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.
Quotes of the Day- "From the House's Mouth"
“We are in the window-covering business, and you don’t cover windows in houses you don’t build,” said Myron E. Ullman III, CEO of J. C. Penney. (Barry Ritholtz in Seeking Alpha, Oct. 29th)
“The housing slowdown has actually increased people’s appetite and interest. In a crazy market like this, both buyers and sellers are trying to get an edge.”- Zillow VP marketing and CFO Spencer Rascoff. Real estate website Zillow's visitors are up, despite the housing downturn. (NY Times, Oct. 30th)
"There is really no positive news in today’s report."- Robert J. Shiller, Chief Economist at MacroMarkets LLC. Shiller's S&P Case/Shiller August index of house prices fell 5% from August 2006 -- the biggest drop since June 1991. On both the national and metro level, home prices keep falling and there doesn't seem to be any hope in sight. (Barry Ritholtz in Seeking Alpha, Oct. 31st)
Real Estate Sales and House Prices
- Case-Schiller Home Price Index: Still No Good Housing News (Tim Iacono in Seeking Alpha, Oct. 31st): "Standard & Poor’s just released the August update for its S&P/Case-Shiller Home Price Index - shown below are changes to home prices for the 20 cities that comprise the index. For those of you having trouble following the color codes, from top to bottom on the rightmost part of the chart, the list of cities is as follows: Los Angeles, Miami, Washington D.C., San Diego, Las Vegas, Tampa, Phoenix, San Francisco, New York, Seattle, Portland, Boston, Chicago, Minneapolis, Denver Atlanta, Charlotte, Dallas, Cleveland, Detroit."
- Dallas Home Values Flat In S&P/Case-Shiller Index (Dallas News, Oct. 31st): "Dallas-area home values were unchanged in the latest national price comparison. The S&P/Case-Shiller index released Tuesday showed that Dallas-area home prices were flat in August, the latest period surveyed. For the year, Dallas-area home prices are up a modest 0.5%. North Texas housing markets continue to outperform the nation. Among the 20 cities in the S&P/Case-Shiller index, prices were down 4.4% from a year earlier. That was the biggest drop since the survey began... As of September, median home prices in North Texas were up 1% from the first nine months of 2006."
- Nursing Home Prices Increase (Hartford Courant, Oct. 31st): "MetLife Mature Market Institute in Westport annual survey: Prices for stays in a nursing home or assisted living center crept up again this year. Connecticut's cities [are] among the most expensive in the nation in both categories. The average cost of a private room in a Hartford nursing home rose to $337/day, or $123,005/year, from $333/day, or $121,545/year in 2006. The Stamford-area nursing home average is now $372/day or $135,780/year, up from $344/day, or $125,560/year, in 2006... Alaska's statewide average [is] $510/day this year. The average cost nationwide is $213/day, or $77,745/year for a private room."
- Eastern Idaho Housing Market Still Performing Well (KPVI, Oct. 31st): "Greater Idaho Falls Association of Realtors: In Bonneville County from January-October 2006, there were 1,399 homes sold, a $145,000 median price, a $160,664 average home price, total volume sales of $224 million, and an average of 99 days that a home stayed on the market before being sold. In 2007, January-October, there were 1,429 homes sold, a $157,000 median price, a $177,062 average home price, total volume sales of $253M, and an average of 99 days that a home stays on the market before being sold... In September-October - 189 homes sold this year, versus almost 100 more in 2006."
- Latest Case-Shiller Home Price Index Shows No Turnaround in Sight (Index Universe in Seeking Alpha, Oct. 30th): "The S&P/Case-Shiller Home Price Indexes for August: The 10-city composite index recorded an annual decline for August or 5.0%, its biggest drop since June 1991, and not far from April 1991's record decline of 6.3%. Meanwhile, the 20-city composite was down 4.4% on an annual basis. August represents the 21st consecutive month of decelerating annual returns and the eight month of negative annual returns. Sixteen out of the 20 cities in the 20-city composite saw declines for August versus just 10 for July, and 15 of those cities are in negative territory for the one-year period."
Real Estate Investment and Sentiment
- Bubbles Seen as Good for Economy (Realty Times, Oct. 31st): "Business columnist Daniel Gross, at the Urban Land Institute's annual fall meeting last week in Las Vegas: "Bubbles have always been good in the past, and historically, we recover from them quickly... The physical and intellectual infrastructure that is created when the bubble is inflating doesn't just go away when the bubble pops. Rather, they remain and become the foundation of new business models... All the houses that were built during the housing boom won't be torn down. Instead, new ownership will come in with a lower cost basis." [Also] home owners learned a thing or too about housing finance/mortgages."
- Not All Is Gloomy in Real Estate: A Blog Network Attracts Capital (NY Times, Oct. 30th): "Property-focused Web sites are still attracting visitors and investors. Curbed.com, a popular real estate blog network with sites in New York, San Francisco and Los Angeles, has obtained $1.5 million in financing to expand into new cities. Curbed [says] traffic is growing 10% a month and the site is drawing national advertisers... [Though] Zillow.com and Realtor.com depend on an active market of buyers and sellers to thrive, nonetheless, Zillow, which estimates home values, last month obtained $30M in... financing, bringing the [financing] total to $87M for the two year-old site. Spencer Rascoff, Zillow CFO: Traffic in Q3 was 20% higher than Q3'06"
Global Opportunities and Alternatives to the Housing Slump
- Japan's Sapporo To Cooperate With Morgan Stanley On Real Estate Business (MarketWatch, Oct. 30th): "Sapporo Holdings Ltd. and Morgan Stanley (NYSE:MS) [will launch] a real estate fund [that] will buy a 15% interest in Yebisu Garden Place, a residential and shopping district in downtown Tokyo, for Y50 billion from the brewer's real estate unit. The deal underscores the attractiveness of Japanese real estate, which has lured domestic and foreign investors as the country's economy improves. Commercial land prices have been recovering in the Tokyo metropolitan area and office vacancy rates have fallen considerably, suggesting that demand for real estate in central Tokyo will persist."
- South Africa: Unprecedented Real Estate Disposal as U.S. Sells Unsafe Diplomatic Residences (All Africa.com, Oct. 29th): "Some 29 diplomatic residences and sites in 21 countries... have recently [been] put up for sale in capital cities... by the US state department... About half are non-residential, including historic embassies and ancillary buildings such as London's former Navy Annex in Grosvenor Square, which is on the market for £90m... The US government is moving many of its overseas workers into more modern or secure building to meet stringent safety requirements enacted after the 1998 bombings of its embassies in Kenya and Tanzania, the September 11 terrorist attacks, and the invasions of Afghanistan and Iraq, which have stoked anti-US sentiment around the world."
Mortgages and Real Estate Lending
- Rate Cut Unlikely To Fix Housing Woes (Kentucky.com, Oct. 31st): "The interest rate cut that Wall Street believes will buffer the economy from housing market woes is unlikely to give much of a boost to suffering banks and homebuilders in the near term, analysts say... The thinking is that lenders can improve battered balance sheets if they have to pay less for money they borrow short-term while the rate they charge borrowers for long-term loans holds steady or moves higher. Yet... struggling homebuilders... are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower."
- MGIC Investment SVP Buys Shares (Forbes, Oct. 30th): "A senior vp of mortgage insurance provider MGIC Investment Corp. (NYSE:MTG) bought 12,384 shares of common stock, according to a SEC filing Monday. In a Form 4 filed with the SEC, Michael G. Meade reported he bought the shares Friday for $20.19 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."
- PMI Group Swings to Loss in 3rd Quarter (Forbes, Oct. 30th): "Mortgage insurer PMI Group Inc. (PMI) reported Tuesday... a Q3'07 net loss of $86.8 million, or $1.04/share, compared with earnings of $104.2M, or $1.16/share, during Q3'06... due to rising loss reserves and claims as more and more people default on their home loans. Analysts [had expected] a loss of $0.67/share for Q3'07. PMI Group added $253.6M in reserves in Q3 to cover losses in its U.S. mortgage insurance operations due to an increase in notices of default."
- Radian, Ambac, May Be Biggest Movers On Fed (Reuters, Oct. 30th): "Barclays report: Radian Group Inc (NYSE:RDN) and Ambac Financial Corp (ABK) may be the biggest winners or losers in the credit markets on Wednesday [with] the Fed... interest rate decision... Last rate cut, the real-estate-exposed financial names outperformed on an absolute basis... They are the greatest beneficiaries of an easing in monetary policy. Credit spreads of Radian and Ambac are again trading near their wides, and as such "they are well positioned to tighten if the Fed makes another half a percentage point cut." After the September rate cut, Radian's credit spreads tightening by 152 basis points, while Ambac's spreads rallied 127 basis points."
Global Subprime Fallout
- BOC Hong Kong's Subprime Exposure Narrows (MarketWatch, Oct. 30th): "BOC Hong Kong (Holdings) Ltd. said Tuesday its exposure to the U.S. subprime mortgage problem narrowed to HK$9.6 billion at the end of Sept. from HK$12.8B three months earlier. Hong Kong stock exchange filing: The HK unit of one of China's four biggest banks by assets said it had charged HK$51 million to the income statement during the July-September period as impairment allowances. BOC Hong Kong, which is 66%-owned by Bank of China Ltd., reported an operating profit before loan impairment allowances of HK$13.3B in the nine months ended Sept. 30. It didn't provide the year-earlier figure."
- Japan's MUFG Expects Subprime Losses To Rise Six-Fold (AFP, Oct. 29th): "Japanese megabank Mitsubishi UFJ Financial Group (MUFG) said Monday that its losses on US subprime loans soared by as much as six-fold over two months to $263 million. MUFG said in August that losses on securities backed by subprime loans to risky borrowers in the U.S. had reached about Y5 billion ($43.8M) as of the end of July. MUFG spokesman: "We are expecting to see that the amount of the losses had risen to a level of between Y20B-Y30B ($262.8M) by the end of September." MUFG reported net profit of Y880.9B in the last fiscal year to March."
- Merrill Lynch CEO Steps Down Following Massive Subprime Losses (National Business Review, Oct. 31st): "The chairman and CEO at Merrill Lynch (MER), Stanley O'Neal, has stepped down after a 21 year career with the firm following huge losses announced by the largest brokerage in America. The resignation comes less than a week after the firm revealed a US$8 billion loss on risky investments in subprime mortgages. Merrill Lynch said boardmember, Alberto Cribiore, would serve as interim non-executive chairman until a successor for O'Neal is determined."
- Credit Problems Delayed are Not Credit Problems Solved (Michael Shedlock in Seeking Alpha, Oct. 30th): "When credit conditions dry up, marginal borrowers turn to plastic," said Merrill Lynch North American Economist David Rosenberg. "We're seeing signs of that already." In an October 5 research note, Rosenberg called rising credit- card delinquency rates as the "next skeleton in the closet. Our biggest concern right now is that there are lot of people who will face a choice between bankruptcy or foreclosure," he said. "Either way, it's going to suck."
- Imperial Capital Bancorp, Inc. Reports Earnings for the Quarter Ended September 30, 2007 (CNN Money, Oct. 30th): "Imperial Capital Bancorp, Inc. (IMP) Q3'07 net income... from the operations of its wholly-owned subsidiary, Imperial Capital Bank (the Bank), of $1.7 million or $0.31/share compared to $6.8M or $1.20/share for Q3'06. President/CEO George W. Haligowski: "Our Q3 results are representative of the weakness currently being experienced in the real estate and credit markets... We've experienced an increase in the level of our non-performing loans and charge-offs during Q3, and we recorded an additional loan loss provision to provide reserves in anticipation of possible future losses."
- Foreclosures Increase More than 300 Percent in AZ, CA and FL (PR Web, Oct. 30th): "Default Research: Foreclosure filings since September 2006 in Arizona have increased 310%, in California they rose 422% and Florida’s foreclosures are up 316%. Over the past month, the counties in each of those states that lead in new foreclosure filings are Maricopa County in Arizona (an increase of 2,127), Los Angeles County in California (5,940 new filings) and Florida’s Broward County (1,141 foreclosures)."
Macro Impact, And Will The Housing Slump Cause A Recession?
- No Bottom Yet in Housing, Paulson Says (Susan Lerner in Seeking Alpha, Oct. 30th): "The US "hasn't hit bottom yet in housing," Treasury Secretary Henry Paulson said Tuesday but noted that the country had enough economic strength to "grow through" the situation. Paulson said the administration was studying what went wrong with the subprime market so it could make policy adjustments "so this doesn't happen again." In wake of the currency's continued weakness and record lows, Paulson said he was "strongly committed to a strong dollar." He noted that "major parts of the capital markets are performing well," but markets for highly structured debt, asset-backed paper and high-yielding debt were taking longer to "reprice" risk."
- U.S. Economy: Confidence Weakens, Home Prices Slide (Bloomberg, Oct. 30th): "Consumer confidence in the U.S. fell more than forecast and home prices dropped the most in at least six years, strengthening the case for the Federal Reserve to lower interest rates tomorrow. The Conference Board's gauge of confidence declined to 95.6, the lowest since October 2005, from 99.5 in September... Home values in 20 U.S. metropolitan areas slid 4.4 percent in the 12 months that ended in August, according to the S&P/Case-Shiller home-price index. The figures heighten concern that consumers will put a brake on spending, which accounts for more than two-thirds of the economy."
- Rebuilding After Fires A Boon To San Diego Region (Reuters, Oct. 30th): "San Diego County fires... destroyed more than 1,500 homes. Initial estimates of insured losses in the county fall in a range of $1B-$2 billion. The... destruction points to a local building boom over the next year... San Diego economist Alan Nevin: "Only 4,000 new single-family homes will be built this year in San Diego County –vs. 9,749 in 2002 -- so an additional 1,500 or more home projects would mark a big boost for local building... More than 5,000 construction workers in the county lost jobs over the past year amid a nearly two-year local housing slump."
- Americans Living Beyond Their Means — Must Read! (Herb Greenberg in MarketWatch, Oct. 29th): "My neighborhood had a block party tonight... After a few drinks... we started talking about the stock market, finances, etc. One interesting thing... everyone in the conversation (about 8 of us guys) admitted that our finances are tighter than ever... A lot of people had to refinance their homes to get out of bad loans (interest only, ARMs, anything subprime). Though many of us were able to get to a 30-year fixed loan, it still raised everyone’s monthly payments a significant amount... and 2 guys mentioned how they had to take a salary cut in order to stay competitive."
Homebuilders, Housing Stocks and Housing-Related Stocks
- Risky Home Building Stocks May Be Lucrative (NY Sun, Oct. 31st): "Bradley Gendell of Cumberland Associates: Ryland Homes (NYSE:RYL) and Toll Brothers (NYSE:TOL) [are] stocks to buy, primarily on the notion that the stocks have been beaten up so badly that they are cheap, and that expectations are finally unrealistically low... Home starts have been way above trend for some time, but are now at the lowest level in 14 years, helping to undo some of the prior excesses... Home builders have had successful "sales" weekends of late, where price reductions have helped thin out bloated inventories. There is demand for housing at the right price."
- Revisiting The Homebuilders: A Comparison Of Bubbles (Bespoke Investment Group in Seeking Alpha, Oct. 30th): "As shown, the S&P 1500 Homebuilder index actually registered more gains than the Nasdaq at its peak, but the comparable time frame (both around 2,000 days) of the two rises is eerily similar. The bursting of the Nasdaq bubble lasted 943 days with declines of 78.29%. The current bursting of the Homebuilder bubble has lasted 831 days with declines of 67%. While the declines have already been severe, for the Homebuilder index to decline to the low levels that the Nasdaq reached, it would have to go down another 34% from here."
- Land Losses, Abandonments Drive M/I Into Red In 3Q (Columbus Business First, Oct. 30th): "M/I Homes (NYSE:MHO) recorded a Q3 loss of $24.2 million, or $1.73/share, vs. a profit of $15.2M, or $1.08/share, during Q3'06. The loss includes $800,000 in severance costs, $6.1M in joint venture investment write-offs and $26.5M in land [write-offs.] Land-related charges... in Florida [were] $25.2 million... Q3 land write-offs also include $453,000 in the Midwest and $6.66M in the Mid-Atlantic region... The company's backlog of homes under contract dropped 48% as of Sept. 30 to a value of $481M, compared with $923M last year. The average sale price of backlogged homes also is down 10% to $327,000, compared with $364,000 last year."
- Is the Bottom Near for Housing? (Motley Fool, Oct. 30th): "Berkshire Hathaway (BRK-A) (BRK-B) Chairman Warren Buffett told Fox Business News he hasn't bought any homebuilder shares yet because he doesn't think they're underpriced... Buffett... may be simply waiting for his price. In fact, the four largest homebuilders -- D.R. Horton (NYSE:DHI), Pulte (NYSE:PHM), Centex (CTX), and Lennar (NYSE:LEN) -- sport a combined $15 billion market cap. If you assume the shares of those homebuilders will slide another 20%, then the price tag would fall to $12 billion, plus a takeout premium. That's very doable for Berkshire and its $40 billion cash hoard."
- Champion Enterprises Prices Offering of $160 Million of Convertible Senior Notes (PR Newswire, Oct. 30th): "Champion Enterprises, Inc. (CHB), a leader in factory-built construction, announced Tuesday the pricing of the previously announced public offering of convertible senior notes due 2037. The transaction was increased in size from the previously announced aggregate principal amount of $130 million to $160M. The company has also granted to the underwriter of the offering an option to purchase up to an additional $20M aggregate principal amount of notes solely to cover over-allotments. Credit Suisse Securities (NYSE:USA) LLC is acting as the underwriter and sole bookrunning manager for the convertible notes offering."
- Jefferies Starts Tupperware at Buy (Street Insider, Oct. 30th): "Jefferies initiates coverage on Tupperware (NYSE:TUP) with a Buy rating and $46 price target. The firm said, "Multi-year turnaround efforts are beginning to gain traction. Tupperware is delivering on its new business model following its acquisition of Sara Lee Direct in late 2005, with the company exceeding expectations and raising its outlook through the year. We maintain above-consensus estimates and our estimate revision bias remains up."
- LandAmerica Reports Third Quarter 2007 Results (PR Newswire, Oct. 30th): "LandAmerica Financial Group, Inc. (LFG), Fortune magazine's number one Most Admired Company in the mortgage services industry, announces Q3'07 operating results. Total revenue decreased by 8.6% in Q3'07 from Q3'06, reflecting the sharp decline in residential mortgage originations during the quarter offset in part by the merger with Capital Title and strong commercial revenue. Mortgage Bankers Association estimated industry-wide residential mortgage originations declined by approximately $147 billion, or 21.1%, in Q3'07 from Q3'06. Net loss in Q3'07 reflected the decline in the residential real estate market... offset in part by continued strength in the commercial market."
- Jupiter Country Club Opens In November (Bunker Shot, Oct. 30th): "Among one of the area’s newest golf course communities, Jupiter Country Club is being developed by Toll Brothers and is situated just west of Florida’s Turnpike on Indiantown Road in northern Palm Beach County... Upon completion, Jupiter Country Club will feature 362 detached single-family luxury homes and approximately 166 attached, two- and three-story townhomes. All home sites have lake, preserve or golf course views. Twelve one- and two-story estate homes range from 2,765 to 5,675 square feet under air and include a swimming pool with prices from $1M-$1.5 million. The townhomes range from 2,281-3,326-sf, with prices from the low $600,000s."
- Beazer Homes (NYSE:BZH) Amended Its Four-Year Revolving Credit Facility (StreetInsider, Oct. 30th): "Beazer Homes USA, Inc. (BZH) amended its four-year revolving credit facility to provide that any adverse judgment entered in the Company's Senior Notes Litigation would not result in an event of default thereunder if... there has been a default with respect to one or more tranches of Senior Notes based on the Company's failure to make a filing with the SEC... or denying a motion for preliminary injunction with respect to such a default, such defaults shall have been waived by the requisite holders of such applicable tranches of Senior Notes in accordance with the applicable Senior Indentures."
- West Side To Get 20 Town Homes (Star Telegram, Oct. 30th) Texas: "CityHomes, the division of Dallas-based Centex Homes that builds trendy, urban town houses and condos, plans a 20-unit infill development of two- and three-story town houses on Carroll Street, just west of Montgomery Plaza on West Seventh Street, called Presidio. Centex bought nearly an acre on the west side of Carroll, between Fifth and Sixth streets, in early August and is preparing the site for infrastructure work that will begin in January, said Steve Langridge, a CityHomes division manager. Construction of the town houses would begin in late spring."
- Patrick Industries Reports Higher Sales, Profitability, and Completion of First Phase of Integration Plan for Third Quarter (PR Newswire, Oct. 29th): "Patrick Industries, Inc. (NASDAQ:PATK) today announced its Q3'07 operating results... marked by increased sales and substantial progress in the integration of operations from the recently acquired Adorn, LLC. Patrick, a leading manufacturer and distributor of building and component products for the Recreational Vehicle, Manufactured Housing and Industrial markets, reported net income of $166,000, or $0.03/share, on net sales of $136.6 million for Q3'07, compared with net earnings of $406,000, or $0.08/share,on net sales of $90.9M for Q3'06."
Commercial Real Estate and Real Estate Investment Trusts (REITs)
- Builders Not Lured By Delayed Fee Bait (Sarasota Herald Tribune, Oct. 31st): "To spur the ailing construction industry... on Oct. 23, North Port changed its impact fee policy to collect the money when projects are finished instead of up front when permits are issued. The change cuts down on the amount of money builders have to spend up front in the construction process, which in the case of commercial construction can be tens of thousands of dollars. Despite the change, builders submitted only six new home permit applications in the past week, hardly a stellar figure considering that North Port issued 33 home permits in September, when the fees were being paid up front."
- Traders Bet Commercial Mortgages To Follow Subprime (Reuters, Oct. 30th): "The strategy hedge funds and other speculators... used with ABX-HE subprime mortgage derivative indexes is now being applied to the commercial mortgage "CMBX" index, pushing yields on the index sharply higher this month as data on U.S. housing worsened... Expectations of rising defaults in the $850 billion commercial real estate market [CMBS] amid some looser underwriting [is] giving investors a reason to short the market, analysts said... Yield spreads on the "BBB-" CMBX index that follows 25 commercial mortgage-backed securities have jumped almost 50% since October 10 to a record high 786.5 basis points as of Monday. The move represents a spike in bearish bets."
- MGM Mirage, Wynn Report Mixed Results (Centre Daily Times, Oct. 30th): "Casino operators MGM Mirage Inc. (NYSE:MGM) and Wynn Resorts Ltd. (NASDAQ:WYNN) reported mixed third-quarter results Tuesday... but laid out future... expansion projects focused on Macau and Las Vegas. MGM Mirage, the world's second-largest casino company, said net profit grew 18% to $183.9 million, or $0.62/share, and revenue rose 6% to $1.90 billion... CEO Steve Wynn [said] concerns about a housing slump affecting gambling in the U.S. and the opening of Las Vegas Corp.'s huge Venetian Macao in late August had no effect on the company's operations. "We tend to be deliciously insulated from some of these macro market trends."
Tracking the Housing Market and Homebuilder Stocks
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