With the ridiculously overpriced homes in Southern California, it’s really hard not to be cognizant of what is going on in the real estate industry. I am a proponent of home ownership against renting but with the huge gap nowadays between the market rent and the average mortgage payment, it is smart just to keep renting and invest the difference in stocks. You may come out even better in the long run. Anyways, below are the collected articles that I’ve stumbled upon just to keep me updated on the real estate industry.

Foreclosures, NOD, And Short Sale

The Los Angeles Times presents Home Foreclosures Hit Record In California. Yes, the great Southern California is experiencing increased in notice of defaults and foreclosures. The economy is sound but homeowners have become trapped in loans that are resetting to rates that exceed their ability to pay.

Foreclosures in the state during the second quarter totaled 17,408, up 799% from the same period last year. The current rate handily eclipsed the previous foreclosure peak set in 1996, when the state was in the final throes of six-year slump.The two eras are sharply different. Back then, the primary culprit was massive defense cutbacks that led to high unemployment. Without a paycheck, people couldn’t pay the mortgage. This time, the economy is generally sound but many people have become trapped in loans that are resetting to rates that exceed their ability to pay. Those excesses need time to make their way through the system.

Dr. Housing Bubble presents Real Homes of Genius: Today We Salute You Lakewood. A short Sale with a $100,000+ loss. I live around the area that’s why I know what the Doctor is talking about. I really like this blog as it features a lot of great articles regarding the housing bubble and specifically Southern California. The featured house is a very good example that the housing bubble has burst. The Lakewood property has been in the market for quite some time and below are the selling and pricing history to illustrate how desperate the bank is to unload this property that the price decreases by $100,000 in just 3 months. In the good bubble years, this home is so great, that it sold twice in one year:

Sale History
08/31/2006: $500,000
03/17/2006: $489,000

However, here is the pricing action on this great home for the past three months:
Price Reduced: 04/24/07 — $499,900 to $485,000
Price Reduced: 05/27/07 — $485,000 to $470,000
Price Reduced: 07/11/07 — $470,000 to $450,000
Price Reduced: 07/18/07 — $450,000 to $400,000 

The American Dream Is Overbought and Overbuilt (Michael (Mish) Shedlock in Seeking Alpha, July 23rd): “Corus Bankshares Inc. Corus has lent a total of $1.07 billion to eight condo developments in downtown Miami, according to the company’s Web site. Corus SEC filing: Corus’s net income in Q1′07 was $26.4 million, a 39% drop from a year earlier. [Mish comment: Corus Bank is frequently near the top of the list in CD rates guaranteed by the US government. Corus bank is willing to roll the dice on insane condo action in Florida and the average Joe can participate basically risk free up to the FDIC limit at the expense of everyone else if and when a government bailout occurs… Miami Realtors Association: Miami condo sales fell to 599 in May, a drop of 46% from a year earlier.”

Mortgage Industry: 

Reuters present Countrywide Profit Down 33%. A clear sign that the housing bubble is slowing down when top mortgage companies such as Countrywide are reporting losses during the year.

The Associated Press, courtesy of Forbes magazine, presents Wells Fargo Curtails Sub Prime Exposure. “Wells Fargo & Co. has stopped offering a popular adjustable-rate mortgage designed for home buyers with troubled borrowing histories, becoming the latest lender to curtail its exposure to the subprime market in response to regulatory and market pressures.”

Housing: No Better Before 2008 (Crain’s Detroit Business, July 23rd): “Mortgage Bankers Association: Michigan continues to rank behind only Ohio and Indiana in mortgage delinquency rates and foreclosures… “We haven’t hit bottom yet. Southeast Michigan lost population last year, it’s a good bet it lost population since then, and it’s hard to see Detroit and Southeast Michigan not losing population going forward. It’s hard to see a turnaround in housing when you’re losing population There’s going to continue to be a lot of homes for sale and a scarcity of buyers.”

Homebuilders And Housing Stocks:

Centex First Quarter Revenues Are Down 32 Percent (Builder Online, July 24th): “Centex Corp. is reporting a $172 million operating loss for its FQ2′07… Rrevenue for the quarter is $1.94 billion, 31% lower than this time last year… Tim Eller, Centex Chairman and CEO: “In FQ2, we reduced overhead expenses and unsold inventory, and we saw an improving cancellation rate in a difficult market. Other highlights of the report: Loss from continuing operations was $1.08/share. Sales (orders) decreased 22% to 6,474. Reduced homebuilding SG&A expenses by 20%, or $80m. Reduced inventory of unsold homes by 17% to 4,815. Homebuilding cancellation rate improved 150 bps [1.5%] to 31.2%.”

Homebuilding Outlook: Sector Picks and Pans (Wall St. Transcript in Seeking Alpha, July 24th): “Eric Landry, Senior Analyst and Associate Director at Morningstar, covering homebuilders: Bullish: At the top… is M.D.C. Holdings (NYSE: MDC - News). The company owns about 17,500 lots as of March, which is enough to satisfy only about two years worth of production, one of the lowest levels in the business. It also has very few options. KB Home (NYSE: KBH - News) just sold the company’s best performing division, its French homebuilder, for $800 million. The transaction probably means management sees ample investment opportunity here in the States going forward. KB’s balance sheet is also pretty strong, with about 4 1/2 years worth of land and pro-forma net debt totaling a bit more than 20% of trailing sales. Lennar (NYSE: LEN - News) is doing as much and probably more than any other builder to innovate its model… Bearish: TOUSA (NYSE: TOA - News) entered into a JV in Florida at the peak of the market in August 2005. The thing was highly levered… WCI Communities (NYSE: WCI - News) has a lot of debt… but there is some acquisition interest there. Orleans Homebuilders (AMEX: OHB - News) has… debt to trailing sales of 68%, on top of almost five years of owned land.”

Source: Yahoo Finance. Image Credit: bigbuloke