RSS Feed by Calculated Risk on 5/21/2009 02:12:00 PM
Thursday, May 21, 2009
California Bay Area Home Sales: "Robust" and "Anemic"
The tale of two cities continues ...
From DataQuick: Bay Area home sales rise again; median price up slightly over March
Bay Area home sales posted a year-over-year gain for the eighth consecutive month in April, with robust sales in lower-cost inland areas once again compensating for anemic sales on the coast. ...Key points (worth repeating):
A total of 7,139 new and resale houses and condos closed escrow in the nine-county Bay Area last month. That was up 12.9 percent from 6,325 in March and up 13.1 percent from 6,310 in April 2008, according to MDA DataQuick of San Diego.
Last month’s sales were the second-lowest for an April since 1995 and were 23.2 percent below the average April sales total back to 1988, when DataQuick’s statistics begin.
Foreclosure resales – homes sold in April that had been foreclosed on in the prior 12 months – accounted for 47.4 percent of Bay Area resales. That was down from 50.2 percent in March and 52.0 percent in February. Last month’s figure was the lowest since foreclosure resales were 46.8 percent of existing home sales last November.
A lower concentration of discounted foreclosure resales in the statistics is one reason the median sale price has recently begun to more or less flatten, or at least erode more slowly, in many markets.
...
Home sales in many high-end areas, especially on the coast, remain at record or near-record-low levels.
In lower-cost communities, first-time buyers have turned to government-insured FHA mortgages, which represented a record 26 percent of all Bay Area home purchase loans in April, up from 3.2 percent a year ago. The combination of FHA financing, steep home price declines and low mortgage rates have fueled record or near-record-high sales this spring in many of the Bay Area’s most affordable, foreclosure-heavy communities.
...
Foreclosure activity remains at historically high levels ...
emphasis added
Hotel RevPAR Off 21.4% Year-over-year
by Calculated Risk on 5/21/2009 11:38:00 AM
Note: HotelNewsNow has a free hotel related newsletter available here. This week they have an update on the Yellowstone Club vs. Credit Suisse case.
And on occupancy and RevPAR from HotelNewsNow.com: STR reports U.S. data for week ending 16 May
In year-over-year measurements, the industry’s occupancy fell 12.6 percent to end the week at 57.8 percent. Average daily rate dropped 10.0 percent to finish the week at US$98.33. Revenue per available room for the week decreased 21.4 percent to finish at US$56.84.
Click on graph for larger image in new window.This graph shows the YoY change in the occupancy rate (3 week trailing average).
The three week average is off 11.3% from the same period in 2008.
The average daily rate is down 10.0%, so RevPAR is off 21.4% from the same week last year.
Philly Fed: Continued Manufacturing Weakness in May
by Calculated Risk on 5/21/2009 10:00:00 AM
Here is the Philadelphia Fed Index released today: Business Outlook Survey.
The region's manufacturing sector continued to show weakness in May ... Although the indexes for general activity, shipments, and employment improved, the index for new orders declined slightly. ... Most of the survey's broad indicators of future activity improved notably again this month, suggesting that the region's manufacturing executives are more optimistic that a recovery will occur over the next six months.
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -24.4 in April to -22.6 this month. Although an indication of continued overall decline, this reading is the index's highest since last September; it has now edged higher for three consecutive months. Still, the index has been negative for 17 of the past 18 months, a span that corresponds to the current recession.
...
Broad indicators of future activity showed improvement again this month. The future general activity index remained positive for the fifth consecutive month and increased 11 points, from 36.2 in April to 47.5. The index has now increased 33 points in the past two months (see Chart).
Click on graph for larger image in new window.This graph shows the Philly index for the last 40 years.
"The index has been negative for 17 of the past 18 months, a span that corresponds to the current recession."
Unemployment Claims: Continued Claims at Record 6.66 Million
by Calculated Risk on 5/21/2009 08:34:00 AM
The DOL reports on weekly unemployment insurance claims:
In the week ending May 16, the advance figure for seasonally adjusted initial claims was 631,000, a decrease of 12,000 from the previous week's revised figure of 643,000. The 4-week moving average was 628,500, a decrease of 3,500 from the previous week's revised average of 632,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending May 9 was 6,662,000, an increase of 75,000 from the preceding week's revised level of 6,587,000.
Click on graph for larger image in new window.The first graph shows weekly claims and continued claims since 1971.
The four-week moving average is at 628,500, off 30,250 from the peak 6 weeks ago.
Continued claims are now at 6.66 million - an all time record.
Typically the four-week average peaks near the end of a recession. There is a reasonable chance that claims have peaked for this cycle, but it is still too early to be sure, and if so, continued claims should peak soon.
The level of initial claims (631 thousand) is still very high, indicating significant weakness in the job market.
Wednesday, May 20, 2009
Report: BofA Wants to Repay TARP in 2009
by Calculated Risk on 5/20/2009 11:46:00 PM
From the Financial Times: BofA seeks to repay $45bn by end of year
Bank of America wants to pay back $45bn in bail-out funds by the end of the year, in a faster-than-expected move made possible by an accelerated programme to raise capital.Stop laughing!
BofA is on track to raise more than $35bn in capital by the end of September...
People familiar with the bank’s plans say negotiations to sell some of BofA’s non-core assets are under way and, if the asset sales occur in the next few months, the bank will be able to fulfil its stress-test obligations and pay back Tarp funds from its $173bn cash reserves.
Plenty of info today:
best to all.
Residential Rental Market and Inflation
by Calculated Risk on 5/20/2009 08:15:00 PM
Goldman Sachs tracks the rents at a large number of apartment REITs - and rents are now falling (excerpted from research report with permission):
REITs tend to adjust more rapidly to changing market conditions than the typical landlord, so changes in their behavior are useful signals of turns in the market ... Public REITs typically report the rent increases they have achieved on a year-over-year, comparable-unit basis with each quarterly filing. ... [the tracked] REITS managed 300,000 units that were comparable to the year-before period in the first quarter of 2009 ... In the first quarter of 2009, the major REITs collectively reported an outright decline in rents for the first time since 2004.Goldman notes that declining rents for REITS typically lead declines in the CPI measures of rent: Owners' equivalent rent of primary residence (OER) and Rent of primary residence.
The following graph shows the year-over-year (YoY) in the REIT rents (from Goldman), Owners' equivalent rent of primary residence and Rent of primary residence (both from the BLS). The Apartment Tightness Index from the National Multi Housing Council is on the right Y-axis.
Click on graph for larger image in new window.This graph shows that the Apartment Tightness Index leads REIT rents, and that the BLS measures of rent follow.
This suggests further declines in the YoY REIT rents, and future disinflation for the BLS measures of rent.
This is important for house prices too. With falling rents, house prices need to fall further to bring the house price-to-rent ratio back to historical levels.
Pension Benefit Guaranty Corporation Deficit Increases
by Calculated Risk on 5/20/2009 06:28:00 PM
From Eric Lipton at the NY Times: Bankruptcies Swell Deficit at Pension Agency to $33.5 Billion
The deficit at the federal agency that guarantees pensions for 44 million Americans more than doubled in the last six months to a record high, reaching $33.5 billion ...Here is the PBGC statement: PBGC Deficit Climbs to $33.5 Billion at Mid-Year, Snowbarger to Tell Senate Panel
The Pension Benefit Guaranty Corporation, as of October, had faced a shortfall of $11 billion. But the combined effect of lower interest rates, losses on its investment portfolio and the increase in the number of companies filing for bankruptcy protection resulted in a deepening of its estimated deficit, officials said Wednesday.
...
With the bankruptcy of Chrysler and a possible similar move by General Motors, the agency is facing a record surge in demand. The new deficit estimate takes into account both pensions it has taken over in the last six months, and others it believes it will have to assume control of soon.
The $22.5 billion deficit increase was due primarily to about $11 billion in completed and probable pension plan terminations; about $7 billion resulting from a decrease in the interest factor used to value liabilities; about $3 billion in investment losses; and about $2 billion in actuarial charges.Last year the PBGC voted to allow equity investments, but luckily the entire portfolio wasn't moved into equities - and they only lost $3 billion on their $56 billion asset portfolio.
Snowbarger notes that as of April 30, the PBGC’s investment portfolio consisted of 30 percent equities, 68 percent bonds, and less than 2 percent alternatives, such as private equity and real estate. All the agency’s alternative investments have been inherited from failed pension plans.
Unfortunately there is much more to come:
The PBGC is closely monitoring companies in the auto manufacturing and auto supply industries. According to PBGC estimates, auto sector pensions are underfunded by about $77 billion, of which $42 billion would be guaranteed in the event of plan termination. The pension insurer also faces increased exposure from weak companies across all sectors of the economy, including retail, financial services and health care.With companies moving away from defined benefit plans, there will be fewer companies paying for insurance in the future - so the PBGC will probably have to be bailed out.
Market Précis
by Calculated Risk on 5/20/2009 04:00:00 PM
By popular demand ...
| 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 compares four significant bear markets: the Dow during the Great Depression, the NASDAQ, the Nikkei, and the current S&P 500. See Doug's: "The Mega-Bear Quartet and L-Shaped Recoveries". |
| The third graph shows the S&P 500 since 1990. The dashed line is the closing price today. The market is only off 42% from the peak. |  |
FOMC Minutes for April
by Calculated Risk on 5/20/2009 02:01:00 PM
From the Fed: Minutes of the Federal Open Market Committee April 28-29, 2009
Some FOMC members suggested buying more Treasury securities:
Members also agreed that it would be appropriate to continue making purchases in accordance with the amounts that had previously been announced—that is, up to $1.25 trillion of agency MBS and up to $200 billion of agency debt by the end of this year, and up to $300 billion of Treasury securities by autumn. Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery; all members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases. The Committee reaffirmed the need to monitor carefully the size and composition of the Federal Reserve’s balance sheet in light of economic and financial developments.The economic projections are near the end. Although the Fed lowered their economic outlook (compared to January), they are still fairly optimistic. As an example, the central tendency for GDP growth in 2010 is 2% to 3%, not far below trend growth, and above trend growth in 2011 (3.5% to 4.8% central tendency of projections). The Fed is also optimistic about the unemployment rate peaking below 10% later this year or in early 2010. In January, the members saw unemployment peaking in 2009, and the central tendency for unemployment was 8.5% to 8.8% in 2009 - we are already at 8.9% in April!
emphasis added
D.O.T.: U.S. Vehicle Miles off 1.2% YoY in March
by Calculated Risk on 5/20/2009 01:32:00 PM
The Dept of Transportation reports on U.S. Traffic Volume Trends:
Travel on all roads and streets changed by -1.2% (-3.1 billion vehicle miles) for March 2009 as compared with March 2008. Travel for the month is estimated to be 245.1 billion vehicle miles.
Click on graph for larger image in new window.The first graph shows the annual change in the rolling 12 month average of U.S. vehicles miles driven. Note: the rolling 12 month average is used to remove noise and seasonality.
By this measure, vehicle miles driven are off 3.3% Year-over-year (YoY); the decline in miles driven was worse than during the early '70s and 1979-1980 oil crisis. However miles driven - compared to the same month of 2008 - has only been off about 1% for the last couple months.
The second graph shows the comparison of month to the same month in the previous year as reported by the DOT. As the DOT noted, miles driven in March 2009 were 1.2% less than in March 2008.
Year-over-year miles driven started to decline in December 2007, and really fell off a cliff in March 2008. Although this data isn't seasonally adjusted, it appears that miles driven has stabilized.
