by Calculated Risk on 4/08/2009 12:26:00 PM

From Bloomberg: Pulte to Buy Centex for $1.3 Billion in Survival Bid

Pulte Homes Inc. agreed to buy Centex Corp. for $1.3 billion in an all-stock deal that creates the largest U.S. homebuilder by revenue ...

“This is really good because not only are there too many homes, there are too many homebuilders,” said Vicki Bryan, a senior high-yield bond analyst for New York-based Gimme Credit LLC.
...
Because of complementary geographic presence and market segments, the new company will save $350 million annually, [Pulte Chief Executive Officer Richard Dugas] said.

This is a stock swap (no cash).

Dugas talks about signs of a housing bottom, but the last sentence makes it clear that this merger is about layoffs and cost savings.

by Calculated Risk on 4/08/2009 11:06:00 AM

From Carolyn Said at the San Francisco Chronicle: Banks aren't reselling many foreclosed homes (ht Starburst)

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources.
...
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac ...

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania.
...
In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.

For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.

I'm not convinced. There might just be a built in a lag between when the banks foreclose to when the properties are finally sold. Instead of using aggregate statistics, it would probably be better to do a survey - follow some number of foreclosures and see what happens to them each month.

by Calculated Risk on 4/08/2009 09:18:00 AM

Roger Vincent writes in the LA Times: Apartment rents fall in Southern California

... The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. The decline should continue this year as more renters lose their jobs, according to the annual USC Casden Forecast expected to be released by the university today.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.
...
Orange County is generally stronger than the rest of the region, the report said, though rents came down 2% last year ...

Falling rents. Rising vacancies. Same story for apartments, malls, and offices ...

by Calculated Risk on 4/08/2009 12:32:00 AM

From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

Retail vacancies at shopping centers were the highest since Reis began publishing quarterly data in 1999 and reflected a net decrease in occupied space of 8.7 million square feet, the biggest drop for a single quarter and more than the 8.65 million square feet given back during all of 2008.

Rents paid by tenants fell 1.8 percent from the previous quarter and 2.9 percent from a year ago ...

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Vacancies at regional malls and super-regional malls ... climbed to 7.9 percent from 7.1 percent in the fourth quarter and 5.9 percent a year earlier ...

Click on image for larger graph in new window.

This graph shows the strip mall vacancy rate since Q2 2007.

Double digits, here we come ...

More from Reuters: Vacancies soar at US strip and regional malls-Reis

Barring a significant economic change, Reis does not expect vacancies to stabilize until sometime in the middle of 2012 if an overall U.S. economic recovery appears next year.

by Calculated Risk on 4/07/2009 09:25:00 PM

The WSJ reports: Treasury Plans to Extend TARP to Life Insurers

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift...

This is apparently for life insurers that are bank holding companies or own a thrift. These bank holding were already eligible for TARP money.

The WSJ mentions that Prudential, Hartford, and Lincoln National have all applied.

by Calculated Risk on 4/07/2009 05:39:00 PM

From Reuters: US apartment market worsens with economy--Reis

... The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as "we are arguably only at the beginning of the current downturn."

Behind the rising vacancy rate is a build-up of available apartments ...

Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.

This puts more pressure on house prices, and also raises more questions about the BLS measure of "Owners' equivalent rent" (that is showing an increase).

With new supply coming online, and families doubling up, it appears rents will decline for some time. Here are some comments from BRE properties in February:

We believe we are looking at a negative rent curve for the next two years.

We believe on a composite basis, market rents in 2009 could fall between 3 and 6% from peak levels in 2008. And the rent cuts in 2010 could be deeper ...

by Calculated Risk on 4/07/2009 03:48:00 PM

More volatility ...

Dow down 2.3% (7,789)

S&P 500 down 2.4%

NASDAQ down 2.8%

Click on graph for larger image in new window.

The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

The second graph shows the S&P 500 since 1990.




The dashed line is the closing price today.

This puts the recent rally into perspective - the S&P is still off almost 50% from the 2007 high.

by Calculated Risk on 4/07/2009 03:25:00 PM

From Bloomberg: Manhattan Office Rents Fall Most in Quarter Century (ht Bob_in_MA)

Manhattan office rents ... dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today. The decline is the most in records dating back to 1984 ...

“It’s gone beyond the financial firms,” Joseph Harbert, Cushman & Wakefield’s chief operating officer for the New York region, said in a telephone interview. “It’s broad across a lot of industries. ... Rents are “falling faster than they did in the last two recessions.”

Sharply falling rents. Hoocoodanode?

by Calculated Risk on 4/07/2009 02:27:00 PM

From Reuters: Source: Bank 'stress test' results delayed (ht Branden DD49)

The U.S. Treasury Department is planning to delay the release of any completed bank "stress test" results ...

The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.
...
The source ... said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.

The original time frame was no later than the end of April, so this is still on schedule. We definitely need institution-specific results.

by Calculated Risk on 4/07/2009 12:06:00 PM

From Reuters: GM shares skid on bankruptcy preparation news

... a source familiar with the company's plans told Reuters it was in "intense" and "earnest" preparations for a possible bankruptcy filing.

Also from Reuters: U.S. carmakers at 70 percent risk of bankruptcy: Moody's

Moody's Investors Service said it still sees a 70 percent chance of bankruptcy for Detroit's automakers ... "Given the lack of progress achieved and the additional progress that will be required in the revised plans, this threat will need to be seen as credible in order to compel adequate movement on the part of stakeholders," Moody's said in a note dated Monday.

At least this story has an expiration date (another 52 days for GM, 22 days for Chrysler).