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US housebuilding slows dramatically. New home construction projects plunging 15 per cent to 1.5m - a level 27 per cent below the same month a year ago.

The US housebuilding sector slowed dramatically last month as new home construction tumbled to a six-year low, according to figures released on Friday which contained troubling signs for the economy.

The fall in permits for new homes suggests the housing market has reached a critical point as builders abandon speculative residential developments to curb oversupply. The largest US homebuilders do not expect the market to recover until early 2008, and have ended virtually all speculative building in a bid to clear inventories which extend more than seven months for single-family homes and more than eight months for condos.

» Search RealEstate-Specific Tags: US housebuilding - Housing Market
» Financial Times

Grim Outlook For Foreclosures Numbers In Massachusetts

Foreclosure data provider report: "Foreclosure numbers in the state are at record-breaking highs... From January 1 to September 30 the state posted 12,945 foreclosures. With three months left in 2006, foreclosure filings have already surpassed previous year totals by 1,452. September's foreclosure filings, were estimated at 60 per day, everyday including weekends and holidays."

» Search RealEstate-Specific Tags: Foreclosures - MA Foreclosures
» foreclosuresmass.com

Releated:

New Jersey Home Foreclosure Indicator Rises 44% From A Year Ago Quarter
"Lis pendens filings, a major home foreclosure indicator, jumped substantially from from year-ago quarter. Upcoming mortgage rate "resets" could make the New Jersey foreclosure situation much worse. According to the state's leading online foreclosure data service the number of lis pendens filed in New Jersey has risen 44% -- from 2,486 in the third quarter of 2005 to 3,577 in the third quarter of 2006."
» NewsWire

Looks Like 5.1% Of Americans Are Due To Lose Their Homes
"5% would be about 4 million homedebtors. At an average debt of say $200,000 each, that'd be about 1 Trillion in defaulted debt. China's foreign exchange surplus (that they'll be unwinding out of dollars) FYI just hit $1 Trillion."
» housingpanic.blogspot.com

Once Locked Out by High Prices, Aspiring Buyers Now Find Reason for Hope

"The Washington area remains one of the most expensive places in the nation to buy a home. Over the past year, as the number of available homes for sale has climbed, prices have flattened or fallen. That has propelled some buyers toward homes that had slipped beyond their reach. It has allowed them more time to shop and afforded them a greater selection. It has also made sellers much more willing to help with such things as closing costs."

» Search RealEstate-Specific Tags: Washington Homes - New Home Buyer
» washingtonpost.com

Auction To Unload New Condos, Homes

"In a dramatic sign of southeast Michigan's lagging housing market, properties with opening bids as low as $30,000 will be offered in the largest-ever auction of its kind in Michigan. Neumann Homes, one of the nation's largest homebuilders, says Michigan's sagging economy -- with the nation's highest unemployment rate and job cuts at Detroit's automakers -- has saddled them with excess inventories and limited options to make a profit or merely break even."

» Search RealEstate-Specific Tags: Home Auctions - Neumann Homes - Housing Market
» Detroit Free Press

JPMorgan Real Estate Fund Gains From Record REIT Acquisitions

The JPMorgan U.S. Real Estate Fund is beating the Standard & Poor's 500 Index for a seventh straight year because mergers and acquisitions in the property industry have reached a record.

The takeovers of real estate investment trusts, including Chicago-based Trizec Properties Inc. and Shurgard Storage Centers Inc. in Seattle, propelled the JPMorgan fund to a 30 percent gain in 2006, topping the S&P 500's 13.5 percent advance. The fund avoids homebuilders, whose shares fell 27 percent this year as the inventory of unsold houses climbed to an all-time high. "Wall Street has been reluctant to recognize'' the value of REITs, said Kevin Bedell, 50, a money manager at Chicago-based Security Capital Research & Management Inc., who oversees the $917 million mutual fund for JPMorgan Chase & Co." We got in the way of a lot of those undervalued securities.

» Search RealEstate-Specific Tags: REIT - Mutual Fund - Homebuilders
» Bloomberg

The 30-year fixed-rate mortgage averaged 6.31% nationally for the week, down from 6.40% last week.

  

The drop reversed increases that occurred in two of the last three weeks and left the 30-year loan at the level it was a year ago.

"With mortgage rates down this week, we may see a spurt of refinancing by those who want to get out of ARMs that are scheduled to reset in the next year while interest rates are still comparatively low."

 » Search RealEstate-Specific Tags: Mortgage Rates - ARM - Refinancing
» MarketWatch

U.S. home sales should "coast" at a somewhat lagging pace next year and prices should remain flat

Overall home price gains should be modest in 2007 while sales will hold steady, David Lereah, the association's chief economist said in a statement from the NAR annual meeting in New Orleans.

While some regions have seen a decline in home prices, the national median existing-home price should increase a modest 1.9 percent in 2006 to $223,700 and then 1.7 percent next year to $227,500, the statement said.

» Search RealEstate-Specific Tags: Home Sales - Home Price - Realtors
» Reuters

Housing Bubble and Real Estate Market Tracker

Home Sales Slid Again In October (The Capital, Nov. 12th) Annapolis, Maryland: "County home sales slid nearly 30 percent for a second consecutive month... But while high-end buyers are still scooping up million-dollar waterfront properties, homes stayed on the market an average 81 days - 97 percent longer than this time a year ago... Middle-class homeowners trying to sell off a home for around $400,000 are having the most difficulty. They want to purchase a more expensive home but must sell off their current home first."

Bottom Fishing (Marketwatch.com, Nov. 10th): Realtor's Association: "Several "signs of recovery" in the housing market: inventories of new and existing homes for sale is falling, home builders are cutting production, mortgage applications have stabilized, mortgage rates have fallen and remain historically attractive, housing affordability is improving and price declines appear to luring buyers back into the market...The hot boom cities are the problem. But these were the boom markets because they had good economic fundamentals, and for the most part that is still true. This is a temporary correction in these hot markets -- but how you define temporary I just don't know."

North County Home Prices Mellow (San Diego Business Journal, Nov. 10th): "The median price for all homes in North County — single-family detached and single-family attached — declined from $557,500 in September to $545,000 in October, according to the monthly report of the North San Diego County Association of Realtors."

Sales Of Existing Homes Decline (Star Telegram, Nov. 8th) "Existing-home sales in North Texas slipped again in October. The 4 percent drop from year-ago levels was the seventh down month this year.

Mortgates and Real Estate Lending

Homeowners Are Going Underwater As Loans Pass Home Values (Statesman.com, Nov. 12th) "In the next couple of years, a combination of rising mortgage interest rates and falling or slow-growing home value could plunge thousands of homeowners underwater-- meaning owing more than the house is worth. It's especially risky for people with interest-only mortgages and pay-option adjustable-rate mortgages... Some might be able to refinance or sell their houses. Still others will lose their houses to foreclosure. Assess your situation... If possible, refinance. There are plenty of loans from which to choose — from plain-vanilla 30-year, fixed-rate mortgages to 40-year loans to hybrid ARMs to more esoteric programs. Or get out."

London House Prices Force Group Buying (Homesgofast.com, Nov. 11th) UK: "Group buying of homes in London seem to be the only way forward for those stepping onto the property ladder. HSBC UK says it has seen a 50 per cent increase in group mortgage applications this year alone. More and more people are getting round high property prices by clubbing together with friends or family to buy a home and this is a trend which is expected to continue. Most group buyers opt to become "tenants in common" which means that each party holds separate shares in the property."

Macro Impact

Economics: U.S. Spending Strong Despite Housing Slide (International Herald Tribune, Nov. 13th): "Combined with falling energy prices and a pickup in job and income growth, [the consumer's] buying spree heralds robust holiday sales and economic momentum heading into the new year...Housing is a major negative for the economy, but the consumer is still the best defense against recession in 2007... Most of the recent slowdown came from a drop in construction spending and a wider trade deficit; consumer spending rose at a 3.1 percent rate during the quarter after growing at a 2.6 percent clip the previous three months... "The 95 percent of the economy outside of housing remains on good footing," said Michael Moskow, [Chicago Fed Reserve president.]"

Barron's Interview With Richard Arvedlund, Cypress Capital Management ( Barron's Summary in Seeking Alpha, Nov. 12th) "Recession: The preconditions are in place: (1) Housing drop of 10-20% (which usually signals a recession of unusual length). (2) Weak auto sales. (3) Inverted yield curve. Where we had been looking for a slowdown, we now think there's a 40% to 50% probability of a recession. Next year could be a very difficult time in the U.S. economy."

Local Economic Slowdown Continues (VoiceofSanDiego.org, Nov. 10th) San Diego: "The county's leading economic indicators sustained a sixth straight month of declines in September, attributed primarily to a drop of more than 30 percent in residential building permits issued compared to the previous year... The September data, compounded with the indexes of the previous five months, were cause for concern but not enough to forecast a recession... One of the big risks to the economy right now is the indirect effect-- that consumers are spending more than they earn... The increase in home value acted like a check on the table in some people's minds... Nationwide, personal savings rates have been negative for the past 18 months... The last time [the savings rate] was negative was in the Great Depression."

Euro Rates Mimic U.S., Sparking Global Slowdown Fear (Marketwatch, Nov. 10th) "The currently rapidly slowing US housing market not only poses severe risks to the U.S. economy but might also become a threat for some European countries... In the U.S., long-term rates have been nearly equal to or below short-term rates for over a year... Many economists, including Federal Reserve Chairman Ben Bernanke, believe that this time the yield curve inversion might be the result of an excess of savings in many countries... Interest rates are determined in the bond market, where a bond yield, or its interest rate, rises or falls inversely to its price... Nouriel Roubini of the Stern School of Business at New York University is convinced that this time-tested market mechanism of predicting the direction of the economy is signaling a recession, as it always has."

Housing Slowdown Forces Wolf To Lay Off 28 (The York Dispatch, Nov. 9th) Pennsylvania: "The Wolf Organization announced it is laying off 28 people because of a slowdown in the housing industry. The building products company, which employs about 600 people locally, has been in operation for more than 160 years... The outlook is that the housing industry might be at a halt until the third quarter of 2007, when the market adjusts to the large number of houses available on the market... Major home builders are off 30, 40 or 50 percent of their income from a year ago, and large dealers are just walking away from land options."

Hedging Your House Price

"Home Prices Plunge!" (Motley Fool, Nov. 10th) "Builders are really the ones that will lead the price drops because they'll lower prices until someone buys. In order to compete, homeowners are also going to have to lower their prices. It's worth thinking about builders, because lower prices for new homes means their profits will be threatened. Some top builders include KB Home (KBH), Hovnanian Enterprises (HOV), Pulte Homes (PHM), DR Horton (DHI), Toll Brothers (TOL), Lennar (LEN), and Beazer Homes (BZH)."

ZipRealty Cuts Forecast As Earnings Plunge 80% (L.A, Times, Nov. 9th) "Online brokerage ZipRealty (ZIPR) lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%. The Emeryville-based company said net income fell to $622,000, or 3 cents a share, from $2.9 million, or 11 cents, a year earlier. Sales fell 7% to $26.2 million. ZipRealty charges a reduced commission to home sellers and gives cash rebates to buyers."

» Search RealEstate-Specific Tags: Home Sales - Housing Bubble - Real Estate Market
» SeekingAlpha

Housing Bubble and Real Estate Market Tracker

Hovnanian Sees Q4 Net Loss, $300 Million Charge (Reuters.com, Nov 7): "Hovnanian Enterprises Inc. (HOV) reported a net loss in the fourth quarter due to land related charges, and sees 2006 earnings excluding these charges at the lower end of its previous outlook. The luxury home builder expects to incur $300 million in inventory impairment and land option deposit write-off charges."

U.S. Home Builders Say Housing Slowdown Continues (Washington Post, Nov. 7th) "Luxury homebuilder Toll Brothers Inc. said it expects to report a 10 percent drop in quarterly home-building revenue, and warned of continuing softness in formerly booming markets such as Northern California and parts of Florida... Toll Brothers said quarterly total contracts suffered from a higher-than-normal 585 cancellations, one-fourth of which came in the Orlando and Northern California markets. The company lowered its land position by around 6,500 lots, ending the quarter with around 74,000 lots owned or controlled, a decline of 19 percent."

Mortgates, Real Estate Lending And Foreclosures

U.S. Mortgage Rates Reverse, Rise In Latest Week (Reuters.com, Nov. 9th) "Average interest rates on U.S. 30-year mortgages rose to 6.33 percent from 6.31 percent in the latest week, and rates on 15-year mortgages also increased, to 6.04 percent from 6.02 percent, Freddie Mac said on Thursday. Mortgage rates had surged earlier in the week after the Labor Department reported the unemployment rate dropped in October. The jobless rate, at 4.4 percent, was the lowest since May 2001.

Macro Impact, and Will a Housing Crash Cause a Recession?

Faster U.S. Growth And Elevated Inflation To Keep Fed On Guard (Bloomberg, Nov. 10): "Economic growth in the U.S. will pick up and inflation will remain elevated through early next year, leaving the Federal Reserve little room to reduce interest rates, according to a survey of economists. The forecasts confirm the view of some Fed policy makers that the expansion may not slow fast enough to cool inflation. Low unemployment, rising incomes and cheaper energy will help consumers sustain the spending that makes up two-thirds of the economy, limiting the damage from the housing slump... Economists are predicting the pace of growth will pick up in the course of next year as the housing market starts to recover."

» Search RealEstate-Specific Tags: Home Sales - Housing Bubble - Real Estate Market
» SeekingAlpha

Housing Bubble and Real Estate Market Tracker

This Isn't Their Moment (New York Magazine, Nov. 8th) “The tough thing is, the market went down. A lot of people are offering 10 percent less.” Experts say it’s best to hold onto real estate for a couple of years to avoid paying capital-gains taxes and to weather changing markets like this one. (When the market was sizzling, homeowners could sell in a year and make at least 10 percent. If that year was 1999, it was more like 25 percent.) But if you bought recently and have to sell now, you may be in a position not heard of since the early nineties: You can actually lose money on a New York apartment... But selling prematurely isn't always a problem... One apartment, in Morton Square, went in one day for full asking. “If it’s great and priced right, it’ll sell".

Real Estate Bubble Bursts While Home Sales Fall Across Nation (New York Times, Nov. 7th) Pheonix: "Until last year, Fulton Homes’ developers were able to raise prices on its new homes by $1,000 to $10,000 almost every week.“People were standing in line for lotteries. Now they just don’t show up. Such cancellations often mean forfeiting as much as 5 percent of the price. The reason? The prospective buyers got cold feet or simply couldn’t sell their old home. Today, the number of unsold homes in the area has soared to almost 46,000 from just a few thousand in early 2005. Sales cancellations among big builders are running as high as 40 percent, double the rate a year ago. New home sales are down by more than 20 percent from their peak last year. And that reported drop does not take account of the extras builders are throwing in free or at steep discounts to lure buyers, which means that effective prices are even lower. The reversal in fortune is at its starkest here in the West. For-sale signs in some new subdivisions are so common that Janet L. Yellen, the president of the Federal Reserve Bank of San Francisco, recently described them as “the new ghost towns of the West.”

Home Sales, Prices Down In Denver (The Denver Business Journal, Nov. 7th) "Home sales and prices continued to slide in October, according to Denver-based Metrolist. The average price of all single family homes dropped from $283,131 in September to $280,551 in October.

U.S./International Mortgates and Real Estate Lending

Will Mortgage Power Reignite Housing Bubble? (Reuters UK, Nov. 2nd) London: "Mortgage lenders' willingness to let first-time buyers borrow ever-larger multiples of their income may ring alarm bells for those who remember the housing market boom, and subsequent crash, two decades ago. Consumer borrowing and personal insolvencies are already at record highs and interest rates are rising -- hardly an ideal time for people to be mortgaging themselves to the hilt. Lenders, however, are confident they are not exposing themselves or their customers to undue risk. They point out that interest rates globally are more stable and capital markets more developed than in past decades. Abbey, Britain's second largest mortgage lender, said this week it would offer homebuyers up to five times their single or joint salaries -- well above the three to four times advertised by most high street banks."

Macro Impact, and Will a Housing Crash Cause a Recession?

September Consumer Borrowing Falls (The Boston Globe, Nov. 8th) "Consumer borrowing fell in September by the largest amount since the recession of the early 1990s. The Federal Reserve said yesterday that borrowing declined at an annual rate of 0.6 percent in September, compared with a 4.6 percent rate of increase in August. Borrowing fell $1.2 billion in September -- the biggest drop since a $1.78 billion decrease in April 1992. The overall economy has lost momentum due to the housing slump."

» Search RealEstate-Specific Tags: Home Sales - Housing Bubble - Real Estate Market
» SeekingAlpha