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 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"

"As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions." Homebuilder Lennar's President and CEO Stuart Miller. (SF Gate, June 26th)

Real Estate Sales and House Prices

• Existing Home Sales Approach Four-Year Low (Seeking Alpha, June 26th): "Bank of New York analyst Michael Woolfolk: "We don't see further [housing] deterioration of the magnitude we were concerned about earlier this year." David Resler, chief economist at Nomura Securities: "[F]alling prices and record high inventories… The 'correction' in the housing market is nowhere near ending." WSJ: Home sellers are facing fierce competition from homebuilders, who are cutting prices sharply to trim inventories. CNBC's Diana Olick: The "household formation" gauge, measuring first-time homebuyers, fell 70% in Q1 versus last year. Annualized, that amounts to 500,000 – an unusually figure and generally seen "in a real economic recession."

• House Sales Are Down (Fayetteville Observer, June 26th): "Fayetteville Association of Realtors: For the fifth consecutive month, house sales in the Fayetteville area have dropped… May sales were down 22%… at 18% [lower prices] than May 2006… Buyers paid an average of $121,948 in May for existing homes… The average price of a new home: $213,918… New home sales fell 19% from last year, the average price rose about 11%... [There's] an average of eight and a half months [inventory for new homes]… five months for existing homes… Homes in the $350,000 range aren’t selling very well. There’s a 17-month supply on the market now."

• Streamlining Bids Should Aid Silverdome Sale (Detroit News, June 26th) Detroit: "Pontiac's leaders seem to be on the right course in their renewed efforts to sell the Silverdome and encourage redevelopment of the site. Foot-dragging and political meddling marred previous efforts by the city to make use of the land, located in a prime spot near major roads and freeways in Oakland County… Housing starts are down throughout Oakland County, and Pontiac's real estate values have grown more slowly than those of the county… Maintaining the 80,000-seat dome, at $1.6 million per year in upkeep and security, is a cost the city can ill afford."

• Home Prices May Keep Enrollment Down (Santa Clarita Valley Signal, June 25th): "Sulphur Springs Union, Saugus Union and Newhall school districts all saw a small dip in enrollment numbers… Newhall School District Superintendent Marc Winger: The Newhall School District anticipated 160 kindergartners starting at Stevenson Ranch Elementary School and 140 at Pico Canyon… However, there are fewer than 120 kindergartners at each of those schools. The price of homes in the valley may be a factor. In March, the median price of a 3BR home in the schools' boundaries was $690,000, a 4BR home was $883,000 and a 5BR was more than $1 million… That may be far too much for a family just starting out with young kids to afford."

• Park Ave Rental Building Goes for $211M (Real Deal, June 25th): "BlackRock will buy 530 Park Avenue, a 139-unit rental building on 61st Street, for $211 million, according to a source. The $1.51-million-per- apartment price tag will make the deal one of the most expensive ever on a per-unit basis."

• Stalled Housing Market Fuels Sellers' Creativity (Daytona Beach News Journal, June 25th): "During May, Realtors sold just 644 existing single-family homes in Volusia and Flagler counties, 29% fewer than the 912 that changed hands in May 2006. Florida Association of Realtors: The median selling price… dropped 14% to $196,800. It was the second time in the past three months that area house prices have dipped below the $200,000 level... 99 condos sold for the month, two more than a year earlier. But condo prices dropped 16% to $208,300, down from $247,900 a year ago."

Real Estate Investing and Sentiment

• Inventory Glut Rises As Home Sales Drop (LA Times, June 26th): "Lawrence Yun, senior economist for the Realtors association, noted that household formation had slowed. He said that implied many people had decided to put off buying a home and were doubling up in rental units or moving back home with parents. "It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market," he said."

• Real Estate-Rich Homeowners Confident Too (Realty Times, June 26th): "The Michaels Opinion Research study, conducted for the Boston Consulting Group, said 55% of Americans say their home would sell for more money now than it would have a year ago. That's down from 59% last summer, but still a majority. The Boston Consulting survey also said 74% of homeowners were confident they could sell their home within the next six months at a price they think it's worth."

• NASA Offers Space Station 'Real Estate' (The Age, June 26th): "NASA expects to have twice as much room as it needs for its research on the International Space Station and is looking for US partners to share the novel piece of real estate. NASA administrator: "What we're trying to do is open up the US segment of the space station to be used by a variety of folks…" NASA plans to spend $1.5 billion a year to operate the orbital outpost and it won't pass any of those costs on to new partners that come aboard. Any partners, however, would have to manufacture their own hardware and pay their researchers' salaries."

Mortgates and Real Estate Lending

• Bank Of America Sees Interest In No-Fee Mortgages (Reuters, June 25th): "Bank of America Corp. (BAC) on Monday said its new no-fee mortgage product has triggered a jump in applications to buy homes, and that it plans this year to develop products to attract U.S. homeowners who need or want to refinance… Floyd Robinson, Bank of America's president of consumer real estate and insurance services, said the pace of mortgage applications is up 40% from a year earlier, after adjusting for changes in overall market activity."

• The Subprime Implosion: It Gets Worse (Fort Wayne.com, June 25th): "An underlying problem in the lending industry is its fragmented and uneven regulation, with numerous regulatory agencies at the federal and state levels. Perhaps it's time for an intriguing idea put forth by Elizabeth Warren, a Harvard law professor. In the journal Democracy, she suggests the creation of a "Financial Product Safety Commission" along the lines of the highly effective Consumer Product Safety Commission."

Subprime Fallout and Foreclosure Impact

• Regulators Probe Rate Of Real Estate Appraisals (Jackson Hole Star Tribune, June 26th): "State regulators plan a widespread review of real estate appraisals in southern Colorado, citing a high rate of home foreclosures in the Pueblo area. Erin Toll, director of the Colorado Division of Real Estate, told The Pueblo Chieftain in Friday's editions her agency would formally announce the review next week. "We're just going to be taking a much closer look at real estate activities in the southern part of the state because the mortgage fraud and the mortgage foreclosure rate is so high in Pueblo," she said."

• Goldman-Issued Subprime Bonds Lead Downgrades: Citi (WISTV, June 26th): "Citigroup Global Markets: Goldman Sachs' (GS) subprime mortgage bonds issued last year are being downgraded by rating companies at the fastest rate of any issuer. Portions of Goldman's GSAMP-issued bonds, which include subprime loans from a variety of lenders, have been downgraded a combined 69 times by Standard & Poor's and Moody's Investors Service in the year through June 15… Sixty of the downgrades refer to classes from 2006 bonds. Goldman was the 15th largest issuer of subprime securities last year with $12.9 billion sold, up 59% from 2005, according to Inside Mortgage Finance. Countrywide Financial Corp., the biggest U.S. mortgage lender, was the top seller of subprime ABS at $38.5 billion sold."

• SEC Knocking on Bear Stearns' Door – BW (Seeking Alpha, June 26th): "Business Week: The SEC has opened a preliminary investigation into the near collapse of the Bear Stearns (BSC) High-Grade Structured Credit Strategies Enhanced Leveraged Fund… On May 15, Bear said the fund, which is invested primarily in securities backed by subprime mortgages, had lost 6.5% in April. On June 7, however, Bear restated the April loss -- without explanation -- at 18.97%, or 23% for the year. The SEC is probing the reasons for this restatement... Bear has halved the amount it will put up to rescue the less leveraged of its two ailing funds after buyers were found for some assets, reducing its potential exposure to $1.6 billion."

• Contrarian Mortgage Plays: IndyMac Bancorp (Value Investor Insight, June 25th): "After compounding earnings at 20% per year over 15 years, IndyMac Bancorp(IMB) is now considered to be just another mortgage lender with potential credit problems. The stock trades at less than 10x forward earnings and 8x trailing earnings and has a nearly 6% dividend yield… If we assume ROE turns negative this year and then rebounds over the next five years to only 12%, we expect the share price to grow around 15% per year. If we assume flattish ROE this year and the company getting back to just a 15% level, we’d expect 20% annual share-price increases."

• East Bay Cities Rank Among Top Zip Codes for Foreclosures (East Bay Express, June 25th): "RealtyTrac survey for CNN Money: More than 25% of the top 500 leading foreclosure zip codes are in California. Among them, seven East Bay zip codes are represented. Antioch: 837 foreclosures during Q2… Oakland: (zip codes 94603 and 94605 with 412 total foreclosures), San Pablo (94806 with 260), Richmond (94804 with 223), and Oakley (94561 with 200). Twelve [Sacramento] zip codes accounted for 3,726 foreclosures… Many of the worst-hit zip codes are in the Midwest. Topping the list is a Cleveland zip code with 783 filings. Detroit has five zip codes represented in the Top Ten for a total of 2,445 foreclosures."

• MBIA May Be the Next Subprime Casualty (Barron's in Seeking Alpha, June 24th): "Bond and debt insurer MBIA's (MBI) AAA-rated $1 trillion portfolio could be endangered by its $7.7 billion in subprime mortgage backed securities [MBS] — specifically the $2.4b in collateralized debt obligations of mixed BBB and A-level bonds. The ABX subprime index has fallen 40% since January, and foreclosures are mounting. Since the BBB-rated MBSs have just 7% collateral from the mortgage pools backing them, anything over 7% in securitized losses would crush BBB bonds, 10% losses could strip 65% off A-rated bonds. MBIA says its CDOs are well collateralized, but has previously fudged losses… MBIA could take a $500m loss or have to dilute stock to raise collateral."

• Emerging Debt Investors Wary Of Subprime, Fed (Reuters, June 24th): "Emerging sovereign debt investors are [cautiously] monitor[ing] an evolving crisis in the U.S. subprime mortgage market and awaiting the Federal Reserve's key post-meeting statement. Fears that the subprime mortgage crisis could spill over into other markets already led some investors to flee risky assets on Friday, in an initial flight to safe-haven U.S. Treasury notes. Emerging debt spreads over Treasuries, an important measure of risk aversion, widened 6 basis points to 159 basis points during the week, according to the JP Morgan's EMBI+ index (11EMJ) Only on Friday, spreads widened 4 basis points."

• Hays Foreclosures Down (San Marcos Daily Record, June 23rd) Texas: "The number of Hays County properties scheduled for foreclosure have continued to fall, with anticipated July listings down 26 percent from July 2006 and 38 percent from this month.That held true for most other counties in Central Texas as well, according to Foreclosure Listing Service, which has been tracking foreclosure activity for more than 40 years. Listings are down from last July 7% in the Austin metro area, 1% in Travis County, 7% in Williamson County and 14% in Bastrop County. Comal County was the lone standout, with a 54% increase. Caldwell and Guadalupe counties are not tracked by the FLS."

Global Impact and Alternatives To The Housing Slump

• Beijing, Shanghai Property Prices Are Too High, Executives Say (Bloomberg, June 26th): "Property prices in Shanghai, Beijing and Guangzhou are too high and developers should focus on the smaller Chinese cities as consumers there grow richer, real estate executives said… Builders such as Cheung Kong [Hong Kong's biggest developer] and competitors including Henderson Land Development Co. are relying on returns from investments in China. China's average housing price in 70 major cities grew 6.4% from a year earlier in May, the fastest in 18 months, according to the National Development and Reform Commission."

• Singapore GIC eyes Russia, Turkey (Brunei Times, June 26th): "The property arm of the Government Investment Corp of Singapore [GIC] is looking to move into Russia and Turkey… [and] sees promise in the U.S. office sector, saying the market has strong fundamentals, and did not expect yields there to narrow further… Last week, GIC Real Estate paid $954 million to buy the London headquarters of Merrill Lynch (MER)… three months after the $851.3m acquisition of a stake in the UK's MetroCentre mall… [GIC] started [investing in the US] 25 years ago… but has since… become one of the world's 10 biggest property investors with a multi-billion dollar portfolio in 32 countries."

• As Israel Prospers, Some Fear Its Defenses May Grow Soft (Wall St. Journal, June 26th) Israel: "Shari Arison, who controls Israel's largest bank and is a… Carnival Corp. cruise lines heiress, paid $1.3 million for her Moshav Bnei Zion [near Tel Aviv] 2.5-acre lot in 1997. In 2005, Noam Lanir, an online-gambling impresario, bought the same-size lot next door for $3.5m… Several 3,000-sf houses built a decade ago… have recently sold for more than $1m each… Real Estate agent Yoav Hadari… fields frequent inquiries from real-estate speculators in the U.S. and Europe. He also gets calls from ultra-orthodox Jews in Israel and abroad, whose black-clad sects are considering nearby farmland for new communities."

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

• Housing Market Continues To Underperform, Says NAR (Realty Times, June 26th): "Joint Center for Housing Studies at Harvard: "Household growth between 2005-2015 should exceed the strong 12.6 million net increase in 1995-2005 by some 2.0m." Immigration will hit all-time records between 2005-2015. NAHB: "Sustainable" demand suggests that approximately 1.8m new homes should be built annually… the recent oversupply will take two years to work through, if builders cut their supply of new homes to 1.65m. With close to 1.5m new households forming through 2015, the supply and demand should be about equal… However, household formation is trending under that projection. NAR: At the current rate of household formation… there will be only 415,000 new households for all of 2007."

Homebuilders And Housing Stocks

• Lennar Posts Worse-Than-Expected Q2 Loss, Says Q3 May Be Worse (Seeking Alpha, June 26th): "Lennar Corp. (LEN) posted a $1.55/share ($244 million) Q2 net loss, reversing last year's $2/share ($325 million) gain… Revenue plunged 37% from $4.58 billion to $2.88b. Analysts were calling for earnings of $0.05/share on revenue of $2.58b. New orders were down 31% to 8,056, homes delivered dropped 29% to 9,568, and its average home price fell 7.5% to $298,000 from $322,000 -- mainly due to a 77% jump in sales incentives to $43,700 per home. CEO Stuart Miller: Lennar has been forced to revalue its properties based on current market conditions. Morningstar: Lennar cut its land inventory before other builders, has reduced its debt, and has an impressive management."

• Ohio 3rd State to Reject Cases Against Paint Manufacturers (Insurance Journal, June 26th): "Ohio is the third state this month where courts have rejected the lawsuits by parents whose children were made sick by lead paint against the companies that might have made the paint… Bonnie J. Campbell, a spokeswoman for manufacturers Atlantic Richfield Company, Millennium Holdings, LLC, NL Industries, Inc. and The Sherwin Williams Company (SHW), said in a news release last week: "For nearly two decades of litigation, plaintiffs have moved from legal theory to legal theory, and venue to venue, in an attempt to place the responsibility for poorly maintained properties on the former manufacturers of lead paint.''

Commercial Real Estate and REITs

• Public Storage: Recession Resistant, Positioned to Win (Daniel Jones in Seeking Alpha, June 26th): "Public Storage (PSA) is a REIT that engages in the acquisition, development, ownership, and operation of self-storage facilities in the US… Funds from operations, or “FFO…” increased to $1.05/share on a fully diluted basis during Q1'07, as compared to $0.94/share for Q1'06, representing an 11.7% increase… Internally PSA is performing, but… Investors have been abandoning PSA’s shares lately, in part due to the run-up in interest rates that impacts REITs... The Q1 “loss” on merger-related charges drove the May 3rd-to- present decline. This has created an opportunity to buy stock in an industry leader at a discount valuation."

• Healthy Outlook For Commercial Real Estate (Chron.com, June 25th): "John Holland, senior managing director of Trammell Crow/ CB Richard Ellis' Gulf Coast/South Texas region: "The general environment of the Houston commercial real estate market is the healthiest in history. By that I mean we've got a convergence of stable ownership with positive economics for the owners — low interest rates, lots of capital, job growth, rental rate growth, investment cash flow — all the things that make it good to own real estate. At the same time, Houston is a very attractive place for tenants to be. It's a good value compared to national markets and worldwide markets, and there's a great quality of life. It's a vibrant, happening place to be."

• PricewaterhouseCoopers survey praises Denver (Denver Business Journal, June 25th): "PricewaterhouseCoopers' Q2'07 Korpacz real estate investor survey sees "continued strength and investor confidence" in metro Denver and nationwide. Positive job growth and other strengthening economic fundamentals have helped fuel strong occupancy and rent growth in metro Denver's office market. So far this year, average rents have risen nearly 25% in downtown Denver, and more than 10% in area suburbs. Metro Denver's prime Rocky Mountain location, highly educated work force and diversified employment base also have helped spur 1.7 million-sf of new office construction. Nearly 600,000-sf of that space are in Denver's central business district."

• Queens portfolio fetching $300M (Real Deal, June 25th) New York: "Vantage Properties is in contract to purchase 47 residential buildings in Queens for approximately $300 million, sources [said]. The deal… is one of the largest residential real estate transactions ever in Queens. The transaction underscores that institutional investors are increasingly interested in older buildings in a borough with low vacancy rates and a growing population. Vantage, a real estate investment firm created in 2005, will nearly double its stake in Queens by purchasing around 1,900 units owned by Nicholas Haros."

• Law Firm Renews At Worldwide Plaza (Real Deal, June 25th) New York: "Law firm Cravath Swaine & Moore will pay around $900 million to renew its lease at Macklowe Properties' Worldwide Plaza for 15 years. The firm is paying nearly $100/sf for 600,000-sf of space at the building, which is on Eighth Avenue between 49th and 50th streets. The deal marks one of the largest leases in Manhattan."

• California Firm Buys Mainstreet At Flatiron Building (Denver Business Journal, June 25th): "Triple Net Properties LLC has purchased the Mainstreet at Flatiron office and retail building for undisclosed terms. The seller was Colton Holdings LLC, which is part of Alliance Commercial Partners LLC of Denver. The 93,000-sf Mainstreet property is located next to FlatIron Crossing mall in Broomfield… Triple Net is a commercial real estate firm whose services range from brokerage and property management to leasing and investment. The company specializes in tax-deferred, 1031 exchange real estate investments."

• Longs Hires Hawaii Real Estate Broker (Pacific Business News, June 25th): "Longs Drug Stores Corp. has hired a local commercial real estate broker to handle its transactions in Hawaii, including planning, site selection and purchase and lease negotiations for new stores… Brian McAndrews, Longs Drugs' VP of real estate: "Hawaii is an important part of our heritage as well as our continued growth." Rock Tang's appointment comes as the nation's largest drug store retailer, Walgreens Co., prepares to open its first Hawaii stores, some in close proximity to existing Longs stores… Longs Drugs opened its first Hawaii store in 1954, operates 36 retail pharmacies on the Islands.

• Sentinel Real Estate buying Omaha REIT (Crain's New York Business, June 25th): "Privately-held Sentinel Real Estate Corp. agreed to buy apartment REIT America First Apartment Investors (APRO) for $532 million, including assumption of debt. Sentinel’s Omaha, Neb., affiliate will buy all outstanding America First common shares for $25.30/share. The purchase price represents a 12.2% premium over the stock's Friday's closing price of $22.54. Sentinel Real Estate… currently manages about $5 billion in real estate assets… America First owns 32 apartments with 7,236 rental units and one commercial property."

• Hines REIT buys Seattle Design Center for $57M (Puget Sound Business Journal, June 25th): "Hines REIT has bought the Seattle Design Center for $57 million. Houston-based Hines bought the two-building, 391,000-sf complex in Seattle's Georgetown neighborhood from Bay West Seattle LLC… The two-story, 130,000-square-foot Atrium Building was built in 1973, and the five-story, 261,000 Plaza Building was built in 1983… Hines said the building is 90% leased, and 1,500 manufacturers use the buildings' showrooms. Hines REIT also owns 720 Olive Way in Seattle."

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