Excluding sales of distressed homes, that is short sales and real-estate owned properties, prices declined -0.6% year-over-year in November, compared with a decline of -1.6% in October.

Including distressed sales, the biggest price drops occurred in Nevada (-11.2%), Illinois (-9.7%), Minnesota (-7.8%), Georgia (-7.7%) and Ohio (-7.2%). Excluding distressed sales, the largest declines occurred in Nevada (-8.8%), Arizona (-4.9%), Minnesota (-4.7%), Idaho (-4.1%) and Georgia (-3.6%)

Some states are showing home price appreciation as well. Including distressed sales, home prices improved the most in Vermont (+4.3%), South Carolina (+2.8%), District of Columbia (+2.1%), Nebraska (+1.9%) and New York (+1.7%). Excluding distressed sales, the five states showing the greatest price appreciation were Maine (+4.9%), South Carolina (+4.9%), Montana (+3.8%), Indiana (+3.3%) and Louisiana (+2.4%).

Paul Ausick

Recent earnings and forecasts from builders like KB Home (NYSE: KBH), D.R. Horton Inc. (NYSE: DHI), Toll Brothers Inc. (NYSE: TOL), Lennar Corp. (NYSE: LEN), and PulteGroup Inc. (NYSE: PHM) have been mixed, but the trend has been slightly positive for the first time in many quarters.

In the 20-city Case-Shiller index, the one-year decline in Atlanta was worst, at -11.7%, followed by Las Vegas at -8.5% and Minneapolis at -8.4%. The two cities posting one year price gains in October were Detroit, up 2.5%, and Washington, D.C., up 1.3%.

Only one city, Phoenix, posted a month-over-month gain in October, and that gain was a mere 0.3%. The largest decline month-over-month came in Atlanta, at -5%, with Detroit falling -3.3% in the month.

The Case-Shiller indices indicate a couple of things. First, the impact of foreclosed properties still weighs on home prices. And as more foreclosed properties hit the market now that lenders are ending their self-imposed moratorium on foreclosures, more pressure is expected on home prices.

Second, the recent good news on new orders and inventory levels from home builders could be more transient than many had hoped. Even the expected improvements in homebuilding were slight, and remained near recent lows.

Home prices have returned to their level in mid-2003, and the 20-city recovery from its most recent low in March 2011 is up 1.9%. That’s barely better than nothing.

Paul Ausick

The unofficial closing bells put the DJIA up about 4 points to 12,107.74 (0.03%), the NASDAQ fell nearly 26 points (-0.99%) to 2,577.97, and the S&P 500 rose 0.19% or more than 2 points to 1,243.72.

There were several analyst upgrades and downgrades today, including Ford Motor Co. (NYSE: F) started as ‘buy’ at Sterne Agee. Other ratings actions today include Goldman Sachs Group Inc. (NYSE: GS) started as ‘market perform’ at Wells Fargo; Research in Motion Ltd. (NASDAQ: RIMM) raised from ‘hold’ to ‘buy’ with a $16 target price at ThinkEquity; Honeywell International Inc. (NYSE: HON) reiterated as ‘buy’ with a $70 target price at Argus; and Oracle Corp. (NASDAQ: ORCL) cut from ‘buy’ to ‘hold’ at Canaccord Genuity and maintained as ‘buy’ with a lowered target price of $40 at Credit Suisse.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: Oracle Corp. is down nearly -11% at $25.98; Nike Inc. (NYSE: NKE) is up nearly 3% at $96.40; Actuant Corp. (NYSE: ATU) is up nearly 9% at $22.61; CarMax Inc. (NYSE: KMX) is down nearly -6% at $29.22; KB Home (NYSE: KBH) is down more than -5% at $7.33; Shaw Group Inc. (NYSE: SHAW) is up nearly 17% at $26.45; and Walgreen Co. (NYSE: WAG) is down about -0.5% at $33.34. For more on the ripple effects of Oracle’s weak earnings, see our coverage here.

Other standouts from today include the following stocks:

Delphi Financial Group Inc. (NYSE: DFG) is up almost 73% at $43.99 after posting a new 52-week high of $44.00. The insurance and financial services company has agreed to be acquired by Japan’s Tokio Marine for $2.66 billion.

Commercefirst Bancorp Inc. (NASDAQ: CMFB) is up nearly 71% at $13.25 after posting a new 52-week high of $13.99 earlier today. The Maryland bank holding company is being acquired by Sandy Spring Bancorp Inc. (NASDAQ: SASR) for $24.5 million in stock and cash, or about $13.50/share.

Westway Group Inc. (NASDAQ: WWAY) is up nearly 23% at $5.50 after posting a new 52-week high of $6.60 earlier today. The bulk liquid storage provider has rejected a $6/share unsolicited takeover offer from an unidentified infrastructure investment fund.

Ampio Pharmaceuticals Inc. (NASDAQ: AMPE) is down more than -17% at $4.38. The drug company announced the sale of 2.2 million shares in private sale to investors at $4.25/share.

VMWare Inc. (NYSE: VMW) is down more than -10% at $76.65. The virtual software company is suffering from Oracle’s weak earnings and guidance.

CommVault Systems Inc. (NASDAQ: CVLT) is down more than -15% at $39.22. The software company is another of Oracle’s victims.

Stay tuned for Thursday. Here are other noteworthy events on the schedule (all times Eastern):

• 8:30 a.m. – US Commerce Department GDP report
• 8:30 a.m. – Initial unemployment benefits claims report
• 8:30 a.m. – Chicago Federal Reserve national activity index
• 8:30 a.m. – Bureaus of Economic Analysis corporate profits report
• 9:55 a.m. – Reuters/University of Michigan consumer sentiment index
• 10:00 a.m. – Federal Housing Finance Agency house price index
• 10:00 a.m. – Conference Board leading economic indicators
• 10:30 a.m. – EIA weekly natural gas inventory report
• 4:30 p.m. – Federal Reserve balance sheet and money supply reports

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Paul Ausick

According to the Mortgage Bankers Association, the number of mortgage applications fell by -10% last week. Of that total, there were -2.3% fewer applications for new purchases and -12% fewer applications for refinancing. Refinancing accounted for 77.3% of all mortgage applications last week, down from 78.6% in the previous week, which might be slightly better news for new home builders if the total number of applications for new homes had increased.

As it is, builders like KB Home (NYSE: KBH), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), D.R. Horton, Inc. (NYSE: DHI), and Beazer Homes USA Inc. (NYSE: BZH) will continue to face the dual headwinds of higher inventory at lower prices and hard-to-get credit for new home buyers. The expected spate of foreclosed properties soon to hit the market is also expected to make matters even worse for the builders.

Home sales are reviving a bit in some markets, as we noted our story on the cities where people want to buy homes. All are in sunbelt cities where underwater mortgages and foreclosures have kept prices low, and where many Americans may be looking for a place to retire. One interesting side note to the uptick in home sales in these cities is that buyers may be making all-cash purchases, and foregoing the whole mortgage application process.

About 30% of US homes sold every month are purchased by all-cash buyers. Nearly 20% of buyers are investors who plan either to rent the property or to flip it as soon as possible. It’s probably no surprise that nearly all these all-cash deals are made on foreclosed or distressed properties. According to the National Association of Realtors, about 30% of all sales in September involved foreclosed or distressed properties.

Another interesting note on mortgages is the rise in 15-year refinancing loans. Last month, 28.8% of all mortgages were of that type. At existing low interest rates, homeowners wanting to stay where they are may be able to refinance and end up paying less per month on a 15-year loan than they are currently paying on a 30-year loan. That assumes, of course, that the homeowner can get approved for the loan.

In September, about 18% of all mortgage applications failed to get approval. Part of the problem has been a lowering of loan limits by lenders, which raises the cost to buyers in areas of  expensive homes where buyers need to get a more expensive jumbo mortgage that exceeds $417,000.

The SPDR S&P Homebuilders ETF (NYSE: XHB) is up nearly 2% over the past 12 months, although it has dropped about -1.5% in the first few minutes of trading this morning. The individual homebuilders shares are down anywhere from -1% to -2.25% in early trading as well.

Paul Ausick

D.R. Horton, Inc. (NYSE: DHI) reported fourth fiscal quarter EPS of $0.11 on revenue of $1.1 billion this morning, short of the consensus EPS estimate of $0.14, but in-line with the revenue estimate. For the company’s full fiscal year, EPS came in at $0.23 on revenue of $3.5 billion. For 2010, Horton posted EPS of $0.77 on revenue of $4.3 billion. That hardly looks like the start of a recovery. Other homebuilders like PulteGroup, Inc. (NYSE: PHM), Lennar Corp. (NYSE: LEN), Toll Brothers Inc. (NYSE: TOL), and KB Home (NYSE: KBH) have posted, at best mixed results. Even home improvement giants like Home Depot, Inc. (NYSE: HD) and Lowe’s Companies (NYSE: LOW) have been mixed.

PulteGroup posted an EPS loss of -$0.34 in its quarter ended in September, but is expected to post EPS of $0.06 for the December quarter. Lennar beat EPS expectations by a penny in its August quarter and Toll Brothers crushed expectations by posting EPS of $0.25. For their current quarters, Lennar is expected to report EPS of $0.17 and Toll Brothers is looking for EPS of $0.05. KB Home put up a better-than-expected EPS loss of -$0.13 in its August quarter and is expected to post EPS of $0.02 for its November quarter.

Home Depot reported EPS for its July quarter of $0.86, beating estimates, and is expected to report EPS of $0.58 next Tuesday. Lowe’s also beat estimates in its July quarter and is expected to post EPS of $0.33 when it reports earnings next Monday. Home remodeling got a boost this year, up 29% year-over-year in August, but that number should begin to decline as the remodeling season is now behind us. Lowe’s announced last month that it would close 20 stores and fire about 1,950 employees, costing the company about $0.17-$0.20 in EPS.

In its quarterly report, Horton noted that its sales backlog had grown nearly 18%, from 4,128 new homes in September 2010 to 4,854 this past September. However, the company also said that its cancellation rate for the quarter was 29%. That backlog can hardly be considered safe, especially given that a surge of foreclosed properties for sale is expected to hit the market sometime in the next few months.

In the earnings release, Horton’s chairman said that the company is positioned “for a stronger start to fiscal 2012.” That’s good, but how the company finishes is more important. There are so many headwinds to new homebuilding that it is hard to be too confident that 2012 will be much better than 2011.

Paul Ausick

Struggling homebuilders like Hovnanian Enterprises, Inc. (NYSE: HOV), PulteGroup, Inc. (NYSE: PHM), KB Home (NYSE: KBH), and others have a tough time competing on price with the thousands of foreclosed properties on the market in states like Nevada, California, Arizona, Michigan, and Florida. Big mortgage lenders like Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM) are not seeing a floods of buyers either, and even re-financings have slowed while interest rates are at their lowest level in decades.

In Nevada, where 1 house in 118 is in foreclosure, home prices actually rose in September by about 2.8%.  The median price for a house in the Las Vegas area rose to $123,400, compared with $120,000 in August, but still 8.6% below the $135,000 median in September 2010.

Total sales in the Las Vegas area, including condos, houses, and townhomes, totaled 4,108 in September, down from 4,693 in August, but up from 3,603 in September a year ago. Unemployment is 14.2% in Las Vegas. So who’s buying?

Investors paying cash are the likeliest suspects. And about 45% of the sales in August were bank-owned properties. The Mortgage Bankers Association’s weekly mortgage application survey still shows that nearly 80% of all mortgage applications are seeking refinancing at the historically low interest rates available.

All those sales around Las Vegas are existing homes, not new homes. And the expectation is that as the robo-signing issues are resolved, more foreclosed properties will come on the market, not only in Las Vegas, but all over the country. New home builders don’t stand much of a chance.

Housing market research firm Clear Capital expects home prices to fall by -1.6% in the fourth quarter of 2011 and another -3.2% by the end of the first quarter of 2012.  At least some of that pressure is due to the expected growth of foreclosed properties on the market.

And the banks? If you were a banker and a homeowner with a 6% mortgage came in and asked to re-finance at 4%, what would you say? If the homeowner was switching banks and has gold-plated credit, you might agree, but otherwise not likely. Given the headaches in the housing market, it wouldn’t be too surprising if all the big banks just decided to get out of the home lending business.

The housing market has seen its seasonal summer boomlet for this year. What’s left of this year won’t turn around a dismal year in the US housing market.

Paul Ausick

According to today’s report, the seasonally adjusted annual rate of sales of new single-family homes in August is -2.3% lower than in July, but 6.1% higher than August 2010.  The number of new homes sold in August 2011 was 295,000 new homes, compared with 278,000 in August 2010. That’s okay, except August 2010 monthly sales were the lowest on record. Pretty weak.

Last week both KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) reported weak earnings. KB did note a jump of 40% in new orders, once again a hopeful sign until compared with the same period last year which couldn’t have been much worse. Other homebuilders PulteGroup, Inc. (NYSE: PHM), D.R. Horton, Inc. (NYSE: DHI), Toll Brothers Inc. (NYSE: TOL), NVR Corp. (NYSE: NVR), and Beazer Homes USA Inc. (NYSE: BZH) have all struggled during the past twelve months, with only NVR showing a share price drop of less than -10%. This is not an industry on the mend.

The Commerce Department also estimates that the US housing inventory increased slightly in August to a 6.6 month supply at the current sales rate. Of that, the Department estimates that 60,000 new homes are completed and ready for sale and another 77,000 are under construction. Another 27,000 are permitted but construction has not yet begun. The total inventory at the end of July was 163,000 houses with 26,000 sold in August. At the end of August, 164,000 new houses were for sale. That’s not an improvement.

The best thing to be said for new home sales is that they are not getting worse even though the absolute numbers are very low. If this data indicates a recovery or any sign of better days ahead for homebuilders, then one is looking at the numbers through rose-colored lenses.

Shares of KB Hoe are down more than -6% in the early afternoon, at $5.55, in a 52-week range of $5.09-$16.11.  Lennar shares are down about -1.5%, at $13.20, in a 52-week range of $12.39-$21.54. Pulte shares are down nearly -2%, at $3.97 in a 52-week range of $3.40-$8.99. The other builders are also trading lower, and the SPDR S&P Homebuilders ETF (NYSE: XHB) is up a fraction at $13.45, in a 52-week range of $13.02-$19.21.

Paul Ausick

Amerisafe, Inc. (NASDAQ: AMSF) named Bear of the Day at Zacks.
Bristol-Myers Squibb Company (NYSE: BMY) Raised to Buy at Goldman Sachs.
Broadcom Corporation (NASDAQ: BRCM) Raised to Market Perform at JMP Securities.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) Raised to Buy at BofA/ML.
Hovnanian Enterprises Inc. (NYSE: HOV) Cut to Underweight at JPMorgan.
Intel Corporation (NASDAQ: INTC) Raised to Buy at BofA/ML.
Johnson & Johnson (NYSE: JNJ) Cut to Neutral at Goldman Sachs.
KB Home (NYSE: KBH) Cut to Neutral at JPMorgan.
Lennar Corp. (NYSE: LEN) Raised to Buy at Citigroup.
Lululemon Athletica Inc. (NASDAQ: LULU) Started as Buy with $75 target at Argus.
MAKO Surgical Corp. (NASDAQ: MAKO) removed from Conviction Buy List at Goldman Sachs; this is one of the best performing stocks of 2011.
Netflix, Inc. (NASDAQ: NFLX) Raised to Neutral from Sell at UBS; Raised to Outperform at Wedbush.
On Assignment, Inc. (NASDAQ: ASGN) named the value stock of the day at Zacks.
ONEOK Partners, L.P. (NYSE: OKS) named Bull of the Day at Zacks.
Tesla Motors, Inc. (NASDAQ: TSLA) Started as Outperform at Robert W. Baird.
Time Warner. Inc (NYSE: TWX) Reiterated Outperform and $40 target at Credit Suisse.
Yahoo! Inc. (NASDAQ: YHOO) Raised to Buy at Stifel Nicolaus.
Youku.com Inc (NYSE: YOKU) Removed from Conviction Buy List at Goldman Sachs.

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JON C. OGG

Before we start calling this runaway home building, a gain of more than 30% was seen in apartment and multi-family construction.  The single-family construction starts were up 9.4%, but that was still apparently the biggest boost in about two years.  This is 453,000 starts on an annualized basis.

iShares Dow Jones US Home Construction ETF (NYSE: ITB) is up 2.6% at $12.45 and the 52-week range is $10.50 to $14.29. Shares were above $13.00 as recently as July 7.

SPDR Series Trust S&P Homebuilders (NYSE: XHB) is up 2.4% at $17.73 and the 52-week range is $13.59 to $19.21.  Shares were above $18.60 as recently as July 7.

KB Home (NYSE: KBH) is up 3% at $9.51 and the 52-week range is $8.95 to $16.11; shares were above $10.00 as recently as July 12 and shares were above $12.00 as recently as late-June.

Hovnanian Enterprises, Inc. (NYSE: HOV) is up 3% at $2.27 and the 52-week range is $1.84 to $5.00.

D.R. Horton, Inc. (NYSE: DRI) is up 4.7% at $11.82 and the 52-week range is $9.72 to $13.50.  Its shares were above $12.00 on July 7.

Lennar Corp. (NYSE: LEN) is up over 5% at $18.34 and the 52-week range is $11.93 to $21.54.  Toll Brothers Inc. (NYSE: TOL) is up 2.8% at $21.18 and the 52-week range is $15.57 to $22.42.  Both of these are much closer to highs than lows compared to many peers.

So, here is why we ask if this is too soon to count a real housing recovery…  Building permits were up 2.5% while builders and real estate agents are effectively still competing with lower-priced existing homes, foreclosed and short-sale properties, plus that huge shadow inventory that banks have still held back.  May’s new home sales were only 319,000 on an annualized basis, about half of what a normal market might be.  Monday’s homebuilder sentiment came in above expectations at 15 for June, but 50 is the benchmark for a positive reading on that front.

Investors will often look to anything they can for a silver lining or a buying opportunity.  The reality is that celebrating these figures right now is still a bit like taking your child to the store and saying he can have the pick of any gift at the store.  It sounds great until that kid is old enough to realize that this is the dollar store.

The issues to consider in homebuilders are numerous.  The important thing to consider is that these stocks are generally considered to be proxies for the actual market about one or even two quarters out.  Investors buying today are not buying for news reports due in August, but they are buying for news coming out this fall and even in winter.  If the stock market stabilizes, these can still run even in a cautious minefield of international economics.  If the stock market tanks all over again or if the data still resembles a double-dip recession’s increased chances, then these will remain in the basement.

JON C. OGG

Alcatel-Lucent (NYSE: ALU) Raised to Buy at UBS.
Arch Coal Inc. (NYSE: ACI) Started as Buy at Soc-Gen.
Celestica Inc. (NYSE: CLS) Raised to Buy at Deutsche Bank.
eBay Inc. (NASDAQ: EBAY) Raised to Buy at BofA/ML.
First Solar Inc. (NASDAQ: FSLR) Maintained Neutral but raised target to $135 from $100 at Credit Suisse.
Hess Corporation (NYSE: HES) Raised to Buy at BofA/ML.
Hudson City Bancorp (NASDAQ: HCBK) Cut to Underperform as Bear of the Day at Zacks.
KB Home (NYSE: KBH) Raised to Hold at S&P Equity Research (late-Wednesday call).
Lululemon Athletica Inc. (NASDAQ: LULU) Cut to Neutral at Stern Agee.
PerkinElmer, Inc. (NYSE: PKI) Raised to Outperform as Bull of the Day at Zacks.
Renren Inc. (NYSE: RENN) Started as Outperform at Credit Suisse.
Tanger Factory Outlet Centers Inc. (NYSE: SKT) Started as Outperform at Credit Suisse.

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JON C. OGG