by Calculated Risk on 2/03/2009 02:59:00 PM

This morning the Census Bureau released the Housing Vacancies and Homeownership for Q4 2008. This is a very useful report, and earlier I posted graphs of the decline in the homeownership rate, and changes in the homeowner and rental vacancy rates.

Nerd alert: I've mentioned this before, but as a reminder readers should use caution when using the Estimates of the Housing Inventory. The homeownership and vacancy rates come from a survey of a sample of households, but the inventory data is based on two year old housing unit controls. See the discussion at the bottom of Table 4. Estimates of the Total Housing Inventory

The totals shown above have a two-year time lag (4Q2007 uses 2005 housing unit controls from Population Division, which are projected forward and 4Q2008 uses 2006 housing unit controls from Population Division which are projected forward).

We can clearly see the inventory increases are too high for 2007 and 2008. First, the inventory each year increases by the number of housing units completed, minus scrappage and net manufactured homes added (a few scrapped housing units may be rehab'd, but that is minor).

The Census data shows inventory increased by 1.998 million in 2007, and 2.191 million in 2008. These numbers are based on two year old housing unit controls and are clearly way too high. Total completions in 2007 were 1.502 million (plus 95 thousand manufactured homes) and completions were 1.116 million in 2008. Add in some scrappage, and the housing inventory probably increased by less than 1 million in 2008 (less than half the amount the Census Bureau reported this morning).

This is just a reminder that users should use caution when using the inventory numbers.

by Calculated Risk on 2/03/2009 01:51:00 PM

UPDATE: MarketWatch headline: Chrysler U.S. sales down 54.8% to 62,157 vehicles in January

MarketWatch headline: GM U.S. sales fall 48.9% to 128,198 units in January

From the WSJ: Ford's Sales Fall 40%, Toyota's Drop 32%

Toyota Motor Corp. reported a 32% drop, as the Japanese company sold 117,287 vehicles in the U.S. last month. Its passenger-car sales dropped to 67,263 from 94,586, while its light-truck sales fell to 50,024 from 77,263.

Chrysler usually reports last, and they have seen the largest sales declines recently (53% year over year in December).

The good news is auto sales have to be closer to the bottom than the top!

by Calculated Risk on 2/03/2009 12:12:00 PM

From MarketWatch: Ford posts 42.1% drop in January U.S. sales

Ford Motor Co. on Tuesday reported a 42.1% decline in January U.S. sales to 90,596 cars and trucks, down from 156,391 vehicles a year earlier.

This is worse than the 32.4% year over year decline Ford reported in December, and the 31.5% decline reported in November.

GM, Toyota and Chrysler report later today.

by Calculated Risk on 2/03/2009 12:03:00 PM

From the Fed:

The Federal Reserve on Tuesday announced the extension through October 30, 2009, of its existing liquidity programs that were scheduled to expire on April 30, 2009. The Board of Governors and the Federal Open Market Committee (FOMC) took these actions in light of continuing substantial strains in many financial markets.

The Board of Governors approved the extension through October 30 of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Money Market Investor Funding Facility (MMIFF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF). The FOMC also took action to extend the TSLF, which is established under the joint authority of the Board and the FOMC.

In addition, to address continued pressures in global U.S. dollar funding markets, the temporary reciprocal currency arrangements (swap lines) between the Federal Reserve and other central banks have been extended to October 30.
emphasis added

by Calculated Risk on 2/03/2009 10:01:00 AM

So much for the homeownership gains of the last 8+ years. Gone.

This morning the Census Bureau reported the homeownership and vacancy rates for Q4 2008. Here are a few graphs ...

Click on graph for larger image in new window.

The homeownership rate decreased slightly to 67.5% and is now back to the levels of late 2000.

Note: graph starts at 60% to better show the change.

The homeowner vacancy rate was 2.9% in Q4 2008.

A normal rate for recent years appears to be about 1.7%. There is some noise in the series, quarter to quarter, so perhaps the vacancy rate has stabilized in the 2.7% to 2.9% range.

This leaves the homeowner vacancy rate almost 1.2% above normal, and with approximately 75 million homeowner occupied homes; this gives about 900 thousand excess vacant homes.

The rental vacancy rate increased slightly to 10.1% in Q4 2008, from 9.9% in Q3.

It's hard to define a "normal" rental vacancy rate based on the historical series, but we can probably expect the rate to trend back towards 8%. According to the Census Bureau there are close to 40 million rental units in the U.S. If the rental vacancy rate declined from 10.1% to 8%, there would be 2.1% X 40 million units or about 820,000 units absorbed.

This would suggest there are about 820 thousand excess rental units in the U.S.

There are also approximately 150 thousand excess new homes above the normal inventory level (for home builders) - plus some uncounted condos.

If we add this up, 820 thousand excess rental units, 900 thousand excess vacant homes, and 150 thousand excess new home inventory, this gives about 1.87 million excess housing units in the U.S. that need to be absorbed over the next few years. (Note: this data is noisy, so it's hard to compare numbers quarter to quarter, but this is probably a reasonable approximation).

These excess units will keep pressure on housing starts and prices for some time.

I'll have some more later today ...

by Calculated Risk on 2/03/2009 10:00:00 AM

From the NAR: Pending Home Sales Show Healthy Gain

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in December, rose 6.3 percent to 87.7 from an upwardly revised reading of 82.5 in November, and is 2.1 percent higher than December 2007 when it was 85.9.
...
Lawrence Yun, NAR chief economist, said the index shows a modest rebound. “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,” he said. “The biggest gains were in areas with the biggest improvements in affordability.”
emphasis added

Last month the Pending Home Sales Index declined, suggesting a decline in existing home sales for January. This report suggests a rebound in February - but also note Yun's comment - most of this rebound will be in areas with significant foreclosure resales.

Note: Existing home sales are reported at the close of escrow, pending home sales are reported when contracts are signed. The Pending Home Sales index leads existing home sales by about 45 days, so the December report suggests existing home sales will increase from January to February.

by Calculated Risk on 2/03/2009 09:28:00 AM

From the LA Times: Boom in Inland Empire industrial space is beginning to go bust

As the regional economy continues to sputter, vacancy rates are beginning to climb at warehouses and distribution centers for industrial goods, putting the already hard-hit Inland Empire at further risk of decline and threatening facilities in Los Angeles and Orange counties as well.

After years of high occupancy and rapid construction of cargo hubs, immense spaces are now standing empty. Some fell victim to the collapse of retailers such as Mervyns and Wickes Furniture; others are vacant because the huge national falloff in demand for consumer goods has meant fewer imports and less need for storing and shipping them.
...
Industrial vacancy in the Inland Empire doubled in the last year, from 6.2% in the fourth quarter of 2007 to 12.4% at the end of 2008, according to figures just released by brokerage Cushman & Wakefield.

The area is being hit hard by the housing bust - and now by the declines in trade and retail.

by Calculated Risk on 2/03/2009 01:29:00 AM

From Bloomberg: Australia’s Dollar Strengthens After Rate Cut, Stimulus Plan

[T]he government said it will spend A$42 billion ($26.7 billion) on grants and infrastructure to counter the impact of the global financial crisis. The Reserve Bank of Australia lowered its benchmark rate 1 percentage point to 3.25 percent, two hours after the stimulus package was announced.
...
Australia’s stimulus package includes A$12.7 billion in grants to families and low-income earners and A$28.8 billion for infrastructure. It will help send the nation’s budget into a A$22.5 billion deficit, the first shortfall since fiscal 2001-02.

This is about 4% of GDP, or the equivalent of close to a $600 billion stimulus for the U.S. (as percent of GDP). Although Australia had a housing bubble, they also had a budget surplus and a trade surplus - so I think they are in a stronger position than the U.S. or the U.K.

by Calculated Risk on 2/02/2009 09:10:00 PM

This should come as no surprise ...

From Reuters: FDIC seeks to triple Treasury Dept borrowing power

The Federal Deposit Insurance Corp is seeking to more than triple its credit line with the U.S. Treasury Department to $100 billion ... The FDIC and Congress are working to boost the agency's current $30 billion borrowing power ...

The move comes as the FDIC's deposit insurance fund has shrunk due to a significant uptick in bank failures over the past year. The insurance fund's value dropped 24 percent in the 2008 third quarter to $34.6 billion.
...
"They have no immediate need for it, but they just want to make sure they're not constrained in the decision by a lack of the insurance fund," [U.S. Rep. Barney Frank, chairman of the House Financial Services Committee] told reporters ...

"No immediate need". Famous last words.

by Calculated Risk on 2/02/2009 07:38:00 PM

This is a pretty stunning number ...

From the NY Times: Joblessness Jumps Sharply Among China’s Migrants

About 20 million of the total estimated 130 million migrant workers, whose cheap labor underpins China’s manufacturing sector, have been forced to return to rural areas because of lack of work, according to a survey conducted by the Agriculture Ministry that was cited at a briefing.

In late December, employment officials estimated that at least 10 million migrant workers had lost their jobs in the third quarter of 2008 as waves of factories and businesses shut their doors.