Chart of the Day: Where Homes Are Underwater

The New York Times has put up an interactive map of homes worth less than the mortgage. Nice little halo there around Central Oregon.

Source:
Where Homes Are Worth Less Than the Mortgage
New York Times
November 11, 2008

CACB Turning the Corner?

Cascade Bancorp released their 10-Q last week and things are surprisingly looking a lot better at the bank:

-Non-Performing Assets decreased almost 15% from last quarter as a few loans began to, once again, “perform.”

-Deposits grew almost 11% from the prior quarter.

-The company remained profitable in one of the worst financial environments our country has ever seen.

One quarter doesn’t make a trend but I think it bodes well for the local economy to see it’s largest local bank see at least a glimmer of daylight.

And the stock price has reflected a bit of this optimism. Since August the company’s stock price has significantly outperformed the rest of the financial sector:

CACB: the Definition of Short Squeeze

Look up “short squeeze” over at investopedia and you’ll likely find this chart.

While the market rallied higher last week on the news of government intervention into the nation’s financial system, Cascade Bancorp (CACB) saw its stock price explode higher as short sellers ran for cover.

As I suggested the last time I took a look at CACB, this breakout and subsequent retest is bullish for the company and may even indicate some sort of reprieve/light at the end of the tunnel for the local economy.

CACB at the Crossroads

Cascade Bancorp’s stock price (CACB) has now broken the downtrend line in place for the past six months and is once again testing the 8.5-8.75 level that has been a key support/resistance line in the sand since the spring.

Just as the 80% decline in the stock has been a decent predictor of the fundamental deterioration at the company, I think where the stock goes from here will say much about what we can expect from the company in coming quarters – and by extension, the local economy.

(Click for video)

B.E.N.D.: Behavioral Economics oN Display

Bendites have gone from blinding optimism to total despair in little over a year’s time. It’s a behavioral economist’s wet dream.

Positive signs for real estate

After 3 years of painful decline, the real estate market is beginning to show some positive signs on both the national and local levels.

The Economist reports in its latest issue on the improving fundamentals:

Sales of new homes, which had plunged nearly 60% from their average level of 2005, have been stable since March. Sales of existing homes stopped falling last autumn. Julia Coronado of Barclays Capital says that construction of homes built for sale, not counting units that already have a buyer, had dropped to 13% below the level of new-home sales in the first quarter (see chart 1). She thinks second-quarter data, due out on August 19th, will show the gap growing to 18%. That is why the inventory of unsold homes, though still near recent highs relative to monthly sales, has fallen sharply in absolute terms.

By the standards of previous cycles, residential construction should be nearing the bottom. Karl Case, a housing expert at Wellesley College and one of the creators of the S&P/Case-Shiller home-price indices, notes that in three previous housing cycles, residential investment peaked at about 5.5% of GDP and hit bottom at around 3.5%. In the latest cycle it peaked at 5.5% in 2006 and by the second quarter had fallen to 3.1% of GDP, below the troughs of 1975, 1982 and 1991. He does not expect much rebound…

Finally, since home prices have dropped about 18% from their mid-2006 peak (based on the S&P/Case-Shiller composite of 20 cities) and incomes have steadily grown, homes are returning to more typical levels of affordability in some regions. Mr Case estimates that in Los Angeles, the ratio of home prices to annual income per person doubled from 2001-06 to 16, and has since fallen to 11. In Boston, it rose from nine to 12, and has since fallen back to nine.

Bloomberg reported last week that lower prices are improving sales figures in many areas of the country:

Price discounts are spurring buyers in some areas of the country, according to the Realtors report. One quarter of the states had sales increases in the second quarter when compared with the prior three months.

“Once the inventory is drawn down, price pressure will return because the costs of construction are rising,” Gaylord said.

And the Los Angeles Times reports today on a significant jump in sales in Southern California:

Southern California home sales rose last month for the first time in nearly three years, although prices continued their downward spiral, data released today showed.

In July, the region’s median price fell 31% from a year ago to $348,000, the lowest since February 2004, when the local real estate market was in the throes of an extraordinary boom, according to La Jolla-based research firm MDA DataQuick.

The ongoing decline in prices appears to be spurring sales. The number of homes sold picked up in July for the first year-over-year expansion since October 2005. All counties, save Los Angeles County, posted at least a 10% increase from July 2007.

Locally, according to Doug Farmer’s numbers, Bend saw inventory actually decline 10% in July from the same month last year while sales actually increased 10% year-over-year.

Now one month doesn’t make a trend but this combination of declining inventory and rising sales is the first positive sign for the market in a long time and exactly the supply/demand recipe for finding a bottom.

Sources:
Behind the housing gloom is an improving backdrop
The Economist
August 14, 2008

U.S. Home Sales Fall to 10-Year Low as Prices Tumble
Kathleen M. Howley and Dan Levy
Bloomberg
August 14, 2008

Southern California home sales jump in July
Annette Haddad
Los Angeles Times
August 18, 2008

Market Conditions for Bend, Oregon
Doug Farmer
RealtyTimes
August 15, 2008

NAHB: Builder Confidence at Record Low
Calculated Risk
August 18, 2008

Bend, OR MSA Real Estate Market Reports, Home Value Info
Zillow.com
Q2/08

So Many Spongebobs

Bloomberg reports today that nearly one-third of homebuyers over the past five years are now underwater:

Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.

I guess it’s simply what you get when you combine over-priced pineapples with sponge-for-brains speculators.

Source:
One Third of New Owners Owe More Than House Is Worth
Bob Ivry
Bloomberg
August 12, 2008

A Hubba Bubba Facial

CNNMoney.com reports today:

May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index… The current price decline streak has been unprecedented in both length and depth.

The most bubblicious areas saw the biggest price declines year-over-year in May, including Las Vegas (-28%), Miami (-28%), Phoenix (-26%), Los Angeles (-24%), San Diego (-23%).

S&P doesn’t track Bend in their indexes but, according to the Bratton Report, Bend ranks right up there with a 23% decline from May 2007. You know what they say, “the bigger they come…”

Source:
Home prices drop record 15.8%
Les Christie
CNNMoney.com
July 29, 2008

CACB in a "World of Pain"

All you need to know from Bank of the Cascades second-quarter earnings release today can be seen in the chart above (an updated version of yesterday’s “Chart of the Day, Part Deux”). The stock price fell more than 17% today as investors reacted to earnings that missed analyst estimates by a “huge margin.”

Here are a couple of pertinent highlights:

-Non-performing assets grew 1,252% from last year to $127 million (equal to almost half of the bank’s net equity).

-Total deposits fell 11.1% from the same quarter last year.

This is not quite what I would consider a surefire recipe for success. The bottom line is the bank is, along with the local real estate market, facing a “world of pain.” The real problem is that there’s no sign of relief in the near future – and investors know it.

(Click for video)

Chart of the Day, Part Deux: CACB Earnings Preview

Bank of the Cascades announces earnings tomorrow. For now, the chart is clearly bearish (overbought under resistance) but, during earnings season, anything is possible.