Category ArchiveReal Estate



Banking & Real Estate 08 Feb 2007 08:24 pm

What Do You Think HSBC Stands For?

House on fire

The Big Picture has fun at HSBC’s (HBC) expense by asking what the four letters stand for. There are plenty of funny ones in the comments. Here are four of mine:

  • Hey Sub-prime Brings Crying
  • Hot Scene Becomes Cool
  • Heady Schlock Becomes Crutch
  • Here Smart Bank Clunks

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Real Estate 30 Jan 2007 08:56 pm

Housing Inequality

Mansion

Inequality today is a pejorative. It’s discouraged even when there’s no explanation for why it’s bad. Bill Gates will probably grow his wealth much faster than me with the release of Windows Vista. His bigger wallet doesn’t harm me. BusinessWeek.com has a story on the most unequal real estate markets in the U.S. The winner is Miami where the top 1% of homes are are 6.5 times the price of the median home. The narrowest span is San Jose, CA, the heart of Silicon Valley. But there even an ordinary home costs a fortune. So what does this tell us? One possibility is places with greater home price inequality get that way because people from a wide range of income levels seek housing there. It could be a diversity effect.

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Real Estate 02 Jan 2007 10:40 pm

Lennar Posts Loss

House on fire

Lennar (LEN), the big home builder announced a fourth quarter loss “after it wrote down property investments and relinquished part of its stake in a company that controls 15,000 acres in southern California.” Barry Ritholtz wonders aloud, “You call this a bottom?”

Mike Shedlock tells us Lennar’s news is quite different from Toll Brothers’ rosy view of the housing market, and “Lennar could not even meet its previously lowered guidance of $1.00-$1.30.”

John Polomny wonders “if this is still the bottom as the CNBC shills are preaching.”

The housing market will depend on what the Fed does with interest rates. If somehow the economy chugs along even with weak real estate and Ben Bernanke has to raise interest rates then we could really see pain from home builders.

That’s not what the always cleaver contrarian James Grant thinks. He finds some scary words from Gary Gordon, a member of the investment committee of Annaly Mortgage Management:

Falling house prices in isolation would constitute no grave peril. A housing-induced downturn in job growth is what would cause a bear’s pulse to race. Gordon insists it’s coming, because the formerly potent stimulus of above-trend borrowing growth is about to be removed. Consider, he notes: “Americans pulled out nearly $500 billion of equity in their homes last year in order to buy other stuff. That number shot up from about $100 billion in 2001.” The source of this borrowing? Why, the 12%–or $2 trillion–bump-up in the appraised value of the 2005 U.S. housing stock, double the 2002 increase. Reduce or reverse this appreciation and you stymie the borrowing boom.

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Real Estate 28 Dec 2006 07:37 am

New-Home Sales Up…Maybe…Sort Of…Not So Sure

Man shrugging

Data that November new-home sales went up did enough to affect the bond and currency markets. But the government isn’t even sure they got the numbers right:

The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common.

The standard error is so high, in fact, that the government cannot be sure that sales increased at all in November.

It can take up to six months for a trend in sales to emerge.

That didn’t stop Bear Sterns economists from spouting,

Although no doubt this report was boosted by the mild weather in parts of the country, the pickup in sales and decline in the number of homes for sale provide further tentative evidence that the housing market is stabilizing.

Economists’ reputations continue to improve.

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Real Estate 14 Dec 2006 01:39 pm

Real Estate: Stuck in Neutral

House buried under snow

AP Business Writer Mark Jewell has a lengthy article on the housing market in 2007. Rough summary: it’s frozen. With rising interest rates buyers want deals while sellers wish for the days of double-digit growth in the value of their homes. Jewell illustrates this with Antioch, CA’s Donald Anthony. He dropped the price of his 4-bedroom ranch by $80,000 and spent $40,000 on improvements. He still has no buyers and doesn’t have the urge to lower his price any further.

Economy.com forecasts “the first decline for an entire year in U.S. home prices since the Great Depression of the 1930s.” Once hot housing markets on the coasts are seeing the most dramatic effects. In the San Francisco Bay area [via Louis Brown]:

Last month’s sales count was the lowest for any November since 2001, when 6,644 homes sold. Since 1988, November sales have ranged from 5,579 in 1994 to 10,897 in 2004. The average is 7,725.

Ben Jones at The Housing Bubble Blog links a bunch of stories showing the lackluster housing market is negatively affecting mortgage firms. Will this spread to the rest of the economy? Not according to this week’s retail sales numbers.

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Economy & Real Estate 12 Dec 2006 02:57 am

Fed to Hold Rates Steady

Ben Bernanke Pop Art
Fed Chairman Ben Bernanke’s worry about inflation while considering the cooling housing market makes many think the Fed will hold interest rates steady:

“We do not expect the FOMC at Tuesday’s meeting to depart from Chairman Bernanke’s recent message that spillovers from the housing downturn will stay limited and inflation risks still predominate,” Goldman Sachs Chief U.S. Economist Jan Hatzius said in a note to clients.

Bernanke called core inflation “uncomfortably high” in a speech on Nov. 28, adding there were risks prices would not recede in spite of the drags on growth from slowing housing markets and weakness at auto plants and other factories.

Fed Vice Chairman Donald Kohn renewed the warning on inflation early this month, saying that while policy-makers expect inflation to ease, “the risks around that expectation are tilted to the upside,” suggesting the U.S. central bank sees a greater chance of rates rising than falling.

Kohn pointed to tight labor markets and an economy that, while growing more slowly than at the beginning of the year, is expanding at a pace not that far below the speed limit for keeping inflation under control.

People holding down ARMS are breathing a sigh of relief. They still have time to lock down their mortgage rates.

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[Graphic via WILLisms.com]

Real Estate 11 Dec 2006 07:57 pm

Housing Market Bottom: Not So Fast Says Analyst

Barry Ritholtz, Chief Market Strategist for Ritholtz Research, isn’t convinced the housing market is anywhere near a bottom. He calls the National Association of Realtors’ assessment “wishful thinking.” Ritholtz’s biggest concern is all that inventory. He writes, “A significant decrease in inventory, plus motivated sellers, would go a long way to seeing a bottom form.”

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Real Estate 11 Dec 2006 04:14 pm

Realtors See Life in Housing Market

House on fire

The soft housing market hasn’t gone up in flames. There’s some life in it, at least for those homes already built:

Existing-home sales should perk up in late 2007, but new-home sales will continue their slide next year, the National Association of Realtors predicted Monday.

By the fourth quarter of 2007, existing-home sales will be 4.6% higher than in the fourth quarter of 2006, predicted David Lereah, the group’s chief economist. That forecast rise in sales applies to the fourth quarters of the two years, not to full year-over-year figures.

In 2007, existing-home sales will reach an annual total of 6.40 million, 1% lower than the 6.47 million projected to be sold in 2006, according to the association.

At the same time, more air is expected to come out of the new-home-sales bubble, the group said. Sales of new homes are expected to drop 9.4% from their 2006 level, to 957,000, the Realtors predicted.

Meanwhile, home prices will make modest gains in the year ahead, the group said.

Whether it was the Fed playing with interest rates or natural market forces we seem to have survived the housing bubble in fairly good shape.

UPDATE: David Bernstein, looking for a home in the Washington, D.C. area wonders if “prices, at least in the D.C. area, are near a nominal bottom?” But if you read The Housing Bubble Blog there’s plenty of stories about the market adjusting–painfully at times.

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