Trouble on the Home Front

HenryTo · Posted: Sat Oct 20, 2007 4:48 am Post subject:

300 homes in Minnesota may be a small number but it is no laughing matter, given that houses (just like everything else) are priced at the margin. Of course, it one home in a 10,000 unit neighborhood sells for 75% of where it sold at a year ago, it could be classified as an anomaly, but if it was a house that was sold right next door - then, that's a different story:

http://www.startribune.com/462/story/1496691.html

rffrydr · Posted: Sat Oct 20, 2007 5:25 am Post subject:

Note the site financing:

rffrydr · Posted: Sat Oct 20, 2007 5:33 am Post subject:

Here lies the true margins of the housing market:

http://www.latimes.com/business/la-fi-retirelatam-sp,0,1885714.special?coll=la-home-center

They're not talking about holing up in an apartment in Mexico City. These are full housing tracts carved from nature, built up in fine Orange County style anf fully occupied by gringos. With their own cars.

15K for a "Flight to Life" trip to Miami for emergency medical and the "savings" soon evaporate. Costa Rica was the role model and became priced like anywhere here in the US. Prices I remember in one of these tracts in Panama were running about $250,000 in '04. It'll be interesting to watch.
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rffrydr · Posted: Mon Oct 22, 2007 9:21 am Post subject:

Slow burn means sloooowwwwwwwwwwwwwww:

http://www.nytimes.com/2007/10/22/business/22market.html?_r=1&ref=business&oref=slogin
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rffrydr · Posted: Wed Oct 24, 2007 1:46 pm Post subject:

How big is 4%? 500,000 homes from last quarter:

http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db20071019_946332.htm?campaign_id=rss_daily
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HenryTo · Posted: Tue Nov 13, 2007 3:10 pm Post subject:

A new kind of housing derivatives, based on Radar Logic's Residential Property Index is now getting a lot of transaction:

http://www.msnbc.msn.com/id/21762164/

Folks can download historical data by directly going to Radar Logic's website:

http://analytics.radarlogic.com/radar-logic-home/historical-data.aspx

thestreet.com has a good article about the recent market action:

http://www.thestreet.com/s/housing-cant-get-leg-up-during-dog-days/newsanalysis/realestate/10389413.html?puc=googlefi

HenryTo · Posted: Tue Nov 13, 2007 3:17 pm Post subject:

Latest "Housing Market Report" from Radar Logic:

http://www.radarlogic.com/research/RPXMonthlyHousingMarketReportforAugust2007.pdf

nodoodahs · Moderator Joined: 06 May 2005 Posts: 1734 Location: TX

I'm calling BS on their report, right here and right now.

Click it, and tell me who's missing from their 25 metro areas.

No TEXAS metro on their list, despite
http://en.wikipedia.org/wiki/List_of_United_States_metropolitan_areas
D/FW and Houston metro being 4 and 6 on the list of largest metro areas in the U.S.

Pretty darn glaring error to leave out two of the top six, in a list of twenty-five. People pay money for this????
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HenryTo · Posted: Tue Nov 13, 2007 4:15 pm Post subject:

Bill, I noticed that too.

Not sure why - but my guess is that once their clients (hedge funds, "market makers, " etc,) demand a certain market, they will create it. The main point is that these contracts - for the first time ever - are start to get attention from hedge funds and prop trading desks alike, not to mention trading liquidity that the Case-Shiller Indices can never match. Still too early to tell but this shows promise.

P.S. I just emailed them and asked your question.

nodoodahs · Moderator Joined: 06 May 2005 Posts: 1734 Location: TX

C-S gets my goat, too. 10 cities? Come on! Cap-weighted? Please! Yet, that's what everybody cites ...

OFHEO isn't perfect, the lack of jumbos is the problem there, but in terms of coverage and weighting (unit not capitalization) it's a far more accurate presentation of price trends.

This whole discussion is similar to my dollar rant, there is a trading index that is Euro-centric and it is cited, often for ECONOMIC impact! But the broad trade-based index is almost never used in discussion, despite the fact that is is actually germane to the economic discussion, i.e. it includes Mexico, China, etc.
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dknoester · Posted: Thu Nov 15, 2007 1:26 pm Post subject: Stern Words From Wells Fargo

From Briefing.com today:

Reuters reports that at the Merrill conference the CEO of Wells Fargo (WFC 32.37, -0.8 Cool

said "We have not seen a nationwide decline in housing like this since the Great Depression."

DK

nodoodahs · Moderator Joined: 06 May 2005 Posts: 1734 Location: TX

texfly101 · Senior Poster Joined: 22 Oct 2007 Posts: 108

so when does this sector become attractive as value stocks? I don't see it before the credit crunch resolves and consumers have some time to shake their fears of course. How does this compare with sectors like tech after the dot com bubble or airlines after 9/11? It will come back but how much further has it to go? How much time to recover? Maybe, this just might be the area to make some advances if the bear comes out of hibernation?
Bill,
I don't think you have ever had such a great supply of set ups, the last one made me choke on my coffee I laughed so hard...dj
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nodoodahs · Moderator Joined: 06 May 2005 Posts: 1734 Location: TX

The price ratios to book look cheap now. The problem is, you don't know how accurate the books are, and if they'll still look cheap later, when the books have a bunch of write-downs thrown on them. Of course, the market could be over-reacting ... or we could be over-thinking it.

Keeping with themes of *subjective* value investing ...

Projecting earnings out might help determine "cheapness," but we've got the same book issues, i.e., are the earnings real. I would add that accrual accounting anomalies, earnings quality, and an examination of the cash flow statements would probably tell me to stay away.

A buddy in the industry says "wait 'til 08 and the earnings are building again, buy of the century, etc." Maybe.

For me, I'm gonna stick with a few methods that statistically seem to work, and if a homey comes on the screen of a method I'm using, I will hold my nose and buy. That's the beauty of a method, rather than making subjective judgments. I would think that a hard-core value investor, say, a "Magic Formula" guy, should probably do the same. Run the screen, check some numbers and maybe read the filings for red flags, and if they fit some pre-determined, tested objective criteria, buy.
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texfly101 · Senior Poster Joined: 22 Oct 2007 Posts: 108

Bill,
Thanks, that sounds very sound....hmmm, did I just do the straight man for you? Anyway, I see where you're going with that and yes, it works. I have noticed that the majority of the system's picks, that they were very fair valued to start and the way that I read it, they all were judged so by the market since they previously had better returns than the market. The system seems to pick fair valued stocks that then can benefit from cash looking to invest...so if real estate shows up, then what the hell, its fair valued and should attract money...dj
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