Mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the 11th straight quarter, hitting an all-time national average high of 6.25 percent for the third quarter of 2009, according to credit rating firm TransUnion. At the current rate, delinquencies would hit a one-year high this year.
Delinquencies are a good predictor of foreclosures, so TransUnion expects that figure to rise as well. Read More
One word from a CEO can obscure an entire earnings reports. Home improvement giant Lowe’s (NYSE:LOW) reported lackluster earnings. However, its chief Robert A. Niblock said, “We are beginning to see signs of improved performance in some of the hardest-hit housing markets including California, Florida and areas of the desert Southwest.” Those areas were crushed so flat that it would require a massive turnaround the regions to do much to help the prospects of Lowe’s or Home Depot (NYSE:HD) Read More
This week’s earnings calendar is going to be dominated by retail earnings. Early in the week you have the home improvement and building material wars with earnings first out of Lowe’s Companies Inc. (NYSE: LOW) on Monday and then Home Depot Inc. (NYSE: HD) on Tuesday.
We have compiled estimates from Thomson Reuters, made some key comments on what to look for in each report, shown past performance, and given some added color on what to look for ahead. We have some concerns here about how these stocks are valued. We also showed the relative performance for 2009, the gains since March 9 that traders use as the official end of the death spiral, and we are also showing performance since July 31.
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Beazer Homes USA, Inc. (NYSE: BZH) has just filed a mixed securities shelf registration that will allow it to sell securities in the amount of up to $750 million. This will allow Beazer and its subsidiaries to sell any combination of Senior Debt Securities, Subordinated Debt Securities, Common Stock, Preferred Stock, Depositary Shares, Warrants, Rights Stock Purchase Contracts, Stock Purchase Units, and Guarantees of Debt Securities.
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Foreclosure rates may have leveled off, but it would be a mistake to count on that being a long-term trend.
New data from RealtyTrac shows foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — were reported on 332,292 U.S. properties during the month, a decrease of 3% from the previous month but still up nearly 19% from October 2008. That may be a bottom of sorts, but not a very convincing one. Nevada, California, and Florida continued to be the hardest hit states. Read More
According to a recent survey conducted by Move.com the some people interested in purchasing real estate as an investment has doubled since March 2009. The results show that this growth has been driven by falling housing prices and increased foreclosures. According to the survey the number of homebuyers that plan to buy an investment property has risen to 12.1%. A significant number of these purchases are happening in the foreclosure market, with 42% of purchases of foreclosed homes being speculative.
Speculative buying in the housing market is an important force in the effort to put a bottom on home prices. However, the number of homes available on the foreclosure market continues to rise. Areas of the country that were the biggest drivers of the housing boom are now seeing record levels of home foreclosures. In September, home foreclosures reached a record level of 8,800, up 90% from a year ago. Without adequate funding, it’s almost certain that the buying power of speculators will be insufficient to sop up the increasing number of foreclosed homes hitting the market.
Even if the number of people investing in real estate continues to rise, their presence in the housing market may cause some bumps as the market begins its recovery. The Move.com survey indicates that close to 60% of speculators expect to buy their foreclosed homes for around 20% below value. If this turns out to be the case, sellers of foreclosed homes will probably in a position to sell as a profit well before other market participants. They are likely to turn over real estate quickly for a rapid return. Depending on how large of a portion of the market speculators represent, their selling may have a depressing effect on the market just as recovery gets underway.
Garrett W. McIntyre
The National Association of Realtors is out with its Q3 data on home sales. As you would expect, there is some positive data and some cautious data. The group reported that most states continued to see rising existing home sales, but prices “moderated” in many metro areas.
The total state existing-home sales rose 11.4% to an annual rate of 5.3 million units. This is up from 4.76 million units on an annualized basis in the second quarter, and is 5.9% above the 5.01 million units on an annualized basis in the third quarter of 2008. The sequential quarterly gains were seen in 45 states and in Washington D.C., but some 28 states and D.C. saw double-digit percentage gains. Compared to Q3-2008, the report said sales were higher in 32 states and D.C.
The government’s many programs to keep the number of mortgage defaults from growing has grown by one. The new Dead for Lease program will allow some homeowners who face foreclosure to turn their homes over to Fannie Mae (NYSE:FNM) then rent them for a year with month-to-month extensions. It is not predictable what the level of fraud in a program of this kind will be, but it is likely to be high. Fannie Mae could end up with a number of houses with no tenants or sub-tenants which have been surreptitiously been moved in Read More
The tool sector for builders and home repair is about to get a lot smaller for investors looking for diversification of company choices to invest in. The Stanley Works (NYSE: SWK) and The Black & Decker Corporation (NYSE: BDK) have proposed a merger which would unite the brands. The companies see accretion to earnings per share of about $1.00 per share by year three with some $350 million in cost synergies. This deal is a stock for stock merger where Black & Decker shareholders would receive a fixed shares ratio of 1.275 shares Of Stanley common stock per 1 share held of Black & Decker common stock.
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The Commerce Department has just shown a report that new home sales for the month of September turned south. This may increase the call for that first time home buyer $8,000.00 tax credit, but it also highlights that housing prices are not going to rocket higher and highlights just how sensitive the home-buyer sector of the economy is with or without a tax handout. The report came in at 402,000 annualized units, down from the 417,000 annualized number for August and very far under the 440,000 expected according to Dow Jones and under the 440,000 expected from Bloomberg. We are watching the SPDR S&P Homebuilders (NYSE: XHB) and the iShares Dow Jones US Home Construction (NYSE: ITB) ETFs fall in response. DR Horton Inc. (NYSE: DHI) and Lennar Corp. (NYSE: LEN) are two of the hardest hit housing stocks today after the news.
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It is no secret that things could be much better at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). But the last week or so has re-highlighted just how dire the situation is for these government sponsored entities and perhaps more importantly for the common shareholders. Both Freddie Mac and Fannie Mae were forced into federal conservatorship last year by Uncle Sam.
We have taken an in-depth look here at the situation and the past to get a feel for the future of these companies (GSE’s). If you parse through the data and watch what has been happening in Washington D.C. of late, there is the clear reminder that these emperors have no clothes on. In the world of Star Trek, these companies stockholders may be facing a Kobayashi Maru scenario.
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The prior data out of the National Association of Home Builders had been improving for three consecutive months. New data for October came out today showing that the index slipped. The problem with already seeing a slip is that the home builder confidence was never really back in the first place. This response was from some 493 builders around the nation. We are watching the SPDR S&P Homebuilders (NYSE: XHB) and the iShares Dow Jones US Home Construction (NYSE: ITB) ETFs fall in response.
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There may be some signs of a sharply improving economy. The FOMC notes released yesterday show that the Fed believes that GDP will start to pick up quickly next year.
The housing market is not part of the recovery. It may be a lagging indicator like unemployment. If so, the lag is significant.
According to new data from real estate research firm RealtyTrac, foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 937,840 properties in the third quarter, a 5% increase from the previous quarter and an increase of nearly 23% from Q3 2008. “They were the worst three months of all time,” said RealtyTrac spokesman Rick Sharga. Read More
The Office of the Comptroller of the Currency issues a quarterly report that shows the rate at which people with mortgage loan modifications default on those loans. The rate changes from period to period, but roughly 45% of homeowners with modified loans are more than 60 or more days past due within eight months of the change taking effect. Read More
If you have had a home for sale on the market for a while, you have probably had to get used to the notion that you have either cut the selling price or that you will have to very soon. A report from Trulia.com today shows that more than one in four houses for sale have gone through at least one price cut. The report puts 25.6% of homes on the market as of October 1, 2009 having had at least one price cut, and it further stated that one in four home listings have cut prices for the fourth straight month.
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The stock market did not fall apart at the seams, but it did very poorly on news that existing home sales dropped last month by 2.7% to a rate of 5.1 million. That was down from a figure of 5.24 million in July. The National Association of Realtors put a brave face on as it released the figures. “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus,” said Lawrence Yun, NAR chief economist. Read More
Investing in mortgages might not be as bad as many thought. Chimera Investment Corporation (NYSE: CIM) has already raised more capital on more than one occasion since coming public in 2007 when the mortgage arena was in the process of going from weak to bottomless. We were intrigued by its vulture investing intentions as it bought up distressed mortgages, particularly as it was tied to the very successful Annaly Capital Management, Inc. (NYSE: NLY). Despite the notion that Chimera became a vulture too soon and well before any bottom could be found in sight, Chimera must be doing pretty well again. Ditto on Annaly. This mortgage REIT status requires each to pay out 90% of its income and Chimera just hiked its dividend to $0.12 for the Q3-2009 period. Annaly also just hiked its dividend payout today to $0.69, which might actually be its highest payout ever.
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Moody’s (MCO) forecasts that some home prices may not return to their pre-recession levels until 2030. This means that hundreds of thousands of Americans may find it impossible to sell their houses without making payments to their banks to cover underwater home loans. Read More
CNBC’s Becky Quick interviewed Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-A) at a very unusual venue this morning…. Fortune’s Most Powerful Womenconference. The mainstay part of the discussion was the ‘one-year later after” that we have seen so much this week. The issue for the public is that Buffett is still leaning toward improvement after having been so negative just in early summer. More importantly for investors, he opined on the Kraft Foods Inc. (NYSE: KFT) and Cadbury plc (NYSE: CBY) deal and partly on healthcare or health insurance in the sale of WellPoint Inc. (NYSE: WLP) and UnitedHealth Group, Inc. (NYSE: UNH).
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Martha Stewart Living Omnimedia Inc. (NYSE: MSO) has a new exclusive product lineup partner. We still want to know where Martha will end up after the K-Mart deal she has with Sears Holdings (NASDAQ: SHLD) expires, although a new partnership unveiled today does not specifically address that question and does not sound “exclusive” despite the term being used.
The Home Depot Inc. (NYSE: HD) announced an agreement today with Martha Stewart Living Omnimedia to develop an exclusive Martha Stewart Living brand of home improvement products. It was not noted that this will have any impact on the K-Mart agreement and it still notes that Macy’s Inc. (NYSE: M) is one of the many retailers where Martha Stewart products will be available.
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