by Calculated Risk on 8/13/2009 01:51:00 PM

From HotelNewsNow.com: STR reports US performance for week ending 8 August 2009

In year-over-year measurements, the industry’s occupancy fell 7.5 percent to end the week at 65.9 percent. Average daily rate dropped 9.7 percent to finish the week at US$97.32. Revenue per available room for the week decreased 16.5 percent to finish at US$64.10.

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 7.3% from the same period in 2008.

The average daily rate is down 9.7%, and RevPAR is off 16.5% from the same week last year.

Comments: This is a multi-year slump. Although the occupancy rate was off 7.5 percent compared to last year, the occupancy rate is off about 11 percent compared to the same week in 2007.

As I noted last week, the end of July and beginning of August is the peak leisure travel period. The peak occupancy rate for 2009 was probably three weeks ago at 67%.

And that is far below normal ... and it is all downhill from here for the rest of the year.

Note: Graph doesn't start at zero to better show the change.

Business travel is off much more than leisure travel, so the summer months are not as weak as other times of the year. September will be the real test for business travel.

Meanwhile supply is still growing at about 3% this year, see here:

STR projects that at the end of 2009, supply will be up 3.0 percent, demand will be down 5.5 percent, occupancy will decline 8.4 percent, average daily rate will drop 9.7 percent, and revenue per available room will be down 17.1 percent.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/13/2009 11:31:00 AM

From Reuters: Bank of America sues Colonial for $1 bln in loans, cash

Bank of America Corp sued Colonial BancGroup Inc for more than $1 billion in loans and cash ... Bank of America, which was the collateral agent for certain loans of Ocala Funding LLC, said Colonial refused to return more than $1 billion of loans and cash which it held as a custodian, agent and bailee. Ocala Funding was a commercial paper vehicle sponsored by Taylor, Bean & Whitaker Mortgage Corp (TBW)....

Bank of America sought an emergency injunctive relief in a complaint filed with a U.S. federal court in Florida on Wednesday. ... The case is In re : Bank of America National Association vs Colonial Bank and John Doe, U.S. District Court, Southern District of Florida, Miami Division 1:09-cv-22384-AJ.

It appears the FDIC is doing a little housekeeping (SEC 8-K filing):

Colonial Bank ... received notice on August 10, 2009 from the Federal Deposit Insurance Corporation ... directing CBG Florida REIT Corp., an indirect subsidiary of the Bank, to exchange all outstanding shares of its Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Stock, Class A, Series A ... for an equal amount of Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Stock, Series A of BancGroup

Colonial appears to be in tatters, and my guess is the FDIC will seize the bank, before they find a buyer for the assets, and operate the bank as conservator. (like with IndyMac last year).

by Calculated Risk on 8/13/2009 10:09:00 AM

From RealtyTrac:

RealtyTrac ... today released its July 2009 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 360,149 U.S. properties during the month, an increase of nearly 7 percent from the previous month and an increase of 32 percent from July 2008. The report also shows that one in every 355 U.S. housing units received a foreclosure filing in July.

“July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” noted James J. Saccacio, chief executive officer of RealtyTrac. “Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

Something to remember: questions have been raised before about the RealtyTrac numbers (see Foreclosure numbers don’t add up), and RealtyTrac has only been tracking these numbers since 2005. For California, I use the DataQuick numbers for NOD activity (released quarterly), and available since the early '90s - but that is just one state.

by Calculated Risk on 8/13/2009 08:31:00 AM

On a monthly basis, retail sales decreased 0.1% from June to July (seasonally adjusted), and sales are off 8.3% from July 2008 (retail ex food services decreased 9.3%).

The following graph shows the year-over-year change in nominal and real retail sales since 1993.

Click on graph for larger image in new window.

To calculate the real change, the monthly PCE price index from the BEA was used (July PCE prices were estimated as the average increase over the previous 3 months).

Real retail sales declined by 8.4% on a YoY basis.

The second graph shows real retail sales (adjusted with PCE) since 1992. This is monthly retail sales, seasonally adjusted.

NOTE: The graph doesn't start at zero to better show the change.

This shows that retail sales fell off a cliff in late 2008, and may have bottomed - but at a much lower level.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $342.3 billion, a decrease of 0.1 percent (±0.5%)* from the previous month and 8.3 percent (±0.7%) below July 2008. Total sales for the May through July 2009 period were down 9.0 percent (±0.5%) from the same period a year ago. The May to June 2009 percent change was revised from +0.6 percent (±0.5%) to +0.8 percent (±0.2%).

Maybe the cliff diving is over, but retail sales are still at the bottom of the cliff ...

by Calculated Risk on 8/13/2009 08:30:00 AM

The DOL reports weekly unemployment insurance claims increased to 558,000:

In the week ending Aug. 8, the advance figure for seasonally adjusted initial claims was 558,000, an increase of 4,000 from the previous week's revised figure of 554,000. The 4-week moving average was 565,000, an increase of 8,500 from the previous week's revised average of 556,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Aug. 1 was 6,202,000, a decrease of 141,000 from the preceding week's revised level of 6,343,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 8,500 to 565,000, and is now 93,750 below the peak of 18 weeks ago. It appears that initial weekly claims have peaked for this cycle.

The number is still very high (at 558,000), indicating significant weakness in the job market. The four-week average of initial weekly claims will probably have to fall below 400,000 before the total employment stops falling.

The DOL report shows seasonally adjusted insured unemployment at 6.2 million, down from a peak of about 6.9 million. This raises the question of how many unemployed workers have exhausted their regular unemployment benefits (Note: most are still receiving extended benefits, although this is about to change).

The monthly BLS report provides data on workers unemployed for 27 or more weeks, and here is a repeat of that graph ...

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are almost 5.0 million workers who have been unemployed for more than 26 weeks (and still want a job). This is 3.2% of the civilian workforce.

It is more difficult to calculate the number of workers who have exhausted their extended claims, but that number is expected to rise sharply over the next few months.

by Calculated Risk on 8/13/2009 12:35:00 AM

Jim doesn't think much of this deal ...

by Calculated Risk on 8/12/2009 07:13:00 PM

Here is some national data on the number of distressed sales in Q2, and the types of homebuyers. This is from a survey by Campbell Communications (excerpted with permission).

Source: Summary Report--Real Estate Agents Report on Home Purchases and Mortgages, Campbell Communications, June 2009

Click on graph for larger image in new window.

The Campbell survey broke REOs down into damaged and move-in ready.

According to this national survey of real estate agents, over 63% of sales were distressed sales in Q2. This is higher than the numbers reported by NAR. From NAR:

Distressed properties ... accounted for 31 percent of sales in June ... Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April ...

The Campbell numbers seem high to me. In Sacramento over 70% of sales in June were distressed, and I'd expect that area to well above the national level. But the NAR numbers seem low.

The second graph breaks out sales by buyer type.

According to the Campbell survey over 70% of sales in Q2 were to first-time buyers and investors.

Although we don't have historical data for distressed properties - or buyer types - this does suggest a market that is far from normal with few move-across or move-up buyers.

by Calculated Risk on 8/12/2009 04:39:00 PM

From California AG Jerry Brown: Brown Orders Mortgage Foreclosure Consultants to Post $100,000 Bond or Face Prosecution (ht Matt at O.C. Register)

Threatening possible criminal and civil prosecution, Attorney General Edmund G. Brown Jr. today ordered 386 mortgage foreclosure consultants to post $100,000 bonds and register with his office.

He also ordered more than two dozen companies to justify suspicious loan modification claims made in "slick advertising," online and through the mail.
...
Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area.
...
The State Bar of California today announced that it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities.

And check out some of this advertising that Brown demanded loan consultants substantiate:

· Brown directed Irsfeld, Irsfeld & Younger, LLP as corporate counsel for JL Richman, doing business as Home Retention Programs of Glendale, Calif. to substantiate its claims including: "Our team has 10 years of success in negotiating 90% of all mortgage loan modification requests to a successful outcome….For the modification requests we accept, our modification failure rate is less than 1%."

· Brown directed 21st Century Real Estate Investment Corporation of Rancho Cucamonga to substantiate its written solicitations including: "[y]our proposed loan modification is a 30 year fixed/3.5% interest rate with a monthly payment of $495. Your monthly savings is $705. Total savings over a 30-year period is $253,800. . . . Your first payment will be negotiated to begin March 2009 - payable to your current lender for $495."

· Brown directed Mortgage Modification Solutions of Irvine to substantiate its claims including: "Our services are due to the FEDERAL MANDATE which makes it mandatory for mortgagees, upon the default of a single family mortgage, to engage in loss mitigation actions" and "Why $3995.00 is nothing compared to what you can accomplish in return? #1- It's 10 times more expensive to hire a CPA or a Financial Advisor to exclusively analyze & Research your financial affairs to create a plan acceptable to the Banking standards."

· Brown directed Alliance Law Center of San Diego to substantiate its letters to consumers stating: "Final Notice: 3/11/09, our review of certain information indicates you may be a victim of federal disclosure violations and/or predatory lending violations, therefore your loan may be invalid, and you may qualify for a loan modification saving you thousands of dollars."

The tips on avoiding scams can't be repeated enough.

by Calculated Risk on 8/12/2009 02:15:00 PM

From the FOMC:

Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
emphasis added

by Calculated Risk on 8/12/2009 01:08:00 PM

I just reread the previous Fed statement to refresh my mind on a few key sentences. Here is the statement from the June 24th meeting.

On the Fed funds rate, I expect no change to this sentence: "The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

But I expect some changes to the economic conditions paragraph. The key phrase last month was "the pace of economic contraction is slowing", and it will be interesting to see if the Fed sees the end of contraction now.

As I noted last week, the $300 billion program to buy Treasury securities is almost over, so there will probably be a comment on this program. More in an hour ...