by Calculated Risk on 4/15/2011 08:30:00 AM

From the NY Fed: Empire State Manufacturing Survey

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved at an accelerated pace in April. The general business conditions index rose for a fifth consecutive month, reaching 21.7, its highest level in a year [up from 17.5]. The new orders index jumped 17 points, to 22.3, and the shipments index shot up 27 points to 28.3. The indexes for both prices paid and prices received rose to their highest levels in more than a year, indicating that price increases continued to accelerate.

The index for number of employees climbed to 23.1 [from 9.1], while the average workweek index edged down to 10.3. Future indexes continued to convey great optimism about the six-month outlook, and the capital spending and technology spending indexes were noticeably higher.

This was above expectations of a reading of 17.0. This is the first regional survey released for April and shows that manufacturing is continuing to expand.

Note: I'll post on inflation later when the median CPI is available. The BLS reported:

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in March on a seasonally adjusted basis ... The index for all items less food and energy rose 0.1 percent in March, a smaller increase than in the previous two months."

by Calculated Risk on 4/14/2011 11:57:00 PM

Voit released their Q1 CRE reports today. These reports are for several cities in the west: Los Angeles, San Diego, Orange County, Las Vegas, and more (these are for several categories of CRE - offices, retail, industrial). There is plenty of detail for those interested in CRE.

The following graphs show vacancy rate vs. new deliveries for offices in Orange County, San Diego and for the Inland Empire.

Click on graph for larger image in new window.

The first graph is from Voit for Orange County (not labeled).

New deliveries stopped a little earlier in Orange County than in some other areas, possibly because of all the subprime companies going under in 2007.

The fewer deliveries have helped, and the vacancy rate is starting to fall. But look back at the '90s - it took several years of falling vacancy rates before new deliveries started hitting the market. It will probably be a few years again this time too.

The 2nd graph is for San Diego (only back to 1999 - so we can't see the early '90s bust).

For San Diego, new deliveries didn't stop completely, and the vacancy rate has only declined slightly. Still net absorption is positive, but there probably won't be much new construction for a few years.

The last graph is for the Inland Empire.

Once again new deliveries have slowed sharply, but the vacancy rate still increased slightly in Q1.

The good news for employment and GDP is that new office construction in these areas can't fall much further. The bad news for construction employment and GDP is that construction probably won't increase significantly for a few years.

by Calculated Risk on 4/14/2011 07:44:00 PM

From the CDC: CDC Study Finds Suicide Rates Rise and Fall with Economy

The overall suicide rate rises and falls in connection with the economy, according to a Centers for Disease Control and Prevention study released online today by the American Journal of Public Health. The study, "Impact of Business Cycles on the U.S. Suicide Rates, 1928–2007" is the first to examine the relationships between age-specific suicide rates and business cycles. The study found the strongest association between business cycles and suicide among people in prime working ages, 25-64 years old.
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• The overall suicide rate generally rose in recessions like the Great Depression (1929-1933), the end of the New Deal (1937-1938), the Oil Crisis (1973-1975), and the Double-Dip Recession (1980-1982) and fell in expansions like the WWII period (1939-1945) and the longest expansion period (1991-2001) in which the economy experienced fast growth and low unemployment.

• The largest increase in the overall suicide rate occurred in the Great Depression (1929-1933)—it surged from 18.0 in 1928 to 22.1 (all-time high) in 1932 (the last full year in the Great Depression)—a record increase of 22.8% in any four-year period in history. It fell to the lowest point in 2000.

• Suicide rates of two elderly groups (65-74 years and 75 years and older) and the oldest middle-age group (55-64) experienced the most significant decline from 1928 to 2007.

There is no data yet for the recent recession, but suicide rates probably increased significantly. This is another impact of the housing bubble - and there is no recovery for the families who lost someone to suicide.

The good news in this study is the long term decline in elderly suicide rates, probably because of improved access to medical care.

by Calculated Risk on 4/14/2011 05:03:00 PM

Here is the weekly update on hotels from HotelNewsNow.com: Upper-upscale segment tops weekly increases

Overall, the U.S. hotel industry’s occupancy was up 4.8% to 62.0, ADR increased 4.7% to US$101.22, and RevPAR finished the week up 9.8% to US$62.80.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

Click on graph for larger image in graph gallery.

This graph shows the seasonal pattern for the hotel occupancy rate.

The occupancy rate is well above the rate in 2009 and 2010, and fairly close to the rate in 2008.

RevPAR is still well below the peak levels prior to the recession. In 2008, RevPAR was $70.76 for the comparable week. It declined 28.1% in the same week in 2009 to $50.85 and is now at $62.80.

The same with ADR. For the same week, ADR peaked at $110.36 in 2008, and is just back over $100 at $101.22.

So even though the occupancy rate has improved, hotel income is still much lower now than prior to the recession.

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

by Calculated Risk on 4/14/2011 01:32:00 PM

The first graph shows the rolling 12 month average of loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported - and possible hints about the trade report for March. LA area ports handle about 40% of the nation's container port traffic.

Click on graph for larger image in graph gallery.

To remove the strong seasonal component for inbound traffic, this graph shows the rolling 12 month average.

On a rolling 12 month basis, inbound traffic is up 17% and outbound up 9%.

The 2nd graph is the monthly data (with strong seasonal pattern).

For the month of March, loaded inbound traffic was up 2% compared to March 2010, and loaded outbound traffic was up 11% compared to March 2010. This was the third highest month for exports ever, and the highest since the peak in 2008.

This suggests the trade deficit with China (and other Asians countries) probably decreased in March.

by Calculated Risk on 4/14/2011 11:50:00 AM

A couple of years ago, when prices fell sharply in many high foreclosure low end areas, we discussed a probable "hard floor" for low end house prices. The price floor would come from investors paying cash and buying low end properties to rent.

Of course this investment strategy doesn't work well in negative absorption areas like Detroit (areas with a declining number of households), but in many areas this is exactly what has happened.

However this doesn't work for high end areas.

Lauren Beale at the LA Times starts with an example: Leasing is in fashion among wealthy house hunters

[A] five-bedroom house in the Sunset Strip area priced at $3.5 million for sale ... the owner recently accepted a short-term lease [for] $10,000 a month to rent.

Why buy when you can't rent for about half the cost? And the renter is not taking the risk of further price declines.

And if we look at this from an investor perspective, no one would pay $3.5 million for $10,000 per month in gross rent. After taxes, maintenance and a high vacancy factor, this is a cap rate under 2%. Ouch (note: high end homes for lease have very high vacancy factors).

More from Beale:

No single clearinghouse tracks such data for all of Southern California, and many top-dollar leases are handled privately, away from the prying eyes of the public. Still, niche data and anecdotal evidence point to an upswing in upscale rentals.

Lease offerings priced at more than $10,000 a month were up 15% through the first part of April over the same period last year on the Combined L.A./Westside Multiple Listing Service, while those in the $7,500-to-$10,000 price range saw a 7% increase

Instead of lowering the price, some owners are leasing - and waiting for a better market:

Adding to the supply of lease houses are absentee owners and investors who haven't been able to sell and decide to take their for-sale homes off the market, put them up for lease and "sit out for six months or a year" or more ...

Just more examples of chasing the price down ... and more accidental landlords.

by Calculated Risk on 4/14/2011 09:57:00 AM

From RealtyTrac: Foreclosure Activity Decreases 15 Percent in Q1 2011

RealtyTrac® ... today released its U.S. Foreclosure Market Report™ for the first quarter of 2011, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 681,153 U.S. properties in the first quarter, a 15 percent decrease from the previous quarter and a 27 percent decrease from the first quarter of 2010.
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Foreclosure filings were reported on 239,795 U.S. properties in March, a 7 percent increase from the previous month but still down 35 percent from March 2010, when 367,056 homeowners received a foreclosure notice – the highest monthly total in the history of the RealtyTrac monthly report since its inception in January of 2005.

“The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” said James J. Saccacio, chief executive officer of RealtyTrac. “Weak demand, declining home prices and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork.”
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A total of 73,393 properties received default notices in March, up 16 percent from February but still down 37 percent from March 2010.
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Foreclosure auctions were scheduled on 93,228 U.S. properties in March, down 4 percent from February and down 41 percent from March 2010.

The decline in default notices is similar to the decline in serious delinquencies. However repossession activity will probably increase as lenders work through the legal issues and the huge backlog of homes 90+ days delinquent or in the foreclosure process.

by Calculated Risk on 4/14/2011 08:39:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending April 9, the advance figure for seasonally adjusted initial claims was 412,000, an increase of 27,000 from the previous week's revised figure of 385,000. The 4-week moving average was 395,750, an increase of 5,500 from the previous week's revised average of 390,250.

Click on graph for larger image in graph gallery.

This graph shows the 4-week moving average of weekly claims for the last 40 years. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 395,750.

This is the 7th consecutive week with the 4-week average below the 400,000 level (not by much). This is the highest weekly level since early February.

by Calculated Risk on 4/13/2011 11:37:00 PM

A few stories ...
• From the LA Times: Senate panel concludes Goldman Sachs profited from financial crisis

Asked if he was disappointed that no Wall Street figures had gone to jail in connection with the crisis, [Sen. Carl Levin] responded, "There's still time."

• From the LA Times: Banks, regulators act to correct foreclosure flaws and here is the press release from the Federal Reserve: Federal Reserve issues enforcement actions related to deficient practices in residential mortgage loan servicing and foreclosure processing

• From the White House: President Obama’s Framework for $4 Trillion in Deficit Reduction

• Retail Sales increased 0.4% in March

• BLS: Job Openings increase in February, Highest since 2008

• Beige Book: Fed sees economic improvement

• Lawler: Early Read on Existing Home Sales and Inventory for March

by Calculated Risk on 4/13/2011 06:58:00 PM

From DataQuick: Southland Home Sales Still Slow, Prices Edge Down

A total of 19,412 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 35.1 percent from 14,369 in February, and down 5.2 percent from 20,476 in March 2010, according to DataQuick of San Diego.

Sales always increase from February to March. Last month’s sales count was 21.4 percent below the 24,706 average for all the months of March since 1988. Sales so far this year are 20 percent below the norm. During the last half of 2010 sales were 25-30 percent below average.
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Sales of newly built Southland homes totaled 1,144, the lowest March in DataQuick’s statistics, which go back to 1988. The peak March was in 2006 with 7,205 sales. The March new-home average is 3,661.
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“As an indicator of upcoming trends, the month of March is actually pretty reliable. We got off to a slow start with sales this year and it doesn’t look like that will change anytime soon. Two of the likely game changers in the short run would be a surge in job creation or another round of price corrections,” said John Walsh, DataQuick president.
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Absentee buyers – mostly investors and some second-home purchasers – bought 26.0 percent of the Southland homes sold in March, paying a median $205,000. The absentee share of the market reached a peak in February at 26.4 percent. Over the last decade, absentee buyers purchased a monthly average of 16.3 percent of homes.

Another weak sales month, especially for new home sales - and right at the peak of the "buying season".