by Calculated Risk on 12/10/2009 11:16:00 AM

From HotelNewsNow.com: Luxury leads occupancy increases for second week in STR weekly numbers

Overall, in year-over-year measurements, the industry’s occupancy fell 4.9 percent to end the week at 47.6 percent, average daily rate dropped 7.3 percent to US$96.25, and revenue per available room decreased 11.9 percent to US$45.86.

Click on graph for larger image in new window.

This graph shows the occupancy rate by week for each of the last four years (2006 through 2009 labeled by start of month).

Notes: the scale doesn't start at zero to better show the change. Thanksgiving was later in 2008 and 2009, so the dip doesn't line up with the previous years.

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

This is a two year slump for the hotel industry. Although occupancy is off 4.9% compared to 2008, occupancy is off about 17% compared to the same week in 2006.

Leisure travel (weekend occupancy) is off only about 2% compared to the same week in 2008, but business travel (weekday occupancy) is off more suggesting no pickup in business travel - see the graph in the HotelNewsNow report.

by Calculated Risk on 12/10/2009 08:59:00 AM

The Census Bureau reports:

The ... total October exports of $136.8 billion and imports of $169.8 billion resulted in a goods and services deficit of $32.9 billion, down from $35.7 billion in September, revised. October exports were $3.5 billion more than September exports of $133.4 billion. October imports were $0.7 billion more than September imports of $169.0billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through October 2009.

Imports and exports increased in October. On a year-over-year basis, exports are off 9% and imports are off 19%.

The second graph shows the U.S. trade deficit, with and without petroleum, through October.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices decreased slightly to $67.39 in October - still up more than 50% from the prices in February (at $39.22) - and the decline followed seven consecutive monthly increases in the price of oil.

Oil import volumes dropped sharply in October, and the decline in oil imports was the major contributor to decrease in the trade deficit.

by Calculated Risk on 12/10/2009 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Dec. 5, the advance figure for seasonally adjusted initial claims was 474,000, an increase of 17,000 from the previous week's unrevised figure of 457,000. The 4-week moving average was 473,750, a decrease of 7,750 from the previous week's revised average of 481,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Nov. 28 was 5,157,000, a decrease of 303,000 from the preceding week's revised level of 5,460,000.

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 decreased this week by 7,750 to 473,750. This is the lowest level since October 2008.

Although falling, the level of the 4 week average is still high, suggesting continuing job losses.

by Calculated Risk on 12/10/2009 12:17:00 AM

See update below for an earlier use of "toxic titles".

Just another addition to the crisis lexicon ... "toxic titles" ... from Fed Governor Elizabeth Duke: Keys to Successful Neighborhood Stabilization (ht Brian)

Communities with weak underlying economies are characterized by a long trend of population loss, gradual impoverishment, and strained municipal resources. For cities like Cleveland, Detroit, and Indianapolis the increase in foreclosures over the last few years has exacerbated a pre-existing vacancy problem. The increased rates of foreclosures and the related economic downturn have hastened a cycle of decreasing property values. Declines in state and local property and sales tax revenues result in even more vacant homes and deteriorating neighborhoods.

Many community organizations and homeowners have been frustrated by the difficulties of working with mortgage lenders and servicers, and these problems are even more exaggerated in weaker market cities. In the most devastated neighborhoods, some lenders do not even complete the foreclosure process or record the outcome of foreclosure sales because the cost of foreclosing exceeds the value of the property. Anecdotal evidence suggests that these "toxic titles" have placed significant numbers of properties in a difficult state of legal limbo.

I've seen toxic titles before in downturns with properties listed for $1 and still no takers ...

UPDATE: Here is an earlier use of "toxic titles" from an article by Mary Kane in Jan 2008: ‘Toxic Titles’ Haunt Cities in Mortgage Meltdown

'Walkaways wind up with “toxic titles,’’ [Kermit Lind, a Cleveland law professor who specializes in housing cases] says. The mortgage company retains a lien, or a charge, on the house, but the borrower still is considered the owner. The property sits in limbo, with the mortgage usually exceeding what it would sell for, because of its decline. If the city has to tear it down, it adds its own $8,000 to $10,000 demolition lien. Not surprisingly, potential buyers aren’t exactly lining up. Non-profit neighborhood groups that could fix up the property face long and expensive legal battles to claim it.

by Calculated Risk on 12/09/2009 09:09:00 PM

Mark Whitehouse writes about the advantages of renting in the WSJ: American Dream 2: Default, Then Rent (ht Pat)

Whitehouse describes one former homeowner with a monthly income of $8,300. He was paying $4,800 a month on his home and he was basically working to pay his mortgage. He was really a "debt owner" since the home was worth far less than the amount owed. He now rents a similar home for $2,200 a month and is enjoying life:

[H]e now has the wherewithal to do things he couldn't when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.

"I don't know if I'll buy another house again, because it's such a huge headache," he says.

This is one of the tragedies of the housing bubble - it encouraged people to become homeowners before they were really ready and also encouraged them to buy too much home (58% DTI for the mortgage is definitely "house poor"). Many of these people will not buy again for years, if ever.

The article also mentions the "stealth stimulus" from all the delinquencies:

For the 4.8 million U.S. households that ... haven't paid their mortgages in at least three months, the added cash flow could amount to about $5 billion a month ... "It's a stealth stimulus," says Christopher Thornberg of Beacon Economics ...

by Calculated Risk on 12/09/2009 07:04:00 PM

From KTLA: Home of Subprime Lender Targeted by Violent Robbers (ht WestSac_grrl)

Three suspects are under arrest after a violent home invasion robbery in a gated Newport Beach community ... The home is owned by Daniel Sadek, a prominent former subprime lender.
...
Police did not immediately know whether the men who invaded Sadek's home were collecting on a debt or were there to rob him. They were taking cash and jewelry ...

Sadek made and lost a fortune in the subprime mortgage business. Quick Loan Funding, which he founded in 2002, wrote about $4 billion in subprime mortgages before it collapsed in 2007

The house was the scene of a fire two weeks ago.

There is no evidence of a connection to the collapse of Quick Loan.

by Calculated Risk on 12/09/2009 03:53:00 PM

From Maria Bartiromo at CNBC: Citi Plans to Repay TARP Via Stock Offering: Sources

Citigroup plans to pay back some of the $45 billion in TARP money it received last year by raising capital through a stock offering, CNBC has learned.

An announcement could come as early as Thursday.

Are the regulators sure they have enough capital?

by Calculated Risk on 12/09/2009 03:02:00 PM

With the Ten Year Treasury yield at 3.42%, I was wondering what that would mean for mortgage rates.

Click on graph for larger image.

This graph is from Political Calculations: Predicting Mortgage Rates and Treasury Yields (based on one of my posts).

Using their calculator and a Ten Year Yield of 3.42%, we would expect the 30 year Freddie Mac fixed mortgage rate to be around 5.38%. Of course it is lower than expected - as it has been from most of the year - and some of the difference from the expected rate is probably due to the Fed's MBS purchases (also prepayment speed is a factor - and also just randomness).

The following table shows the difference between the expected and actual rate for the last 6 months. This suggests that mortgage rates will rise about 30 to 50 bps relative to the Ten Year Treasury yield when the Fed stops buying MBS.

	Ten Year Treasury Yield	Expected Mortgage Rate	Freddie Mac Mortgage Rate	Spread
May	3.28%	5.28%	4.86%	0.42%
June	3.71%	5.59%	5.42%	0.17%
July	3.54%	5.46%	5.22%	0.24%
Aug	3.58%	5.49%	5.19%	0.30%
Sep	3.39%	5.36%	5.06%	0.30%
Oct	3.37%	5.34%	4.95%	0.39%
Nov	3.40%	5.36%	4.88%	0.48%
Average				0.33%

by Calculated Risk on 12/09/2009 12:40:00 PM

“Has there been one financial leader to say this is really excessive? Wake up, gentlemen. Your response, I can only say, has been inadequate.”
Paul Volcker, former Fed Chairman, Dec 8, 2009

From The Times: ‘Wake up, gentlemen’, world’s top bankers warned by former Fed chairman Volcker

“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence,” said Mr Volcker ... He said that financial services in the United States had increased its share of value added from 2 per cent to 6.5 per cent, but he asked: “Is that a reflection of your financial innovation, or just a reflection of what you’re paid?”

And from the Telegraph: Ex-Fed chief Paul Volcker's 'telling' words on derivatives industry

"You can innovate as much as you like, but do it within a structure that doesn't put the whole economy at risk."
...
Mr Volcker argued that banks did have a vital role to play as holders of deposits and providers of credit. This importance meant it was correct that they should be "regulated on one side and protected on the other". He said riskier financial activities should be limited to hedge funds to whom society could say: "If you fail, fail. I'm not going to help you. Your stock is gone, creditors are at risk, but no one else is affected."

by Calculated Risk on 12/09/2009 09:27:00 AM

From the Association of American Railroads: Rail Time Indicators

Click on graph for larger image in new window.

This graph shows U.S. average weekly rail carloads. This can be a little misleading because the data is impacted by the Thanksgiving holiday, and most of the decline is in coal. (see the notes below)

From AAR:

• In November 2009, U.S. freight railroads originated 1,089,077 carloads, an average of 272,269 carloads per week. That’s down 8.2%, or 96,900 carloads, from November 2008’s 1,185,977 carloads (when the weekly average was 296,494 carloads) and down 17.4% from November 2007’s 1,318,023 total (a weekly average of 329,506 carloads).

• Coal had 78,535 fewer carloads in November 2009 than November 2008, accounting for most of the 96,900 total carload decline for the month.

• U.S. intermodal traffic (which isn’t included in carload figures) totaled 794,184 trailers and containers in November 2009, an average of 198,546 per week. That’s down 6.7% from November 2008 (when the weekly average was 212,879 units) and down
14.1% from November 2007, when the weekly average was 231,124.

• Freight railroading is a 24/7/365-days a year business, but Thanksgiving week is always one of the lowest-volume weeks of the year and therefore holds down the November average.

• If Thanksgiving week were excluded, November would have been the highest volume month for U.S. railroads since November 2008 for both carload and intermodal traffic.

The AAR report has a number of other graphs for various sectors like autos and housing. As an example they compare U.S. Housing Starts with U.S. and Canadian Rail Carloads of Lumber, Wood & Forest Products.