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Five Things You Need to Know: Themes Converge Into Possible Housing Solution

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There are several themes at play in today's Five Things that we believe could potentially converge into a singular, overarching housing solution.

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Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Inside Retail Sales

The headlines will show retail sales in April fell, but behind the numbers retail sales were actually stronger than expected. The Commerce Department reported U.S. Retail Sales dropped 0.2%, but excluding purchases of autos retail sales actually increased 0.5%.

Gas station sales fell 0.4% on the back of surging gas prices and over the weekend a number of newspaper articles pointed to a surprising surge in mass transit usage across the country due to rising gas prices.

Related to the retail sales report, Wal-Mart (WMT) reported sales rose 3.2% last month, but the retailer only managed it thanks to discounts of as much as 30%. Chief Executive Officer H. Lee Scott said on the company's recorded call that customers are focusing on food and daily use items as opposed to discretionary purchases.


2. SUV Prices Plummet

High fuel prices are causing the value of used SUVs to plummet, often below what's listed in the buying guides shoppers use to negotiate with dealers, USA Today recently reported. The price declines are impacting many car shoppers hoping to trade in their gas guzzling SUV's for smaller, more fuel efficient cars.

Manheim, an operator of auctions where car dealers buy their used-vehicle inventories, tracks wholesale prices on SUV's and show prices are down 17% from a year ago.

While the below book prices would seem to raise the appeal of SUV's to less gas-price sensitive shoppers, CNW Marketing Research reports the number of days used SUVs are going unsold reached 66.4 days last month, up from 48.6 days last year.

Meanwhile, Toyota (TM), facing its first annual earnings decline in eight years due to a soft U.S. market, is delaying opening of a Mississippi SUV assembly plant that was initially scheduled to be up and running by late next year.

Also this morning, General Motors (GM) Chief Operating Officer Fritz Henderson said the U.S. auto industry is "in a recession." Really? What was the U.S. auto industry in last year? Or maybe it was just the company itself, which lost $38.7 billion in 2007, that was in a recession.


3. Self-Storage Housing?

The New York Times ran a piece over the weekend that shows the widespread impact of the housing crisis. Apparently, the increase in foreclosures nationwide has led to a surge in the rental of self-storage centers. Now, however, as the economic impact of housing widens, an increasing number of people are defaulting on their self-storage unit bills.

According to the Times, the auctioneer, Blair Auction & Appraisal, has been conducting sales at self-storage facilities in the Midwest for more than a decade. "If a site used to have 10 auctions, these days it has 15 or 20," Wayne Blair, the owner, told the Times. At one site in Detroit, he auctioned off the contents of 45 units, the newspaper reported.

The article says there are 51,000 self storage facilities nationwide. One publicly-traded company that invests in storage centers is Public Storage (PSA). The stock is up more than 18% year-to-date.

On a side note, one aspect of self-storage I was surprised the Times article did not mention is the use of self-storage containers for housing. Now it is illegal, or at least against self-storage container center policies, to live in a self-storage unit, but it is well known, especially here in Manhattan, that certain self storage centers have some population of live-in users.


4. Speaking of Modular Housing

According to the Detroit Free Press, a Detroit-based group is hoping to win city approval to use empty shipping containers to construct a residential project.

"The project would stack empty containers four high, cut in windows and doors, install plumbing, stairways and heating, and add amenities such as balconies and landscaped patios," the article says.

If it wins approval the 17-unit project would break ground this fall. The project will reportedly cost about $1.8 million, or 25% less than a normal condo project of similar quality.

But this idea is not exactly new. Container City is a project located at Trinity Buoy Wharf near London's Docklands. It was completed in 2001.

But apart from city approval, there's at least one fly in the ointment the Detroit group may not have considered: a shortage of shipping containers. According to a story in the Wall Street Journal last week, Peter Friedman, executive director of the Agricultural Transportation Coalition, estimated agricultural exporters could have shipped 20% to 30% more products in the past six months if more containers were available.

Apparently the Detroit group hoping to win approval for their own container city hasn't heard about the shortage of shipping containers. CAI International (CAP) and Textainer Group Holdings Limited (TGH) are two companies that lease shipping containers.


5. Modular Housing

There are several themes at play in today's Five Things that we believe could potentially converge into a singular, overarching housing solution: Foreclosures and Economic Hardship, High Gasoline Prices, Diminishing SUV Demand, Self-Storage Units, Shipping Container Shortages, Emergency Modular Housing Units.

The answer? Stackable Modular Housing Units Built from Used SUV's. I believe that one day in the not-so-distant future, the unwanted steel carcasses of four-wheel drive sport utility vehicles will be converted into stackable, modular low-income housing units. Think about it. They have nice seats, power windows, built in radio/cd players. Some things just make too much sense.

No positions in stocks mentioned.

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