August 2006."

  • Vacant Houses, Scourge of a Beaten-Down Buffalo (NY Times, Sept. 13th): "Mayor Byron W. Brown recently unveiled a $100 million five-year plan to rip down 5,000 houses, about half of all the vacant houses in the city, which ranks second only to St. Louis in the percentage of vacant properties per capita nationwide. The best way to save Buffalo, he reasons, is to mow down the buildings on these properties — starting with the ones deemed the worst fire hazards or those near schools — and encourage church groups, entrepreneurs and neighbors to build homes in their place… Buildings on more than 2,000 vacant properties have been destroyed since 2000."

Affordability Impact

  • Housing Takes Bigger Bite of New Yorkers’ Incomes, Census Data Shows (NY Times, Sept. 13th): "Census Bureau’s 2006 American Community Survey: In Brooklyn, 31% of homeowners with a mortgage are spending 50% or more of their income on housing costs, the highest percentage in any large county in the state. In the Bronx, 32.9% of renter households are paying a similar share of their income for their apartments… About 49.8% of homeowners with a mortgage in the city were paying 30% or more of their income on housing, a level commonly viewed as a limit of affordability, vs. 48.8% in 2005… Homeowners [in Brooklyn] had the second-highest median monthly costs in the city, at $2,194… Manhattan had the highest, with $2,758."

Real Estate Investing and Sentiment

  • NCI Makes Move to Become Online Leader in Virtual Real Estate Content (RIS Media, Sept. 17th): "Network Communications Inc. [NCI], a publisher of print and online real estate information, announced the roll-out of InView Virtual Tours: a quick and easy way for advertisers to get rich media content online and for home shoppers to take a virtual tour of a property without ever leaving their home. Advertisers receive a camera kit that includes a digital camera and an accessory lens - which is everything that is needed to produce high-quality virtual tours in an instant."

  • Real Estate Market of 2008 May Be Worse than 2007, Says Watchdog Group (Associated Content, Sept. 16th): "America's Watchdog and its National Mortgage Complaint Center: Current predictions are that "the 2008 national real estate market will… see millions of Americans lose their homes to foreclosure as more mortgage lenders go out of business, home builders go bust and commercial real estate investment trusts collapse. America's Watchdog [AW] is a consumer advocacy group that, as the parent group of several consumer protection agencies, is continually keeping tabs on and assisting businesses and consumers with everything from mortgages and real estate issues, to product piracy and counterfeiting, to corporate waste, fraud and corruption."

  • Scholars Link Success of Firms To Lives of CEOs (Yahoo! Finance, Sept. 13th): "David Yermack, a New York University finance professor: A study he co-wrote looked at executives' home purchases. It found that on average, the stocks of companies run by leaders who buy or build megamansions sharply underperform the market. The researchers don't claim to know why. They theorize that some of these executives might be focused more on enjoying their wealth and less on working hard. One CEO looked at was Trevor Fetter of Tenet Healthcare Corp., who bought a 10,057-square-foot manse in Dallas around the start of 2005. Since then, Tenet's stock is off more than 60%."

Mortgates and Real Estate Lending

  • Fed Rate Cut May Spark Rally on Wall St. (Yahoo! Finance, Sept. 15th): "For the man on the street, a cut would lower credit card bills, make mortgages cheaper and perhaps inject enough confidence into the stock market to revive ailing 401(k) investments… A cut in interest rates would immediately make fixed-rate mortgages cheaper. Homeowners with lines of credit will pay less… A cut [may] do little to help the slumping housing industry. Stocks might rally if the Fed delivers, but [says] Tom Wilson, managing director of institutional investments at Brinker Capital: "You have to keep in mind that they are cutting because there is something not right with the economy."

  • Minnesota Builder Under Investigation For Mortgage Fraud (Builder Online, Sept. 13th): "The FBI and state of Minnesota authorities are investigating mortgage fraud in the state, and while federal and state authorities would not refer to any builders by name, alleged wrongdoing by home builder Parish Marketing and Development Corp. of Eagan, Minn… Minnesota Department of Commerce: The Parish case could very well be the largest case of mortgage fraud in the state's history. The U.S. Attorney's Office in Minnesota, which has taken the lead in the case, said that the alleged mortgage fraud involves nearly 200 properties, $100 million in mortgage proceeds, and $50M in losses."

  • Fannie Mae ‘Prepared to Act’ if Portfolio Cap is Increased (Roy Mehta in Seeking Alpha, Sept. 12th): "Fannie Mae is fighting for its regulators to lift the company's investment limits so it can buy home loans and provide liquidity and stability in the market. In 2006, its regulator, the Office of Federal Housing Enterprise Oversight, capped the company's portfolio at $727 billion, until Fannie reformed some of its business practices… CEO Daniel Mudd: "We've come into compliance with all the major issues outlined in the consent agreement." [Still,] last month the OFHEO rejected Fannie Mae's request to increase its portfolio limit… The cap agreement does have terms that would allow [the] OFHEO to waive the cap if there are "market liquidity issues" or "other relevant information."

Global Subprime Fallout

  • Japanese Wives Sweat as Markets Reel (NY Times, Sept. 16th): "Since the credit crisis started… this summer, many middle-class Japanese homemakers who… ventured into online currency trading in the last year and a half [were hit]… These women bought and sold stakes worth into the millions of dollars through margin trading, a potentially lucrative but risky form of trading that uses borrowed money. Kazuhiro Shirakura, an analyst at the Yano Research Institute in Tokyo: Until the credit crisis… the value of foreign currencies traded online by private Japanese citizens, including women, averaged $9.1 billion a day — almost a fifth of all foreign exchange trading worldwide during trading hours in Tokyo."

  • Future Of British Mortgage Lender In Question After Run On Deposits (Int'l Herald Tribune, Sept. 16th): "[Sources said] British mortgage lender Northern Rock account-holders had withdrawn about £1 billion, or more than $2B, after Northern Rock turned to the Bank of England for an emergency credit line. [There were] unconfirmed reports that another £500 million was pulled out Saturday. If so, Northern Rock has lost about 6% of its deposit base since the bank announced a [Bank of England] bailout last week… Northern Rock was particularly vulnerable to other banks' reluctance to extend credit because it has relied predominantly on the capital markets, rather than consumer deposits, to raise money to finance its own lending."

  • House Prices Feel The Heat (The Independent, Sept. 16th): "A fall in house prices could be… a result of the credit crisis gripping the UK mortgage market [and] the world money markets… Northern Rock's SOS to the Bank of England on Thursday is already pushing up home loan repayment costs for thousands of Britons… In the past few days, the Abbey and the Halifax have both raised rates on their tracker mortgages by between 0.1% and 0.2% respectively. Standard Life has announced that it will be repricing its mortgage rates… Worst affected could be those with poor credit histories looking for sub-prime loans."

  • London Rightmove House Prices Fall Most Since 2004 (Bloomberg, Sept. 14th): "Rightmove Plc: London house prices fell the most since 2004 this month after five interest rate increases in a year and turmoil in financial markets sapped buyers' confidence. The average asking price for a home in the U.K. capital declined 2.5% from August to 384,439 pounds ($774,000), according to Britain's biggest real-estate Web site. The reading is taken from a survey conducted from Aug. 12-Sept. 8. For the U.K. as a whole, prices fell 2.6%. Growth in London property values is faltering after the collapse of the U.S. subprime mortgage market triggered losses in securities linked to the loans and spurred banks to raise lending rates."

Subprime Fallout

  • Greenspan: Yes, Virginia, There Was a Housing Bubble (Judith Levy in Seeking Alpha, Sept. 17th): "Financial Times: prior to the Monday release of his memoir, The Age of Turbulence: Adventures in a New World, former Fed Chairman Alan Greenspan granted that there was indeed a housing bubble and classified investor thirst for asset-backed securities as an addiction to cocaine. Greenspan said the fall in housing prices will probably be… a "large single-digit" percentage decline that could enter the double digits. He also cautioned that the Fed… should not cut rates too sharply because of the risk of an "inflationary resurgence." Greenspan forecasts that CDOs "will never get back to the levels and structures that they were, because now everybody knows you cannot price them."

  • Countrywide Caught in Mortgage Spiral (Yahoo! Finance, Sept. 15th): "Several analysts believe Countrywide (CFC) [the largest U.S. lender] will survive this crisis, based on the strength of its retail banking operation, track record in the industry and operating changes made [recently]. But they said it could see deeper cutbacks and lose ground to competitors while weathering a housing crisis expected to last [into 2009]. Frederick Cannon, Keefe, Bruyette & Woods: "Countrywide is not in as strong a position as its biggest competitor, Wells Fargo (NYSE:WFC)." Stan Ross, chairman of the Lusk Center for Real Estate at the University of Southern California, said Countrywide will face intense competition as big and small lenders move to focus on prime loans, a sector once dominated by Countrywide."

  • Countrywide Jumps on New Financing (Roy Mehta in Seeking Alpha, Sept. 13th): "Countrywide Financial announced Thursday it was able to secure $12 billion in financing… Countrywide President David Sambol: "Looking forward, the company expects that it will be a long-term beneficiary of the current conditions and corrections in the mortgage industry, and we are confident that the actions which we have taken in response to the current environment will position us for profitable future growth and success." Countrywide used its entire $11.5B credit-line and sold $2B in preferred shares to Bank of America in August. Last week, CFC announced it would cut up to 20% of its workforce to cut costs."

  • Bill Nygren: Washington Mutual Should Emerge Stronger (Bill Nygren in Seeking Alpha, Sept. 12th): "Bill Nygren, manager of Oakmark Select: Fear in the home mortgage market… has caused sharp declines in the stocks of mortgage originators. Our largest holding, Washington Mutual (NYSE:WM)… has taken on less risk in their loan portfolio than their peers have, as demonstrated by the strong credit ratings of their borrowers and their lower loan-to-value ratios. Further, as a bank, WaMu has much longer term funding than do pure mortgage originators [who] rely on short term borrowing… Because poorly funded competitors are exiting the business, this difficult period should end up enhancing Washington Mutual's long term earnings potential.

Foreclosures

  • Mortgages, Real Estate Fluctuating in Hernando County, Florida (Associated Content, Sept. 16th): "The Gulf of Mexico's Florida's Nature Coast's… inventories of houses for sale are growing everyday... In July of 2007, Florida was 2nd to California in foreclosure filings… There are 4 new developments within 15 square miles of our house that have now been abandoned, awaiting either bankruptcy or foreclosure. This is the norm nearly everywhere you go on the Nature Coast… the level of growth for Hernando County, that was slated to develop faster than Pasco County our neighbor directly to the south on the Gulf of Mexico, will probably have to wait for at least 5 years."

  • Foreclosures Put Harsh Spotlight On Sils (Chicago Daily Herald, Sept. 15th): "With overall foreclosure rates reaching uncomfortably high levels… Regulators and legislators have been considering whether they should bar stated-income loans [SILs] or limit them… Restricting SILs would be costly. The SIL was itself a response to limitations of the underwriting system. Many prospective home buyers have the income to afford a mortgage, but can't meet the standards of full documentation [such as] presenting W-2s or tax returns for two years. Self-employed borrowers usually have the most trouble meeting this requirement, and stated-income loans were originally designed to deal with them, but other legitimate cases quickly emerged."

  • Foreclosure Figures Still Climbing In The Alamo City (San Antonio Business Journal, Sept. 14th) Texas: "Foreclosure Listing Service Inc.: Delinquent mortgages have led to a total 7,525 foreclosure filings over the course of this year in Bexar County… a 4% increase from the 7,235 foreclosure filings posted over the same period last year. FLS: At the October Bexar County auction, a total of 726 foreclosures filings have been posted for the upcoming event -- a 2% drop from the 711 filings posted for the October 2006 auction. In the metropolitan area… the 796 foreclosure filings for the upcoming October auction [mark] a 2% decrease from the 809 postings for the October 2006 auction."

  • Scary Foreclosures Not As Widespread As It Seems (San Jose Mercury News, Sept. 13th): "Mortgage delinquency problems only affect people with outstanding loans, and more than 1 out of 3 homeowners own their properties… debt-free. Of the remaining two-thirds of all owners with active mortgage accounts - the latest survey examined 44 million of them – prime loans that are 30 days past due or more constitute just 2.6% of all loans nationwide… 97.4% are continuing to be paid on time… [Some] 14.5% of subprime mortgages nationwide are now behind on their payments by at least 30 days… On the other hand, 85.5% of subprime borrowers are still paying on time every month… In 34 states, the rate of new foreclosures actually decreased."

Global Alternatives To The Housing Slump

  • Mivtach Shamir Invests $13 Million In Indian Real Estate (YNET News, Sept. 16th): "Mivtach Real Estate, a subsidiary of investment company Mivtach Shamir, has purchased along with partners 1,100 dunams (about 275 acres) in the Indian city of Chennai, where it plans to build assets spreading over 2.25 million-sq.m. (24.2 million-sf), including offices, hotels and commercial centers. Chennai is India's fourth-largest city. Mivtch Shamir's investment is expected to amount to $13 million (out of a total of $30 million), and in exchange it will own 32% of the Indian project company."

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

  • Economists Get a Whiff of Recession (Christian Science Monitor, Sept. 17th): "A sharp decline in house prices and the related fall in home building … could lead to an economy-wide recession," warned Martin Feldstein, one of the official arbiters of US recessions and expansions… on Sept. 1… Wall Street is waiting to see if the Federal Funds rate – the interest on loans that commercial banks, in effect, make to one another – will be trimmed one-quarter percentage point to 5%, or cut by half a percent, or even more… As to concern that such a rate decline might lead to a stronger economy and higher inflation, Feldstein reckoned such an unwelcome inflationary outcome would be "the lesser of two evils."

  • Subprime Mess: No One's Fault But Our Own (Vitaly Katsenelson in Seeking Alpha, Sept. 17th): "For the government to bail out the victims of this housing debacle… you and I will be paying higher taxes and/or money will be diverted from cancer research or other social programs because your neighbor elected to live in a larger house… The bailout will introduce an asymmetric payoff for current and future homeowners: Owning a house will become a risk-free endeavor. If your house price goes up, great. If it goes down, you claim to be a victim and society compensates you for the risk you’ve taken… This will set the stage for an even greater next housing crisis."

  • Old-World Media Start to Feel the Pain (Advertising Age, Sept. 17th): "TNS: U.S. ad spending fell for the second quarter in a row… Sure, ad expenditure is linked to the overall health of the U.S. economy. And the… subprime-mortgage mess… But American companies are shifting more and more marketing dollars out of paid media… So strong is the internet's growth horizon that it shouldn't be an issue that some of the medium's biggest advertisers are mortgage players now getting spanked. Steve Weinstein, PacificCrest analyst: Countrywide Financial, for instance, was the eighth-largest online advertiser during H1'07, according to Nielsen NetRatings, spending more than $93 million. Any open inventory from lending companies "got filled up right away."

  • Eight Notes on Residential Real Estate (David Merkel in Seeking Alpha, Sept. 16th): "Title insurers-- note investable idea: wait for a little while, because fraud claims will eventually pass. An entry point on the title insurers will come slightly after housing inventories begin to decline.)… In the case of American Home Mortgage, many borrowers face foreclosure because tax and insurance payments are not getting to to the local governments and insurance companies. What new homes are getting built are smaller, which is quite a change in the over-housed US. And, anytime a bubble bursts, it is a business opportunity for the lawyers… Now, I wonder if Merrill Lynch (MER) will have any significant hits from subprime?"

  • Sawmills Pressured As Furniture Plants Go Abroad (USA Today, Sept. 16th): "Lumber production nationally is down 25% since 2000 to just over 10 billion board feet, according to the Hardwood Review, regarded by many in the industry as authoritative for economic forecasts. The publication predicts production will fall to 9.5 billion by the end of 2007. Pennsylvania Agriculture Dept.: The number of Pennsylvania mills has declined by about 20% since 2001 to just more than 300… Pennsylvania Forest Products Association: The lean times are largely blamed on the trickle-down effect of dozens of U.S. furniture and cabinet manufacturers in the last several years moving overseas, particularly to China, where wages are lower… [and] the housing industry slump."

  • Let's Point Fingers At Subprime's Real Villains (Sign on San Diego, Sept. 16th): "John Browne, a former British parliamentarian who now writes the online Financial Intelligence Report from Florida, says the U.S. mortgage market is still full of “toxic waste” – loans that should never have been made and may never be repaid. A slash of the interest rates will do little to encourage investors to buy that debt. Instead, it could raise the specter of inflation and further lower the value of the dollar, which is already at 15-year lows against the euro. “A Fed funds cut will not bring back the U.S. housing market,” Wells Fargo economist Eugenio Aleman bluntly said."

  • Warning Signs and Defining Economic Moments (NY Times, Sept. 14th): "Leon Tuberman, CEO of the Barn Furniture Mart in California: Business is down only about 5%... but he was not replacing the five employees who left the store voluntarily in the last six months: “When someone refinances a home and they have extra money, they buy new furniture; when somebody buys a new home, they buy new furniture. When their adjustable-rate mortgage just increased by 40%, they don’t buy furniture." Tex Pitfield, who owns a petroleum distributing business outside Atlanta, says he is not renewing the leases on 4 of his 20 trucks because business has slackened, especially in areas directly connected to residential real estate."

Homebuilders And Housing Stocks

  • Nucor Coporation: Little Reason For Optimism (Zachary Scheidt in Seeking Alpha, Sept. 17th): "Nucor (NYSE:NUE) shook up the steel sector Wednesday, guiding earnings to $1.10 - $1.15 for Q3. This compares to $1.14 in Q2 and record earnings of $1.70 in Q3'06… The company cited continuing softness in sheet metal markets and increasing costs of raw-materials. The company also noted that the softness was largely due to a lack of demand in the automotive industry and residential construction. With housing, not only are the structures not being built, but consumers are subsequently not buying washers and dryers, ovens, refrigerators, and other appliances that typically have a high steel content."

  • Standard Pacific: Buyer Be... Where? (Colin Peterson in Seeking Alpha, Sept. 17th): "For days, Standard Pacific (SPF) has been touting its "Mission: Possible" throughout Southern California, with bonuses for buyers totaling as much as $20 million. SPF is aiming to sell 200 homes by offering mortgage loans with rates of less than 6% and other perks, including a free 42-inch plasma-screen television with every home purchase. But in Victorville on Friday, the blowout looked more like a washout. Only a trickle of potential buyers showed up on the first day of the 10-day event… Meanwhile, Bubble Markets Inventory Tracking: StanPac community "Avaron at Del Sur," has lowered prices by 10-20% since spring 2007, but… is still failing to sell houses.

  • Hovnanian Enterprises: 'The Housing Market Has Bottomed' (Michael Dawson in Seeking Alpha, Sept. 16th): "Ara Hovnanian, CEO Hovnanian Enterprises (NYSE:HOV), said Friday: “The bottom is very near but I think it’s going to stay along the bottom for a while before a recovery.” If the bottom is in why is Hovanian having a fire sale this weekend? The company is offering discounts of up to almost $150,000 on homes… Picking bottoms is a losing proposition… I will pass on the first 15-20% off the bottom. The bottom can only be identified in hindsight… The bottom is in when homebuilders start raising prices, not having fire sales."

  • Enticing Homebuyers With Extras (OC Register, Sept. 15th): "DataQuick: Only 2,285 residences in Orange County were sold last month, down 33.9% from the previous year… Standard Pacific (SPF), which reported a $206.7 million loss in H1'07 vs. H1'06 has no choice but to empty its inventory. Similarly, homebuilder K. Hovnanian Homes is attempting to entice wary homebuyers with incentives of up to $100,000 in 31 neighborhoods throughout the region. Real Estate Consultant John Burns: "These sales are tremendous. I don't know how a re-seller can compete, because homebuilders have dropped prices and homeowners haven't."

  • Haven From Housing (MarketWatch, Sept. 14th): "Jeff Fettig, CEO Whirlpool Corp.: "While [U.S.] industry demand for Whirlpool (NYSE:WHR) appliances such as washers and refrigerators could be down as much as 4% this year, sales growth in large international markets have been in the double percentage digits: "Brazil and Latin America ha[ve] been extraordinarily strong. Asia… has been very strong." Stanley Works Co (NYSE:SWK), one of the country's largest tool makers, said strong demand in Eastern Europe and Asia helped offset the domestic housing slump… Overseas profit as a part of income from continuing operations [at Black & Decker (BDK)] increased to 30% in 2006 from 19% in 2001… Caterpillar (NYSE:CAT), one of the world's largest suppliers of construction machinery [said] second-quarter revenue still was up by 7% because of more international sales… At a time when North America dropped from 53% (of total Q2 sales) to 43%."

  • Bill Miller On Timing Buys In Housing Stocks (Bill Miller in Seeking Alpha, Sept. 12th): "We were clearly too early in buying [housing] stocks in late 2005 and 2006… The very poor housing fundamentals, now exacerbated by a subprime loan collapse and the continuing upward repricing of adjustable-rate mortgages made in the past few years, show no signs of improvement. But the market looks forward, and by the time those signs are tangible and evident, the stocks will likely be a lot higher. If we did not own housing or housing-related stocks (such as Countrywide Financial), we would be buying them now, amid the panic selling currently underway. That said, just because we own them does not mean we won’t sell them if we think we can improve the portfolio’s long-term risk/reward profile by doing so.

  • Brookfield Homes CEO Buys Lot of Stock (Barron's , Sept. 12th): "Recent insider activity at Brookfield Homes (BHS) helps demonstrate that insider purchases shouldn't serve as automatic buy signals for investors. Brookfield President and CEO Ian Cockwell has been a persistent buyer of his company's shares for nearly two years. His latest purchase was in the last week when he spent nearly $1 million to purchase stock in Brookfield, a home builder focused on markets in California and Washington, D.C. SEC filing: Cockwell acquired 53,000 shares from Friday through Tuesday at an average per-share cost of $18.58… He now directly holds 1.2 million shares in addition to 82,000 exercisable options. Combined, the stake represents 4.7% of Brookfield's outstanding shares."

Homebuilder ETFs

  • Another Stupid ETF Story (Greg Newton in Seeking Alpha, Sept. 16th): "WSJ: State Street Global Advisors’ S&P Homebuilders ETF (NYSEARCA:XHB), with $198 million in assets, is down about 30% in the past three months and about 49% since it hit the market in early 2006...The State Street fund has seen weekly outflows totaling $110.5M since mid-July, after seeing weekly net inflows amounting to $141M from the start of the year to mid-July, according to AMG (the fund has also seen large inflows and outflows at other times during the year, suggesting the recent outflows could reflect institutional rather than retail trading). Having been short the aforementioned S&P Homebuilders ETF since shortly after its introduction… NakedShorts believes XHB to be a most excellent investment product."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

  • $80 Target on Buy-Rated PSA (Trading Markets, Sept. 15th): "Zacks senior real estate investment trust [REIT] analyst Greg Sukenik: Buy-rated Public Storage (NYSE:PSA) Q2 FFO [funds from operation] was $1.10/share, $0.06 below our estimates, although well up from the year earlier quarter... 'Operationally, PSA's portfolio continues to perform well; same-store NOI [net operating income], occupancy and rental rates all increased from last year. We think the recent sell off has been overblown, and PSA now represents good value. [With] strong earnings momentum, and PSA is the best positioned operator in the sector. 'With the acquisition of Shurgard, PSA removed a major competitor, and is by far the largest self-storage operator in the U.S."

  • InnSuites Reports 21.1% Increase in Operating Income (Trading Markets, Sept. 14th): "InnSuites Hospitality Trust reported operating income of $1.4 million for H1'07, an improvement of $247,000, or 21.1%, from the prior year six-month period operating income of $1.2 million. This increase is consistent with the strong hospitality industry and is reflective of the Trust's continued improvement in the operations of its five core suite hotels as well as improved management and licensing fee revenues… "The industry trends in terms of occupancy and rate were strong in fiscal 2007 (February 1, 2006 to January 31, 2007) and we expect these trends to continue in fiscal 2008," said James Wirth, President and CEO."

  • Midwest Commercial Real Estate Index Tanks (KPC News, Sept. 14th): "The Midwest led the biggest-ever drop in the national quarterly commercial real-estate index compiled by the Society of Industrial and Office Realtors. The national index dropped nearly 4.5 points, to 113.7, for the summer of 2007. That is the weakest score since SIOR began compiling the index nearly two years ago. The Midwest index plunged more than 10 points, from 104.6 in the spring to 94.5 in the summer."

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