by Calculated Risk on 1/12/2009 03:55:00 PM

From Dow Jones: Apartment-Complex Developers Falling Behind On Loan Payments (hat tip Robert)

The rapid reversal of fortunes in commercial real estate is taking down yet another sector: multifamily housing.
...
While sharp declines in retail and office sectors of commercial real estate have commanded attention in recent months, some analysts say deterioration in the multifamily sector is quickly catching up. ... Much of the multifamily sector's problems center around troubles in converting apartments to condominiums, as is the case in Miami, or the challenges in converting rent-controlled units to market-rate apartments, as in Manhattan.

In Florida, California, Arizona and Nevada, the flood of unsold condominiums is entering the apartment market and the excess supply is lowering rents in those areas, Barclays Capital analysts say. That's resulted in lower revenues for owners, which in some cases is making it more difficult to keep up with mortgage payments.
...
In November, the delinquency rate on securitized loans to apartment and condominium properties rose to 1.9%, a dramatic jump from the 0.9% at the start of the year, according to Realpoint LLC ...

This is a great follow up to my post last Friday: The Residential Rental Market. I noted that despite the increase in demand for rentals, rents are now falling because of the rapid increase in supply due to condo "reconversions", builders changing the intent of new construction (started as condos but became rentals), and other reasons. And falling rents means rising delinquencies for properties purchased with overly optimistic pro forma projections.

by Calculated Risk on 1/12/2009 11:26:00 AM

WSJ Headline: Obama has asked Bush to request the remaining $350 billion in TARP funds from Congress.

UPDATE: From CNBC: Bush to Seek Rest of TARP Money At Obama's Request

President-elect Barack Obama asked President Bush to request the remaining $350 billlion of the Wall Street bailout fund, and the White House said Bush would do so.

"President Bush agreed to the president-elect's request," White House spokeswoman Dana Perino said in a statement.
...
The request would permit Obama's administration to have the ability to use the money shortly after taking office.

by Calculated Risk on 1/12/2009 10:03:00 AM

This is interesting because medical spending is frequently considered recession proof ...

From Hologic Press Release:

"This year will be challenging for our entire industry, as many drivers of our business remain uncertain," said Jack Cumming, Chairman and Chief Executive Officer. "The severe and rapid economic downturn, result[ed] in a decline in hospital spending ... we witnessed an unprecedented decline in demand for capital equipment at the end of the quarter ... Hospital systems across the country have responded to tightening access to capital by restricting capital expenditures, implementing tight spending controls and reducing personnel."
emphasis added

by Calculated Risk on 1/12/2009 12:28:00 AM

"It's sad to say, but we really went nowhere for almost ten years, after you extract the boost provided by the housing and mortgage boom. It's almost a lost economic decade."
Mark Zandi, chief economist of Moody's Economy.com

From the WaPo: Economy Made Few Gains in Bush Years

President Bush has presided over the weakest eight-year span for the U.S. economy in decades, according to an analysis of key data ...

We will probably see a slew of articles over the next ten days on the various failures of the Bush administration. I think the two worst economic mistakes were the Bush fiscal policies (creating a huge structural budget deficit) and the administration's ideological opposition to regulation and oversight that allowed the housing and credit bubbles to form.

The WaPo article outlines other failures.

by Calculated Risk on 1/11/2009 08:24:00 PM

From the WSJ: Wave of Bankruptcy Filings Expected From Retailers in Wake of Holidays

... U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings, altering the landscape at malls and on main streets across the country.

Retailers are particularly vulnerable in the current downturn after a decade of buoyant consumer spending, which encouraged them to overexpand and overborrow. Now, the banks and private investors who financed the boom are pulling back.

Several of the industry's biggest lenders, including General Electric Co.'s GE Capital, CIT Group Inc. and Wachovia Corp., are tightening lending terms and reducing exposure to retailers.

Their tougher terms are making it harder for retailers to find capital to reorganize under bankruptcy-court protection, as they were able to do in the past, meaning there are likely to be more liquidations.

Poor sales, too much debt and tighter lending standards ... the BK attorneys will probably be busy!

by Calculated Risk on 1/11/2009 02:37:00 PM

Last year I noted that there weren't anywhere near enough shovel ready public projects to even offset the expected decline in non-residential structure investment in 2009 - much less make up for the declines in residential construction employment and other areas of job losses.

In May of 2008, I estimated the decrease in non-residential investment for malls, offices and lodging alone at about $60 billion. This is far greater than the $18.4 billion estimate of shovel ready projects from The American Association of State Highway and Transportation Officials.

As the Obama team has noted, properly chosen infrastructure projects provide the best bang for the buck. These projects provide jobs today, and they are an investment in the future. We need more projects ...

And since Obama asked for suggestions ... How about a demolition program?

First, if any state and local governments have old idle buildings waiting for future plans, why not demolish them today? This would provide jobs for local workers, and prepare the land for future development and remove an eyesore. The Federal Government could pay for this demolition.

Second, how about a tax credit for demolishing residential housing units? In many areas there are old, vacant housing units. These are a public nuisance, but the owners have no motivation to demolish the property. Why not provide a tax credit if the properties are demolished in 2009? This could eliminate housing units from the housing stock, provide local jobs, and possibly remove a public nuisance.

A demolition plan would probably only add a few billion to the stimulus package, but it would be well targeted providing jobs in many communities and prepare the land for renewed growth in the future.

Just my 2 cents ...

by Calculated Risk on 1/11/2009 01:17:00 PM

"We have this trucking survey, and it went down to almost eight this week. [the index is 0 to 100 with 50 being normal] ... This is suicidal on that particular survey which is highly correlated to the economy."

ISI Chairman Ed Hyman (no link)

by Calculated Risk on 1/11/2009 10:44:00 AM

Christina Romer, the Chair-designate for the Council of Economic Advisers talks about the stimulus plan ...

by Calculated Risk on 1/10/2009 04:43:00 PM

Here is an outline of the Obama Plan (not much detail): The Job Impact of American Recovery and Reinvestment Plan Click on graph for larger image in new window.

by Calculated Risk on 1/10/2009 09:25:00 AM

From Bloomberg: Morgan Stanley May Pay Citigroup $3 Billion in Brokerage Merger

Morgan Stanley may pay Citigroup Inc. as much as $3 billion for control of a venture that would combine their brokerage units ... Morgan Stanley ... may get 51 percent of the new company and an option to acquire the rest over three to five years ... The transaction may be announced as soon as tomorrow, the person said.

Citigroup ... would get cash for its Smith Barney brokerage, while Morgan Stanley would get recurring fee revenue and more potential banking customers.

Just shuffling the TARP money ...