Housing Bubble and Real Estate Market Tracker

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Includes: ASN, CAA, CNS, HOV, KBH, LEN, RYL, TOL, XHB
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"

“It’s a cleanup quarter,” said Michael Mayo, a financial services analyst at Deutsche Bank. Mayo said the big writedowns by UBS and Citigroup were similar to previous large write-offs after events like the tech bubble bursting or the commercial real estate bust in the early 1990s. (NY Times, Oct. 2nd)

Real Estate Sales and House Prices

  • Housing Downturn Persists In September (Colorado Springs Gazette, Oct. 2nd): "Pikes Peak Regional Building Department: The number of single-family homebuilding permits issued last month in El Paso County fell to its lowest level in nearly 16 years. Also, the median price of homes — mostly resales — that sold in September fell when compared with Sept. 2006, the Pikes Peak Association of Realtors said. It was the second straight month prices have fallen. And with another batch of foreclosures in September, the number of loans in default for the first nine months of 2007 has surpassed the total for 2006, according to the El Paso County Public Trustee’s Office."

  • Home Prices Steady, Sales Down On Oahu (Pacific Business News, Oct. 2nd): "Honolulu Board of Realtors: The median price of a single-family home on Oahu in September was $650,000, unchanged from August and nearly 5% higher than Sept. 2006, when it was $620,000. But the 255 houses sold last month were the fewest since February 2006, when there were 248 sales. The number of sales also was a 29% decrease from September 2006, when 359 single-family homes sold… The median price of a condominium in September was $335,000, up 3% from August, and up nearly 5% from Sept. 2006, when it was $320,000. Condo sales in September were down 14% vs. Sept. 2006."

  • Los Angeles Weighted Average New Home Prices Rebound in Third Quarter, 2007 (WebWire, Oct. 2nd): "After falling for three consecutive quarters, the weighted average price in the Los Angeles County detached new home sector rebounded by more than 13% this quarter to $872,026. Weighted average detached home sizes increased by nearly 12% to 2,548-sf reversing a three quarter decline. According to Marketpointe Realty Advisors, Inc. ResidentialTrends publication, these price and size increases caused the value ratio to increase as well, although by less than 2%, to roughly $342/sf. Overall weighted average new home prices in the Los Angeles region increased by nearly 3% from Q2 to $625,569."

  • Home Sales Tumble, But Median Price Up (MyValley.com, Oct. 2nd) California: "DataQuick Information Systems: Home sales across the Coachella Valley fell 25% in August compared with the same month last year, though the median price edged up… The valleywide median price rose to $390,000 in August, a 1% increase compared with August 2006… In a separate report, the California Desert Association of Realtors and California Association of Realtors - which compiles monthly sales and price statistics somewhat differently from DataQuick - showed the valley's median price was up 6.4% from a year ago to $377,920, while sales volume tumbled 16.8%."

Real Estate Investing and Sentiment

  • A Dinosaur Stirs - AOL Real Estate Relaunches (Future of Real Estate Marketing, Oct. 1st): "AOL Real Estate just did a soft launch of its real estate portal - the site, still in BETA, has been significantly redesigned and now incorporates map-based search using maps from Mapquest, home valuation tools from Cyberhomes (see Cyberhomes Sneaks Into the Big Time) and mortgage data from Bankrate.com… This really signals to me is that old media is waking up to real estate online. This is only the beginning in the evolution at established media properties that will begin to incorporate more of a search tools pioneered by the Real Estate 2.0 crowd."

Mortgates and Real Estate Lending

  • Countrywide Financial Corporation Appoints David Sambol to Board (Trading Markets, Oct. 2nd): "Countrywide Financial Corporation (CFC), today announced that David Sambol, President and COO, has been appointed to its board of directors… A 22-year veteran of Countrywide, Mr. Sambol was appointed President and COO in 2006. In addition to overseeing all operations of the Company, Mr. Sambol's responsibilities currently include leadership of corporate operational and support units. Mr. Sambol also serves as a member of management's Executive Committee."

  • Radian Group, Deloitte to Part Ways (Chron.com, Oct. 2nd): "Mortgage insurer Radian Group Inc. (NYSE:RDN) said Tuesday Deloitte & Touche LLP will no longer be its independent auditor following the filing of the company's third-quarter financial report. Deloitte's engagement as the company's independent registered public accountant had been scheduled to end after the 10-Q filing, had Radian completed its merger with MGIC Investment Corp… Deloitte declined to stand for reappointment. The company… noted that Deloitte's audit reports… for each of the three years ended Dec. 31, 2006 contained no adverse opinions and weren't qualified or modified as to uncertainty, audit scope or accounting principles."

  • Nonprofits Sue To Keep Seller-Funded Assistance On FHA Loans Alive (Inman News, Oct. 2nd): "Two nonprofits that are among the largest facilitators of seller-funded down-payment assistance on FHA loans have filed suit to block a rule change that would bring an end to the practice… AmeriDream and Nehemiah Corp. of America -- say the rule change will have a disproportionate impact on minorities, low-income and single-parent families who rely on the down-payment-assistance programs they provide. The Department of Housing and Urban Development, which proposed the rule change in May, maintains that seller-funded down-payment assistance artificially inflates home prices and more than doubles the odds that a loan will end up in default."

Global Subprime Fallout

  • Westpac Buys Australian Mortgage Lender's Operations (Int'l Herald Tribune, Oct. 2nd): "Westpac Banking will buy the brand and distribution business of Rams Home Loans Group, swooping onto assets of the lender, which struggled to refinance its debt after the U.S. subprime mortgage crisis. Westpac, the fourth-biggest Australian bank, will pay 140 million Australian dollars, or $124M, for 92 Rams outlets and assume all future loans, it said Tuesday. The deal was hailed as a cheap buy for Westpac, which is seeking to expand its mortgages arm, but will leave Rams as an operation with no new business from November, servicing only existing loans."

  • Spain Property Delinquencies May Jump, Moody's Says (Bloomberg, Oct. 2nd): "Moody's "Spanish Banks and Real Estate" report: Spanish property loan delinquencies may increase as much as 15-fold by the end of 2008 as interest rates rise… Loan-payment arrears by developers and builders may reach 5.5% of total property loans from the current 0.37%... The increase would mark a "soft landing'' for Spain's 12-year property boom. After rising 178% between 2000-2006, more than any other country in Europe, Spanish home prices are being threatened as the highest European Central Bank interest rates in six years curb consumer spending, Moody's said."

  • Japan Investigating Subprime Exposure (Reuters, Oct. 2nd): "Japan's financial regulator is investigating the exposure of the country's financial firms to the U.S. subprime mortgage market to gauge the risks facing the world's second-largest economy. Banking analysts have said Japanese firms have little to fear from the subprime market squeeze because they have made relatively small investments in the mortgage-backed products that have prompted large losses for global banking names, such as UBS AG (NYSE:UBS) and Citigroup Inc (NYSE:C). But Japan's financial services minister, Yoshimi Watanabe, said authorities were looking into potential risks for the economy."

Subprime Fallout

  • Morgan Stanley To Cut 600 Mortgage Jobs (Crain's NY Business, Oct. 2nd): "Morgan Stanley (NYSE:MS) on Tuesday said it would cut around 600 mortgage-related jobs-- about 500 jobs throughout the U.S. with the remaining cuts occurring at Morgan’s U.K. subsidiary, Advantage. Less than a year after Manhattan-based Morgan Stanley made a push to expand its presence in the mortgage arena, the Wall Street firm plans to put all of its global mortgage businesses under one umbrella… to forestall any future losses stemming from the nation’s mortgage fallout. Last month, Morgan reported a 17% decline in third-quarter profit, though revenues climbed 13% for the quarter."

  • Prudential Sues State Street Units For Fund Losses (Reuters, Oct. 2nd): "U.S. insurer Prudential Financial Inc (NYSE:PRU) said its retirement unit had filed suit against units of State Street Corp (NYSE:STT) seeking restitution for funds sold by State Street that suffered heavy losses. The insurer said in a SEC filing that results for the latest quarter would include a pretax charge of about $80 million to reflect payments to clients who suffered losses from the funds… [Prudential claims] State Street Global Advisors and affiliate State Street Bank and Trust Co.'s Intermediate Bond Fund and Government Credit Bond Fund made "undisclosed, highly-leveraged investments in mortgage-related financial instruments… without notifying Prudential or its retirement plan participants."

Foreclosure Data

  • Foreclosure Flood Increases (Rocky Mountain News, Oct. 2nd): "More than 19,000 foreclosures have been filed in the seven-county Denver area in the first nine months of the year, only about 300 shy of the record set for all of 2006. There were 19,120 foreclosures in the first three quarters of the year, marking a 37% jump from the 14,001 filed through September of last year, county public trustee offices said Monday. A record 19,425 foreclosures were filed in 2006… Denver showed the largest number of foreclosures at 5,375 in the first three quarters, and the biggest percentage increase from the same period last year, at 50.6%."

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

  • More on Pending Home Sales (Calculated Risk, Oct. 2nd): "WSJ: "Existing home sale activity is still above the normal level. This graph shows annual existing home sales since 1969 (and inventory levels since 1982). (Note: 2007 is the August seasonally adjusted annual rate of sales). The current sales rate is still above normal historical levels - even if sales fall 6%-10% in September (as suggested by the pending home sales index)… Sales would have to fall to about 4.6 million units (SAAR) to reach the median level of sales as a percent of owner occupied units for the last 35 years. So even if sales fall to 5 million or 5.2 million units in September, sales could fall further."

Homebuilders And Housing Stocks

  • Option Activity Alert: Lennar (NYSE:LEN) (Schaeffer's Research, Oct. 2nd): "On Thursday, Joseph Hargett detailed the notable put activity seen on KB Home (NYSE:KBH) of late. Today, fellow homebuilder Lennar (LEN) showed up on our list of top single-day put/call ratios at the International Securities Exchange [ISE]. On Monday, 2,908 puts were bought to open at the exchange, compared to just 186 calls bought to open. This bearish activity transpired despite Lennar (and a handful of other builders) earning a Citigroup upgrade yesterday… Monday's activity was not an isolated event; Lennar also shows up on our list of the top put/call ratios taken during the past 10 trading days."

  • Standard Pacific Choosing Regional Suppliers (Builder Online, Oct. 2nd): "This week, Standard Pacific Homes' 25 divisions in eight states are scheduled to vote online for their preferences of suppliers in several product categories. This is an intermediary step towards StanPac establishing uniform regional assortments for its purchasing agents. Using an online collaborative tool called ThinkTank, Standard Pacific will conduct an online poll of its divisions' preferred vendor choices for [construction material]… [The goal of] Standard Pacific's (SPF) supply-chain management program, initiated in 2005 and called 1Standard, is to leverage its buying power with suppliers and reduce its costs through strategic sourcing and better training of its purchasing teams."

  • Hovnanian (NYSE:HOV) And Ford (NYSE:F): A Free Car With Every Home? (24/7 Wall St., Oct. 2nd): "Homebuilder Hovnanian (HOV) recently ran a sale on… houses in selected areas across the country. According to The Washington Post "the largest discounts were on the most expensive homes… A 3-bedroom condominium by the Hudson River in West New York, has been reduced $240,000, or 22%, to $862,000." Auto research firm Edmunds.com: Ford (F) sales will be down double digits for September… If Hovnanian really want to move those high-end homes, it may want to offer a Lincoln, Jaguar, or Land Rover as an incentive. Ford seems to have plenty of inventory. Hovnanian could probably get them at a discount."

  • Hovnanian Enterprises Up on Investors' Hopes (Market Intelligence Investor, Oct. 2nd): "Hovnanian Enterprises (HOV) has fallen for most of this year, rising recently despite the [recent] National Association of Realtors pending sales report. [The report] increases investors' hopes that the Fed will cut interest rates at the next meeting. Technical indicators for the stock are neutral and improving while S&P gives HOV a negative 2 STARS (out of 5) sell rating. If you’re looking for a hedged play on this stock, consider a November bull-put credit spread below the $7.50 range. HOV stock could fall up to 38.7% before expiration and this position would still be profitable."

  • Builder's Silent Auction Gets 'Good Results' (Fredricksburg.com, Oct. 2nd): "The president of Ryland Homes' Washington division said a silent auction on area homes Saturday yielded "reasonably good results." Ryland (NYSE:RYL) put up 140 homes for silent auction Saturday in its Washington division, which includes developments in the Fredericksburg area. The company set a minimum bid on each home, and prospective buyers could write down offers… [Ryland] said about 70% more people came in to look at homes than the average for the past few months. Sales were up about 40%... Most of the homes that sold went at or near the minimum price."

  • Wappingers Revisits Master Plan (Poughkeepsie Journal, Oct. 2nd): "Wappingers school district trustees reviewed a $159.3 million plan Monday night, including a new elementary school and expansions to two junior high schools, that would be required to implement the district’s master plan. The local share of the cost would be $87M... Thirty-three acres for the school were donated by developers Toll Brothers (NYSE:TOL). The district is still acquiring the property. The construction plans are part of the district’s master plan, which is designed to reconfigure students into facilities to meet the district’s class size and grade configuration goals."

Homebuilder ETF's

  • Housing Stocks...Ignoring Poor Housing Data (XHB, PHM, DHI) (24/7 Wall St., Oct. 2nd): "The National Association of Realtors monthly Pending Home Sales Index for August came in at 85.5, M/M -6.5%, and Y/Y-21.5%. This is perhaps the worst data on recent record, but it is worth keeping in mind that this data is August and before the FOMC rate cut… The SPDR Homebuilders ETF (NYSEARCA:XHB) is up almost 5% today at $23.20 and the ETF did maintain its strength after these numbers came out. Citigroup's upgrade for a trade yesterday is turning out to be quite a call. The XHB ETF closed Friday at $21.40, almost an 8.4% gain in two days."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

  • Housing Recession Spreading Into Reits And Investment Quality Commercial Real Estate (India Daily, Oct. 3rd): "The unsold home inventory is skyrocketing… Investors that are sitting duck with many unsold homes are running thin on their resource to hold them any more. They are slowly putting these properties on the rental markets. Some are even taking steps in getting variances to convert these units to commercial real estate… The commercial and rental properties have started falling as the income obtainable from these properties starts sliding down. The REITs are getting cheaper…The commercial real estate recession always lags the residential real estate recession by two to three years when the price correction is above 10%."

  • Manhattan Offices Get High Rents In 3rd Quarter (The Real Deal, Oct. 2nd): "The Manhattan office market saw record high rents in Q3, according to a market report released today by Cushman & Wakefield. In Midtown, Midtown South and Downtown, average prices jumped to $74.47, $45.83 and $45.86 respectively. Overall average rent for Manhattan office space increased 6.3% from Q2 to $62.90. Office vacancies, however, increased from 5.3-5.7%, and year-end layoffs foreseen in the financial services sector could dampen office demand in early 2008."

  • ProLogis Buys 17-Building Japan Portfolio for $735M (Globe St., Oct. 2nd): "Continuing to increase its Asian presence through a variety of strategies, ProLogis has negotiated a $735-million sale-leaseback transaction with the Matsushita Group, a leading global supplier of electronics and other consumer products. The deal gives ProLogis and joint venture partner GIC Real Estate Pte Ltd. a block of 17 warehouse properties ranging in size from 84,000 sf to 831,000 sf for a total assemblage of 3.6 million sf… Matsushita will continue to occupy 15 of the warehouses, which are mostly situated in Tokyo and Osaka, Japan’s leading distribution markets. About 60% of the square footage in the portfolio is in those two cities."

  • Cohen & Steers Announces Change in Global Realty Majors Portfolio Index (PR Newswire, Oct. 2nd): "Cohen & Steers, Inc. (NYSE:CNS) announced three pending changes to its Global Realty Majors Portfolio Index (NYSE:GRM) today. The changes follow the announcement that [apartment REIT] Archstone-Smith Trust (ASN), is expected to be acquired by an entity jointly controlled by affiliates of Tishman Speyer Real Estate Venture VII, L.P. and Lehman Brothers Holdings Inc. on October 5, 2007. Once the acquisition is complete, Archstone-Smith will be deleted from the index. Essex Property Trust, Inc., a REIT that acquires, develops, redevelops and manages multifamily residential properties in the western U.S., will be added to the index on the same date."

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