City Ventures, Inc. is a California homebuilder focused on repositioning underutilized real estate in communities in Southern and Northern California into residential housing in supply constrained coastal urban infill areas. The company also targets high demand suburban locations. Deutsche Bank Securities and Goldman Sachs were listed as the book-runners. Co-managers were listed as Citigroup, Imperial Capital, J.P. Morgan, and UBS Investment Bank.

The company claims to have grown its home sales revenue, orders and closings from $45.2 million, 144 homes and 103 homes in 2011 up to $96.5 million, 187 homes and 202 homes in 2012. During the three months ended March 31, 2013, the company’s home sales revenue, orders and closings were $19.2 million, 74 homes and 35 homes versus $19.1 million, 58 homes and 46 homes. Its adjusted gross margins were 28.4% as of the end of 2012 and 26.4% as of the March quarter of 2013, with EBITDA margins of 16.2% and 11.1% for the same periods.

FULL IPO FILING

The seasonally adjusted purchase index decreased by 3% from the last report. On an unadjusted basis, the composite index dropped by 4% week-over-week. The unadjusted purchase index decreased by 4% for the week, and is up about 12% year-over-year.

The MBA’s refinance index fell 3% week-over-week.

The share of refinancings remained unchanged at 69%, close to its lowest level in nearly two years. Adjustable rate mortgage loans account for 7% of all applications, unchanged from last week.

The average mortgage loan rate for a conforming 30-year fixed-rate mortgage rose from 4.15% to 4.17%. The rate for a jumbo 30-year fixed-rate mortgage decreased, from 4.25% to 4.23%. The average interest rate for a 15-year fixed-rate mortgage fell from 3.32% to 3.30%.

The contract interest rate for a 5/1 adjustable rate mortgage loan rose from 2.78% to 2.81%.

Interest rates continue to rise and to have an impact on new loans. Refinancings remain depressed as interest rates rise, and that is likely to continue unless rates begin falling again.

The seasonally adjusted rate of new building permits fell to 974,000, which is 3.1% below the upwardly revised April rate of 1.05 million and 20.8% higher than the May 2012 rate of 806,000,000. The consensus estimate called for 973,000 new permits.

Single-family housing starts rose slightly to an annualized rate of 599,000 in May, up 0.3% from the downwardly revised April rate of 597,000.

Permits for new single-family homes rose 1.3% in May, to an adjusted annual rate of 614,000, from a downwardly revised total of 614,000 in April.

The rise in new housing starts is due virtually entirely to a sharp jump in buildings with five or more units. In April, multiple unit construction fell from 356,000 starts in March to 245,000. The May count rose to 306,000, a jump of 24.9%. Year over year, construction starts on multiple family buildings are up 69.1%.

The National Association of Homebuilders (NAHB) yesterday reported an eight point rise in builder confidence in June, noting that low inventory levels are encouraging builders once again to ramp up construction.

The National Association of Home Builders (NAHB)/Wells Fargo housing market index rose by eight points from 42 in May to 50 in June. A January reading of 47 had been the highest for the index since April 2006. An index reading below 50 indicates that more builders view sales conditions as poor than view them as good. The reading was sharply higher than expected reading of 45.

The eight-point jump in the index is the largest one-month gain in more than 10 years.

Subindexes that measure current sales conditions and sales expectations came in at 56 and 61 in May. The subindex that estimates prospective buyer traffic rose seven points to 40. The reading for sales expectations is the highest since March 2006.

The NAHB’s chief economist noted:

Builders are experiencing some relief in the headwinds that are holding back a more robust recovery. Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.

The index hike to its highest level in seven years bodes well for home builders and for new home buyers. Inventories of homes for sale are very low right now, which drives up prices for buyers. More building will moderate the price increases, even as new home builders will be able to increase their selling prices.

The company named Doyle Simons its new CEO, who had been the CEO and chairman of Temple-Inland prior to its acquisition by International Paper Co. (NYSE: IP). Simons has been a director at Weyerhaeuser since February of 2012.

Weyerhaeuser also said it intends to offer 28 million common shares to finance its $2.65 billion acquisition of Longview Timber, which is currently owned by Brookfield Asset Management Inc. (NYSE: BAM). Weyerhaeuser said the acquisition will immediately boost company earnings and has raised its dividend from $0.20 to $0.22 beginning with the September payment.

Finally, the company will explore strategic alternatives for its Weyerhaeuser Real Estate Company (WRECO). Now is a “prudent time” to do this, according to the company’s retiring CEO, given the improvement in the housing market. WRECO is among the 20 largest home builders in the U.S.

The acquisition of more timberland is the biggest news here. Lumber prices have fallen since the beginning of the year, after running up in the final few months of last year. Random length lumber contracts are trading around $285, down from around $400 in February and March. Whether the acquisition pays off even better for shareholders will depend in large part on demand for homebuilding, which should pick up soon.

Shares in Weyerhaeuser are up 3% in premarket trading this morning at $29.15 in a 52-week range of $20.11 to $33.24.

The interest rate on a 30-year fixed-rate mortgage rose from a prior week average of 3.91% to 3.98%, well above the rate of 3.71% in the same week a year ago.

One year ago the 15-year fixed-rate stood at 2.98%, but that rate has now jumped from 3.03% last week to 3.1% this week.

The interest rate on a 5-year Treasury adjustable-rate mortgage loan rose from an average of 2.74% in the prior week to 2.79%, and is slightly below the rate of 2.8% in the same week one year ago. The 1-year Treasury-indexed adjustable-rate mortgage loan interest rate remained unchanged at 2.58% and is down from 2.78% one year ago.

Freddie Mac’s chief economist noted a growing interest among buyers in adjustable-rate mortgages (ARMs), which now comprise 17% of all mortgage applications.

According to yesterday’s data from the Mortgage Bankers Association, new loan applications rose 5% last week. It is likely that most increase came from purchase applications rather than refinance applications, which now account for just under 70% of all loan applications, compared as much as 85% or more when mortgage rates were declining.

In a recent research report, the Deutsche Bank analysts point out that with rising rates, those who qualify for a mortgage still are likely purchase a home, but they will not have the pricing flexibility they did a few months ago. Deutsche Bank has changed its ratings on some of the top names in the business. Here are their stocks to buy now.

D.R. Horton Inc. (NYSE: DHI) is the third largest holding in billionaire Stanley Druckenmiller’s portfolio. The company posted robust earnings per share results last quarter, with EPS coming in at $0.32, compared to $0.13 for the same quarter of last year. The Deutsche Bank price target is $27. The Thomson/First Call estimate is at $28. Investors are paid a small 0.6% dividend.

MDC Holdings Inc. (NYSE: MDC) is benefiting from the some of the strongest home prices in the nation, as they build primarily in the West. Deutsche Bank has a $46 price target, while the consensus estimate is $42.75. Investors are paid a 2.8% dividend.

Meritage Homes Corp. (NYSE: MTH) operations span across southern and western United States, including Arizona, Texas and California. Compared to a $0.15 loss per share in the last quarter of 2012, it turned the tables and posted a $0.32 per share profit in first quarter of 2013. Deutsche Bank has a $52 price objective, and the consensus is right in line at $52.

Ryland Group Inc.‘s (NYSE: RYL) recent acquisition of LionsGate Homes will allow it to gain control over the Fort Worth market, where LionsGate Homes currently operates 17 active communities. In addition, the acquisition will provide Ryland with approximately 843 lots and homes for future sales and 146 homes, which already have been sold. Deutsche Bank has a $49 price target. The consensus target for the stock is $49 as well.

Toll Brothers Inc. (NYSE: TOL) had a significant second quarter 2013, with a 57% increase in the dollar value of its home sales and a 36% increase in the number of units sold, the biggest quarterly increase in seven years. Deutsche Bank has a $39 target for the luxury building leader, while the consensus target is at $40.

TRI Pointe Homes Inc. (NYSE: TPH) is a small cap name that makes the stocks to buy list. The company is focused on building in southern and northern California. Deutsche Bank has a $21 target. The consensus is higher at $22.50.

One interesting item is the home builders warned investors off the stocks well before the market crashed. In 2006 and 2007, their analyst and investor conference calls were very bleak and warned of a prolonged slowdown. In contrast, home builder conference calls for the first quarter of 2013 have been very bullish and detailed strong demand, low rates and a rising stock market as major factors for optimism. So while rates are rising, a 4%, 30-year mortgage in the big scheme of things is still an outstanding bargain. Deutsche Bank analysts think their stocks to buy are as well.

RealtyTrac released:

its U.S. Foreclosure Market Report for May 2013, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 148,054 U.S. properties in May, an increase of percent from the 75-month low in April but still down 28 percent from May 2012. The report also shows one in every 885 U.S. housing units with a foreclosure filing during the month.

The improvement from last year is almost certainly a sign that the overall market has recovered somewhat. But research firms such as Corelogic and Case-Shiller have issued data recently that show the recovery is indeed extremely uneven, with some cities showing home price increases in double-digit percentages, while others have posted very little progress at all. If banks are trying to take advantage of higher real estate prices, they face the same challenges that buyers do, which is that in some markets, selling a home does not yield much if the market is stagnant and, primarily for that reason, many mortgages remain underwater.

Another by-product of accelerated foreclosures is that the activity floods some markets with homes offered at below-market prices. The desire of banks to off load inventory, even at depressed prices, tends to push down the prices of other homes within the neighborhoods in which these foreclosed upon homes are for sale. Thus, the upward trend may encourage banks to sell, but the sales can arrest the price improvement in the same markets.

As has been true since the start of the housing crisis, while a portion of the markets have recovered, the recoveries are from such a low base that home owners in these cities cannot count the recovery as something that helps them individually. The hardest hit markets, such as Nevada and Florida, have a nearly endless volume of houses that have not had sufficient price recovery for their owners to keep them for a period of what is likely to be several years. The mortgage burdens in these areas continue to greatly outweigh any very modest price improvement. RealtyTrac reported on the extent of this damage:

A 20 percent monthly increase in foreclosure activity pushed Florida’s foreclosure rate to highest among the states in May, up from the No. 2 ranking in April. One in every 302 Florida housing units had a foreclosure filing during the month, nearly three times the national average. Florida foreclosure starts jumped 39 percent from a two-year low in April, but were still down 17 percent from a year ago. Scheduled foreclosure auctions in Florida increased 6 percent from the previous month and were up 79 percent from a year ago, while Florida bank repossessions increased 14 percent from the previous month and were up 20 percent from a year ago.

Nevada foreclosure activity increased annually in May after 27 consecutive months of annual decreases, but the state’s foreclosure rate still slipped to second highest among the states after ranking No. 1 in April. One in every 305 Nevada housing units had a foreclosure filing during the month. The increase in overall foreclosure activity in Nevada was driven primarily by an 81 percent year-over-year increase in foreclosure starts, which reached a 20-month high in May. Meanwhile scheduled foreclosure auctions in Nevada increased 21 percent from the previous month but were still down 14 percent from a year ago, and bank repossessions increased 4 percent from the previous month but were still down 64 percent from a year ago.

Ohio posted the nation’s third highest state foreclosure rate for the second month in a row in May, with one in every 584 housing units with a foreclosure filing during the month. A total of 8,770 Ohio properties had a foreclosure filing during the month, down 27 percent from a 31-month high in April and down 15 percent from May 2012. Ohio foreclosure starts and scheduled foreclosure auctions both decreased in May, but bank repossessions were still up 7 percent from a year ago — the ninth consecutive month with an annual increase in bank repossessions.

Maryland foreclosure activity increased 11 percent from the previous month and was up 134 percent from a year ago, and the state posted the nation’s fourth highest foreclosure rate in May: one in every 587 housing units with a foreclosure filing.

South Carolina foreclosure activity decreased 2 percent from the previous month and was down 11 percent from a year ago, but the state still posted the nation’s fifth highest state foreclosure rate in May: one in every 600 housing units with a foreclosure filing.

Other states with foreclosure rates ranking among the 10 highest nationwide were Illinois (one in every 606 housing units with a foreclosure filing), Georgia (one in 693 housing units), Washington (one in 736 housing units), Arizona (one in 742 housing units), and Wisconsin (one in 774 housing units).

Top metro foreclosure rates in Florida, Nevada, Pennsylvania and Illinois cities
With one in every 209 housing units with a foreclosure filing, Miami posted the nation’s highest foreclosure rate in May among metropolitan statistical areas with a population of 200,000 or more. Foreclosure activity in the Miami metro area increased 29 percent from the previous month and was up 59 percent from a year ago.

Five other Florida metro areas posted foreclosure rates that ranked among the top 10 in May: Jacksonville at No. 2 (one in every 225 housing units with a foreclosure filing); Tampa at No. 3 (one in every 290 housing units); Orlando at No. 7 (one in every 336 housing units); Ocala at No. 9 (one in every 352 housing units); and Sarasota at No. 10 (one in every 360 housing units).

Other metro areas with foreclosure rates ranking in the top 10 were Las Vegas at No. 4 (one in every 296 housing units); Reno, Nev., at No. 5 (one in every 301 housing units); Reading, Pa., at No. 6 (one in every 306 housing units); and Rockford, Ill., at No. 8 (one in every 347 housing units).

If the housing markets have started to improve as much as most analysts claim, there is plenty of data to demonstrate that the optimism is misplaced, at least when it is considered from market to market.

If home prices improve by 5%, another 1.6 million homeowners will regain positive equity.

The data was released today by research firm CoreLogic Inc. (NYSE: CLGX).

Another 11.2 million properties have positive equity below 20%, meaning that of 39 million properties with positive equity and 11.8 million properties underwater or with less than 20% equity, nearly 45% of all properties remain in jeopardy.

CoreLogic’s CEO noted:

The negative equity burden continues to recede across the country thanks largely to rising home prices. We are still far below peak home price levels, but tight supplies in many areas, coupled with continued demand for single family homes, should help us close the gap.

The five metropolitan areas with the highest percentage of properties with negative equity are Tampa-St. Petersburg, Fla. (41.4%), Miami (40.7%), Atlanta (34.5%), Chicago (34.2%) and Warren-Troy, Mich. (33.6%).

The five with the highest percentage in positive equity are Dallas (91.7%), Houston (91%), Nassau-Suffolk, N.Y. (90.8%), Philadelphia (90.4%) and New York (89%).

Among other notable data points from the report:

• Average loan-to-value ratio is 67.2%.
• Total properties equal 48.69 million.
• Aggregate value of negative equity totals $580 billion.

The seasonally adjusted purchase index increased by 5% from the last report. On an unadjusted basis, the composite index rose by 16% week-over-week. The unadjusted purchase index increased by 14% for the week, and is up about 6% year-over-year.

The MBA’s refinance index rose 5%, week-over-week, off last week’s six-month low.

The share of refinancings rose slightly from the previous week’s total of 68% to 69%. This marks the end of four consecutive weekly decline in refinancings, but the total remains close to its lowest level in nearly two years. Adjustable rate mortgage loans now account for 7% of all applications, up 1% from last week.

The average mortgage loan rate for a conforming 30-year fixed-rate mortgage rose from 4.07% to 4.15%. The rate for a jumbo 30-year fixed-rate mortgage increased, from 4.20% to 4.25%. The average interest rate for a 15-year fixed-rate mortgage rose from 3.23% to 3.32%, its highest level since April 2012.

The contract interest rate for a 5/1 adjustable rate mortgage loan rose from 2.76% to 2.78%.

Interest rates continue to rise and to have an impact on new loans. Refinancings remain depressed as interest rates rise, and that is likely to continue unless rates begin falling again.