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

• Home Sales Slump Slows; Buyers Still in Charge (Star Tribune, Feb. 12th): "Minneapolis/St. Paul, Minnesota Realtor Ass'ns: Signs of recovery from the deep doldrums of late 2006… Pending sales for January were down 6% from January 2006, compared with double-digit declines during much of 2006. That's about 600 fewer transactions than were posted when the market peaked in 2003 and still within historical averages… Inventory remains at record highs, but the increases have been much more moderate than during most of 2006, when monthly listings jumped as much as 40%. Last month, the number of new listings was up 5%."

• Atlanta: Saturated Market, Mortgage Fraud Fallout has Flattened Home Prices (USA Today, Feb. 12th): "Atlanta Realtors Board: Atlanta has a saturated 11.2-month supply of homes and condos for sale, up from a 7.2-month inventory in December last year. That's the main reason prices are flat and homes are taking longer to sell… Many homes are being sold by lenders… from foreclosures… Atlanta… had been for a good number of years the No. 1 mortgage fraud market in the U.S… For condos, whose average sale price exceeded $200,000 in December for the first time, there are worries that overbuilding could turn the market oatmeal-soft."

• Housing Not Really in Slump (Desert Sun, Feb. 11th) California: "A two-month surge in home sales… Desert real estate professionals are upbeat about the 2007 housing market. Further bolstering their confidence: A new report that 2006 wasn't as bad as some had feared… The average valley home sale price… was $482,900 in Q4'06, down from $483,200 in Q4'05. Home sales surged nearly 20% in December compared with November… Valley's home inventory level down for the first time since last summer. There were 8,236 homes on the market in mid-December, down 362 from November. For 2006, however, home sales… dropped about 27% from the often frenzied pace of 2005."

• A Home's Real Value (Boston Globe, Feb. 11th): "Today's typical first-time buyer is 32 years old and earns about $58,000, according to a recent National Association of Realtors survey. He spends $165,000 on a house – obviously not in Massachusetts – and plans to stay six years. The typical repeat buyer is 47, makes almost $82,000, and hangs on to a house for nine years."

• ORRA: Homes Sales Slow, Median Prices Rise in January (Orlando Business Journal, Feb. 9th): "In January, 31.5% fewer homes sold than in the same month last year. The median price this month rose by 3.6% to $249,700, while interest rates edged up to 5.9%. The supply of Orlando homes, meanwhile, rose by 1,729 homes in January to total 21,266 -- a 16.1-month supply. Single-family homes represented the largest portion of homes on the market... with 15,770, a 7.6-percent increase since December… Condominiums increased 12.7% since December to 3,648. Duplexes, town homes and villas accounted for 1,848 of the inventory, a 12.1% jump."

Foreclosure Trends

• Texas Leads Nation in Foreclosures (Austin Business Journal, Feb. 12th): "In Texas, 14,728 new foreclosure filings were reported over the course of January -- the highest number of new foreclosures posted by any state in the United States, according to RealtyTrac… Texas is averaging one foreclosure for every 547 households -- making it the state with the sixth-highest foreclosure rate. And while those 14,728 new foreclosure filings represent an increase from the number of filings posted in Texas in January 2006, that increase is less than 1%, RealtyTrac officials note."

• County Leading State in Foreclosures (Memphis Business Journal, Feb. 12th): "Foreclosures in Tennessee continued to rise in January with Shelby County hit the hardest, reporting 1,034 foreclosures during the first month of 2007, according to Foreclosures.com… Florida led the Southeast U.S. with 11,500 properties in some stage of foreclosure during January 2007… The entire Southeast region, which includes Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia, had a total of 20,199 foreclosures during January 2007."

• Mortgages Causing Problems for Solano Homeowners (Times Herald, Feb. 11th): "About 500 more mortgage default notices went out to Solano County mailboxes recently, signaling the highest rate of foreclosure activity in eight years, a real estate information service reported Jan. 23. Defaults rose by 484, or 163%, in Solano County."

Mortgates and Real Estate Lending

• New Century Financial Corp.: Same as the Old Century (Jack Ciesielski in Seeking Alpha, Feb. 12th): "The firm buys back subprime loans that it sold to securitization trusts, a la Statement 140… The company is supposed to set up an allowance for the expected losses it would incur when it “takes back” the unhealthy loans. Apparently, this didn’t happen [in New Century]. Putting such loans back on the balance sheet at fair value would cause them to reverse such an allowance, and there was nothing to reverse… The mid-1990’s saw many firms hit the wall when their securitization assumptions turned out flawed. It’s almost as if nothing was learned from the past. It’s early to say that this is going to be a widespread problem, in that these errors seem to be of New Century’s own doing."

• Startup Firm Allows Homeowners to Tap Equity Without Payments (Investment News, Feb. 12th): "Real Estate Equity Exchange [REX] offers consumers cash representing up to 15% of their home’s value in exchange for a cut of up to 52.5% of the capital appreciation when the property is sold. REX gets 3.5% of the gains for every 1% it pays the consumer for the option…REX: "The typical origination fee for a reverse mortgage is about $17,000… Cash is tax-free, and consumers have up to 50 years to sell their homes… At the time the house is sold, there is a service charge of approximately $15,000… American International Group [is] the largest shareholder of Rex."

• Small Down Payments Becoming the Norm (Charlotte Observer, Feb. 10th): "National survey research: From mid-2005 to mid-2006, according to a sampling of 7,548 purchasers, nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. An additional 30% put down 10% or less, and 20% put down 5% or less. The median down payment was 2%. In other words, the median-sized mortgage for first-timers was 98% of the purchase price… Before the mid-1980s, the 20%-down mortgage was the only game in town."

Global Alternatives To The Housing Slump

• Asia and Europe Lead Continued Surge in Global Office Investments (Finfacts Ireland, Feb. 12th): "Commercial real estate services firm CB Richard Ellis Group: Investment in office buildings… surge around the globe, with Asia and Europe markets [leading the way] in 2006… Competition among investors, yield compression, and a limited pool of desirable assets has led investors to broaden their geographic search for opportunities… In the U.S., $23.3 billion of office properties in the NY investment market traded in 2006, up 31% from 2005’s US$17.7 billion… Middle Easterners were the biggest foreign investors in the U.S., with over $5.0 billion in acquisitions… Australians purchased over $8.5 billion in U.S. real estate in 2005, and another $3.7 billion in 2006."

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

• The Myth of 'Superstar Cities' (Wall St. Journal, Feb. 13th): "Economic and demographic trends suggest that the future of American urbanism lies… in younger, more affordable and less self-regarding places... Between 1990 and 2006, job growth in Las Vegas averaged over 6% annually; Phoenix and Riverside well over 3%; Houston, Atlanta, Dallas and Charlotte right around 2%. New York City, L.A., Boston, Chicago and San Francisco all remained well less than 1%. … In recent years the difference in [home] prices… has increased beyond all reason. San Francisco prices since 1950… have grown at twice the national rate for the 50 largest metropolitan areas."

• Spring Fever Optimism: Economic Forecasters Are in For a Surprise (Michael Panzner in Seeking Alpha, Feb. 12th): "Freddie Mac (FRE) remains upbeat… "despite growing problems in the mortgage finance arena and a continuing supply-demand mismatch in the housing market that will exert a major drag on economic activity for the foreseeable future"… Others, [such as] economist Nicholas Perna are… relaxed, apparently believing that an overleveraged, overextended, and grotesquely distorted economy is unlikely to falter without first being dealt some sort of death blow, plain for all to see. "I think we've got the wherewithal here, if we don't have a big spike in interest rates, to ride this thing out for a while."

• Will Boomers Start a Meltdown? (Newsday, Feb. 11th): "If we isolate ourselves to the U.S. - or the U.S., Western Europe and Japan - the future is not very happy for the baby boomers," said Wharton School finance professor Jeremy J. Siegel, author of "The Future for Investors." There are not enough people who are workers and savers in coming years to absorb the literally trillions of assets that will have to be sold by the boomers to finance their retirement. That will mean lower prices for financial assets and real assets such as real estate."

• Patrick Industries Reports Increased Sales and Earnings for 2006 (Auto Channel, Feb. 8th): "Patrick, a leading manufacturer and distributor of building and component products for the Recreational Vehicle (RV), Manufactured Housing (MH) and Industrial markets, reported net earnings of $0.2 million, or $0.04 per share, on net sales of $72.8 million for Q4'06, compared with net earnings of $1.2 million, or $0.25 per share, on net sales of $83.9 million for Q4'05… Industrial and other sales, which include sales to the kitchen cabinet, office furniture, store fixtures and other industries, represent approximately 28% of the Company's sales for 2006, compared with 27% for 2005."

Impact on Housing Related Industries

• Outlook Varied at Household Product Cos (Forbes, Feb. 12th): "The Dow Jones U.S. Durable Household Products index has risen about 25% August's 52-week low. But a closer look at the stocks comprising the index reveals two distinct classes of companies: those dependent on the housing sector remain distressed as that market's slump persists, while those more closely tied to trends in consumer spending posted gains. Durable households goods includes products… such as appliances to furniture to lawn care equipment. Many of the companies in the sector are small and medium-sized manufacturers that sell to either retail chains or directly to manufacturers in the building sector."

• Bearish Fundamentals Should Continue to Weigh on Copper Prices (Resource Investor, Feb. 10th): "Copper prices climbed to their highest levels of all time… $4.44 per pound in April of 2006… From government [attempts to cool the] Chinese economy… Chinese copper imports fell 19% [in] 2006… [Then a] severe slowdown in U.S. housing starts: Builders account for 46% of U.S. copper use with the average new U.S. home containing about 400 pounds of the metal… The slump… substantially affected demand… Copper prices have receded more than 40% from their 2006 highs… The primary barrier copper faces in the near future is high stockpiles… from last year’s unprecedented price explosion."

Homebuilders And Housing Stocks

• Three New Hedge Funds Banking On Housing Bubble Burst (Fin Alternatives, Feb. 13th): "Lahde Capital has launched U.S. Residential Real Estate Hedge I, II and V funds… poised to cash in on the burst of the real-estate bubble… All three funds utilize the same strategy—shorting the riskiest tranches of sub-prime mortgage securitizations—but with differing levels of leverage, topping out at five times leverage. Fund manager: "The conditions that led to the mass proliferation of sub-prime mortgage underwriting have all reversed. We are now in an environment where it is virtually impossible to profitably underwrite sub-prime mortgages. Increased delinquencies and foreclosures will negatively impact the lowest-rated tranches of mortgage-backed securities."

• Real Estate Stocks Are Done - Really?!? (Mebane Faber in Seeking Alpha, Feb. 12th): "Momentum, and its trading cousin trend-following, plays a large role in many of the strategies I follow. One example is the current performance of REIT stocks (with Friday being an obvious exception). Many pundits will go on TV and claim that an asset class (or stock) can't possibly go any higher (or lower, see 2000-2003 in stocks). REALLY? How many times on the chart could you have said, REALLY? Take a look at the chart for the Real Estate iShares ETF (IYR)."

• Real Estate ETF Proves Analysts Wrong (Tom Lydon in Seeking Alpha, Feb. 12th): "Last month's second best performing exchange traded fund was iShares Cohen And Steers Realty Majors (ICF), with a 14.9% return… and 22% in returns for the past three months... This is a higher risk fund with concentration in few stocks. Holdings have higher than average price-earnings, price-book and other valuations… As of December 31, ICF owned 30 REITs and the funds top ten names made up 60% of total net assets… Simon Property Group (SPG)… Vornado Realty Trust (VNO)… and Equity Office Properties (EOP) [were its top three holdings]. Analysts for the past year said the ETF was unattractive and overvalued. Were they wrong?"

• U.S. Homebuilder WCI to Explore Sale of Company (Sing On San Diego, Feb. 12th): "Homebuilder WCI Communities… has retained Goldman Sachs to explore a possible sale of the company, sending shares up 5.4%. The builder of high-end Florida homes and condominiums said Goldman would also look at other possible changes to its capital structure. WCI last month adopted a shareholder rights plan, commonly known as a “poison pill” after activist investor Carl Icahn boosted his stake in the company to 14.6%. WCI shares have risen about 37% since Icahn disclosed his initial stake in the company on Nov. 14."

Commercial Real Estate and REITs

• Mills Says Simon/Farallon Offer is Superior (Reuters, Feb. 13th): "Mills Corp. (MLS) said on Tuesday it had received a definitive offer from Simon Property Group Inc. (SPG) and Farallon Capital Management L.L.C. to acquire the mall owner for $24 per share in cash. Mills' board determined that the Simon/Farallon offer was superior to a bid submitted by Brookfield Asset Management Inc. (BAM). It plans to terminate its deal with Brookfield."

• Makena Resort Sold for $575 Million (Maui News, Feb. 10th): "Seibu Group is selling Makena Resort, including the Maui Prince Hotel, to a hui of veteran local developers for $575 million. The local members are Everett Dowling of Dowling Co. and Trinity Investments… Dowling and Trinity are teaming with giant Morgan Stanley Real Estate, which has steered more than $100 billion in real estate investments since 1991."

• Foreign Real Estate Flows Brighten Dollar Outlook (Reuters, Feb. 9th): "U.S. commercial real estate market returns appeals to foreign investors… The business and industrial property sectors… are among the best performers in U.S. asset markets. Cash-flush foreign institutional investors are wise to the trend, investing some $20 billion in U.S. commercial real estate last year alone. The sector should get even more of that money again in 2007, property fund managers say. Commercial property investments accounted for more than 10% of roughly $180b in foreign direct investment in U.S. assets in 2006. Those inflows are… financing the U.S. trade deficit and are thus supportive for the dollar."

• Macklowe Takes 8 Former EOP Assets in Manhattan (CoStar, Feb. 9th): "Macklowe Properties is walking away with all but one of Equity Office Properties Trust's Manhattan holdings, a portfolio of Class A Midtown buildings totaling about 6.6 million square feet for about $7 billion. In the first of several expected asset sales to begin the process of dismantling EOP's former portfolio, The Blackstone Group flipped the well-leased properties to Macklowe following its $39 billion take-private deal, which closed at lightning speed today."

• Commercial REITs Could Have Room To Rally Further (CNBC, Feb. 9th): "[REIT's] still could move higher in the near term… Large institutional REIT investors and REIT index funds will have to invest in other REITs after tending their shares in Equity Office… The Equity Office takeover [could] spur other deals… There were $119 billion in REIT deals last year… Bulls are betting [on Office REITs, saying] commercial rents will continue to rise at a robust clip and office-building supply will remain tight because new construction is expensive… Boston Properties and Mack-Cali are attractive takeover candidates because offices have predictable cash flows, and they're located in the supply-constrained Northeast and Mid-Atlantic."

• Blackstone Could Sell $6.5 Billion in Real Estate Assets: WSJ (CNBC, Feb. 9th): "Private-equity firm Blackstone Group's real-estate arm looks set sell office buildings in Seattle and Washington, D.C., to Beacon Capital Partners for about $6.5 billion… Assets from a recent takeover contest for Equity Office Properties Trust… If successful the transaction comes immediately after Blackstone's $7 billion sale of New York office buildings to Macklowe Properties… The news comes in the same week as Fortress Investment Group raised $634 million in its initial public offering, making it the first private-equity firm to go public."

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