Housing Bubble and Real Estate Market Tracker

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 get this sent to your blackberry or desktop email by signing up for our no-spam free email subscription service.

Real Estate Sales and House Prices

• Housing Predictor Forecasts Major Price Drop (Clickpress, Jan. 5th): "California is the hardest hit single state in falling home values in the nation… San Diego will drop more than 13% on average in 2007… Los Angeles more than 11%... Miami, a 13.6% drop… Washington state and Utah are experiencing massive areas of growth... Texas is undergoing the largest growth in its history… forecast by the US Census Bureau to be one of only three states to have nearly 50% of the nation’s population by 2030… The exodus from New Orleans has produced growth in northern Louisiana, Mississippi and Alabama."

• Housing Decline To Continue (Pasadena Star News, Jan. 4th): "California Building Industry Association Chief Economist Alan Nevin: The standing unsold housing inventory is moving down rapidly… also a considerable drop in excess inventory in condominium conversions, with owners either selling out or reverting back to rental status… Town house and other low-density home building will continue normally, but there will be a cutback on high-rise development in urban cores… There's going to be less product, builders shut off the pipeline six months ago and are building more on demand and in smaller phases… builders are confident it will stabilize this year."

• Pending Home Sales Post Third Consecutive Decline (Housingbubbleblog, Jan. 4th)“An index of signed purchase agreements fell 0.5 percent, a third consecutive decline, to 107 from 107.5 in October, the National Association of Realtors said. The index was down 11.4 percent from November 2005… Regionally, pending home sales fell 2.8% in the Northeast, 1.1% in the South and 2.6% in the West. Pending home sales rose 4.8% in the Midwest. Pending sales are down about 16% year-over-year in the West.”

• San Antonio: A Bubble in a Less Bubbly Market (Housing Doom Bubble Blog, Jan. 3rd): "San Antonio was a market experiencing modest growth until Fortune magazine anointed it the nation’s strongest housing market, predicting an 8.3 percent home price appreciation in 2006. Out-of-town investors flooded in, glutting the market with rental homes. S.A. Board of Realtors: The average monthly rent dropped from $1,301 to $1,099. At the end of October, more than 2,000 homes were for rent… S.A. also saw a similar drawdown and increase in inventory as speculators moved into and out of the market… We expect the negative implications of a contracting market to spread to "baby bubble" communities as well."

• Home Prices Fall Just a Bit; Brokers See ‘Soft Landing’ (NY Times, Jan. 3rd): "Pamela Liebman, president of the Corcoran Group: “The big story here is [what] never happened: That prices would crash in 2006 and a strong buyer’s market will emerge. Buyers can certainly pick and choose, but those who think they are going to have a field day right now are mistaken… the fear of a price collapse caused by a construction boom has not been borne out so far, and the outlook remained good for this year. Several thousand planned condominiums have instead been turned into hotels and office buildings, as hotel profits and office rentals have risen."

• Colorado's Housing Market Splits In Three Ways (New West.net, Jan. 4th): "The record number of foreclosures in the state has given it a bad rap... Home sales in Pitkin County, home of Aspen and Snowmass, were up 19 percent in 2006. The average price for a single-family home in Aspen hit $5.44 million in 2006... Also in Pitkin County, so-called "worker housing" or affordable housing sales hit $21.6 million in 2006, the highest in at least five years… Worker or affordable housing is subsidized by state, federal or other funding sources, prices are capped, appreciation and the number of units for sale are limited."

Real Estate Investing and Sentiment

• Newest Hotels To Develop Part-Time Chicagoans Who Buy Luxury Condos (Daily Herald, Jan. 4th): "Despite danger signs of overbuilding, a batch of new, luxury hotel-condos is sprouting across the city. Developers like David Pisor of Elysian and Donald Trump are banking on this business model, still new to Chicago, to make big money by converting suburbanites and business travelers into part-time Chicagoans. The projects under development are selling for $480,000 for studios to more than $3 million for large suites… Hotel-condos have already proven to be lucrative investments for developers and buyers alike in coastal and destination cities like New York and Las Vegas."

Mortgates and Real Estate Lending

• People Want Out of Adjustable Mortgages as Rates Go Up (The Ledger.com, Jan. 5th): "LendingTree, an online mortgage marketplace, reports a surge in refinancing of ARMs in the past six to eight weeks, and expects the trend to continue… One reason people are switching is that the difference in the rate on adjustable and fixed mortgages has narrowed. For example, the rate on a mortgage that can adjust annually was 5.84 percent recently, compared with about 6.22 percent on a fixed-rate mortgage. Borrowers are opting to pay a little more for the fixed-rate mortgage to avoid the risk of a reset on an adjustable mortgage in the future."

• Reverse Mortgages Turn Home Equity Into Income (The Day, Jan. 5th): "Homeowners at least 62 years old can tap into their home's equity without selling their house or taking out a home-equity loan… Unlike a traditional mortgage requiring monthly principal and interest payments, a reverse-mortgage lender pays the homeowner instead … Financial-services firms such as IndyMac Bancorp Inc. have been cutting the costs of reverse mortgages and offering deals… Bank of America Corp. recently [started] a reverse mortgage pilot project in Phoenix… Countrywide Financial Corp. says it expects to launch a new reverse mortgage in 2007. The competition from both is expected to put further downward pressure on costs."

• Seniors Need To Know Pros, Cons Of Reverse Mortgages (Ventura County Star, Jan. 5th): "'Front-loading' or upfront costs, paid out of the home's equity at closing, are very high. Reverse mortgage lenders make money through interest, origination fees and points… While interest rates vary according to the market, closing costs are significantly higher with reverse mortgages. Additionally, borrowers continue to be responsible for real estate taxes, conventional homeowners insurance and home repairs, and have the added burden of paying for mortgage insurance, too. Depending on where you live, the proceeds from a reverse loan could prove a barrier to qualifying for Medicaid, which counts loan proceeds as an asset."

• Clear Sailing Ahead for 2007 (Tim Iacono in Seeking Alpha, Jan. 3rd): " Predictions for 2007: "A 10 percent decline in the year-over-year national OFHEO (Office of Federal Housing Enterprise Oversight) resale price data; not refinancings, just resales… The popping will not result from a lack of dumb buyers, but rather a dearth of willing lenders. At some point in time, making sub-prime, option-ARM, interest only, 50-year loans no longer makes business sense, and that time will be 2007. There are far too many headwinds going into the mother of all ARM (Adjustable Rate Mortgage)-resets in the months ahead. Ditech.com will not be able to save everyone."

• First American Says It Backdated Stock Options (Reuters.com, Jan. 5th): "First American Corp. (FAF) a real estate insurer and mortgage information provider, said the company had backdated stock options. In November the company said it had reached the preliminary conclusion that the recorded date of some options grants differed from the actual date. The incidents occurred between 1996 and 2006. The cumulative [cost] impact is $35.7 million, mostly non-cash in nature. It will restate some of its past financial statements."

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

• Residential Housing Investment And The Macro Picture (Barry Ritholtz in Seeking Alpha, Jan. 5th): "Housing activity is a function of several factors: Rates, the overall economy, supply, population growth, rental prices… Like all asset classes, other elements will impact end demand: sentiment, speculation, liquidity (easy financing terms, loans, mortgages)… Over the past 5 years, rates dropped, supply expanded, population expanded, prices rose. That's normal. But then rates plummeted even further, prices rose more quickly [encouraging] Real Estate Speculation... Most of the time, Real Estate is a function of the overall economy: Job creation, GDP, Rates.This go round has seen the roles reversed: it's the prime mover of the economy."

• Will Higher Interest Rates Help The Rental Market? (Real Estate Journal.com, Jan. 4th): "Sacramento: No rental-market boom if the housing market goes bust… Developers overbuilt rental properties in recent years, leading to the highest vacancy rates in more than 15 years… and forcing landlords to offer incentives… A big drop in the housing market could actually make matters worse. When home prices fall, foreclosures often increase rapidly, and many are converted into rental units until a buyer can be found. That only adds more rental supply to the market, exacerbating oversupply problems."

• USDA Rural Development Reduces Interest Rate On Home Mortgages (Cherokee Sentinel, Jan. 3rd): "The U.S. Department of Agriculture Rural Development announced a decrease in the home mortgage interest rate for its Homeownership Direct Loan Program- 5.75%, down from 6%, effective January 1, 2007… The Section 502 direct loan program is available to eligible very-low and low income households to purchase an existing home, purchase a site and construct a dwelling, or purchase a newly constructed dwelling in rural areas. Financing under this program is available for up to 100 percent loan-to-value, and no down payment is required."

• U.S. Economy: Manufacturing Rebounds From Contraction (Bloomberg, Jan. 3rd): "An eighth consecutive decline in private residential projects, the Commerce Department report showed. A 1.4 percent gain in private non-residential construction, reflecting increases in spending on transportation projects, hotels and commercial space, helped offset the 1.6 percent decline in residential building… Illinois Tool Works Inc., the maker of Wilsonart countertops and Duo-fast nail guns, cut its fourth-quarter profit forecast for the second time this year as residential construction and auto production sagged. The housing and automotive industries make up about 11 percent of Illinois Tool's total sales."

Hedging Your House Price By Shorting Stocks

• Taylor, Wimpey May Lure Buyers as U.K. Building Booms (Bloomberg, Jan. 4th): "Taylor Woodrow Plc and George Wimpey Plc, the U.K.'s two biggest homebuilders, may become takeover targets as a housing boom lures private-equity buyers… House building stocks have had a good 2006 and there may be more consolidation. British enthusiasm for home ownership has helped fuel 36 straight quarters of economic expansion under PM Tony Blair, as soaring property values spurred consumers to borrow and spend. Seventy percent of homes are owner-occupied, compared with 56 percent in France and 41 percent in Germany."

Commercial Real Estate and REITs

• Twelfth REIT Tapped To Join The S&P 500 (Marketwatch, Jan. 4th): "The index committee at Standard & Poor's has opted to replace Symbol Technologies Inc. in the widely followed S&P 500 Index with apartment owner and operator AvalonBay Communities Inc., a move that would boost the number of hot-performing real estate investment trusts in the index to a dozen, analysts said… As one of the most least-leveraged REITs, AvalonBay likely won't have to issue additional shares as a result of its S&P 500 inclusion."

• Morgan Stanley Group Sells 16 Town & Country Apts. for $677.4M (CoStar Group, Jan. 2nd): "The investment group of Morgan Stanley Real Estate, Onex Real Estate and Sawyer Realty Holdings that acquiredTown & Country Trust in February 2006 for $1.4 billion said it sold 16 of the former REIT's apartment properties in Baltimore in two separate transactions… The sale represents less than half of the 13,300 units that were owned by the Baltimore trust, one of the first major REITs to be acquired by the wave of private equity investors that has fueled the remarkable merger and acquisition activity throughout the commercial real estate sector."

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