The Wall Street Journalreports (subscription required) that "The Dow Jones Equity All REIT Total Return Index, which tracks 114 publicly traded REIT stocks, rose 28.9% in the April-June period, the biggest quarterly gain for the index since it debuted in 1989."
REITs still have a long, long way to go until they've regained the ground they've lost during the real estate rout -- they were down 31.6% in the first quarter and 38.8% in the fourth quarter of last year.
Headed into tomorrow's earnings announcement, analysts are expecting another loss, but a much smaller loss than the company reported for its first quarter. Last quarter we saw a loss of 98 cents per share. This quarter analysts are predicting a loss of "only" 63 cents per share.
It was the largest jump in three months, as new home construction increased by 17.2% during the last month.
The increase was much higher than analysts had been expecting, and last month we moved up to an annual rate of 532,000 units... well above the 500,000 units that had been forecast.
The good news is that there was a 6% drop in foreclosures from April to May. That is the good news, but the bad news is that May was the third straight month in a row for foreclosures topping 300,000.
RealtyTrac, which is the firm responsible for these figures stated that the exact number of foreclosure filings during the month was 321,480.
Jim Cramer can't seem to make up his mind on where housing is going. In his email newsletter, author and fund manager Whitney Tilson writes this:
I can't figure out what Cramer's saying on housing prices. Today he wrote "Housing-price stabilization isn't in the cards at all," but yesterday he wrote "I am thinking of calling the housing decline over right now on this data. There are very few regions that haven't bottomed."
Cramer's theatrics aside, many investors are looking to buy back into real estate investment trusts (REITs), whose stock prices have been absolutely hammered over the past two years. Even if home prices aren't done falling, the sub-liquidation valuations assigned by the market to many of these companies could make them good investments.
Even as the government tries to clean up after the housing excesses of the past few years, The Wall Street Journalopines (subscription required) that it's also sowing the seeds of a new housing bust with Federal Housing Administration loans.
FHA loans are federally insured mortgages made available to first-time home buyers. They require down payments as low as 3.5% (but it's really less because closing costs can be rolled in) and a credit score of just 620 -- far below the 700+ required by most private lenders right now.
As the subprime market has completely dried up, marginal home buyers are returning to the FHA, leading to a huge increase in FHA loan volume. Nearly a third of mortgages are FHA loans, up from just 2% in 2006.
In an appearance on CNBC, Richard LeFrak explained that the problem with the housing market is that "we just have too many damn houses in the United States right now."
His solution? Offer permanent resident status to any foreigner who comes here and buys a vacant house. That would solve a fundamental problem facing housing right now: The only way to deal with the excess surplus of unoccupied homes is to bring people here to occupy them.
The plan has a lot to recommend it: Offering permanent resident status only to those with enough money to buy a home would have the added impact of stimulating consumer spending -- it wouldn't be a bunch of poor people with no money and no skills coming in search of jobs. Check out the full interview below.
Real estate investment trusts have been, as you might expect, pulverized by the downturn in housing but the Wall Street Journalreports (subscription required) that that may be setting the stage for a wave of consolidation in the field.
30% of REITs are trading at prices below $5 per share, and experts say that those are the companies most likely to be the target of acquisitions. For most investors though, the sub-$5 REIT strategy probably isn't such a hot idea. The Journal piece mentions General Growth Properties (NASDAQ: GGP) but the problem with that is that the company is very likely destined for bankruptcy court unless it can make a deal. The best strategy is to find good companies with good long-term prospects with low valuations that will make them attractive to potential acquirers. Buying junk companies in the hope that they'll be acquired by a bigger player is just too speculative -- especially in an environment where credit is so tight.
As people lose their homes and become renters while foreclosed properties sit vacant waiting to work their way through the system, you might think this would be a golden age for rental properties.
It isn't. According to Reis Inc., a New York real-estate-research firm, the average vacancy rate for the top 79 US markets has reached 7.2%, a full percentage point higher than it was two quarters ago. Interestingly, vacancy rates were higher in the first quarter of 2004. Effective rents fell 1.1% in the first quarter. Reis believes rents could be down as much as 2% for the year and vacancy rates could top 8%.
Economist Robert J. Shiller -- the one who identified the internet bubble and the housing bubble as bubbles before pretty much anyone else did -- will introduced a pair of new ETFs later this month in partnership MacroShares.
The MacroShares' Major Metro Housing product will consist of two kinds of shares: "up" shares and "down" shares. If you want to bet that housing prices will go up, buy the "up" shares. If you're feeling bearish, buy the "down" shares. But the fund won't be investing in housing at all.
George Soros is one of the truly legendary figures in world finance. He doesn't use fancy mathematics and he doesn't follow the crowd. In 2007 he predicted the coming collapse of the world financial system. Unlike other pundits, Soros has the courage to make huge bets, often using his "feelings" about what he sees is happening.
In 2007, he came out of retirement to trade his hedge fund and made $2.9 billion. This past year his fund made $.1.7 billion. He is listed as one of the top 25 hedge fund traders in the world, with an estimated net worth of $11 billion.
The nation's fifth largest home builder, KB Home (NYSE: KBH), had its chance to impress Wall Street this morning when it reported first quarter earnings, and it did not disappoint, easily beating out analyst estimates.
As we discussed in our earnings preview, the company had been expected to show a net loss of 81 cents for the quarter. The actual loss for the quarter was less than expected, with a reported loss of only 75 cents per share.
We will see earnings from one of the major home builders in the morning, as KB Home (NYSE: KBH) gets its chance to impress Wall Street when it reports its first quarter numbers prior to the market open.
The company, which last year ranked the 5th largest home builder in the country, is expected to show a loss for the quarter of $0.81 per share. Should the company be able to match these estimates, it would be a great improvement over its fourth quarter loss of $3.96 per share. When looking back at the same period last year, KBH showed a loss of $3.47 per share for its first quarter last year.
We will get a little better idea of just what is happening with the real estate market tomorrow when home builder 
It was the largest jump in three months, as new home construction 
Jim Cramer can't seem to make up his mind on where housing is going. In his email newsletter, author and fund manager Whitney Tilson writes this:
A roundup of the dark tidings from BloggingStocks and elsewhere on the Web:
Even as the government tries to clean up after the housing excesses of the past few years, The Wall Street Journal 
In an 
In the wake of the last five weeks' irrational exuberance its time to get real again. Via the 
Real estate investment trusts have been, as you might expect, pulverized by the downturn in housing but the Wall Street Journal 
As people lose their homes and become renters while foreclosed properties sit vacant waiting to work their way through the system, you might think this would be a golden age for rental properties.
George Soros is one of the truly legendary figures in world finance. He doesn't use fancy mathematics and he doesn't follow the crowd. In 2007 he predicted the coming collapse of the world financial system. Unlike other pundits, Soros has the courage to make huge bets, often using his "feelings" about what he sees is happening.
The nation's fifth largest home builder, 
Is there a Bernie Madoff in your portfolio?
New McDonald's to include recharging stations for electric cars
Cramer on BloggingStocks: Dirty manipulation 
