by Calculated Risk on 2/08/2013 08:00:00 PM

Another update on hotels from HotelNewsNow.com: STR: US results for week ending 2 February

In year-over-year comparisons, occupancy was up 3.6 percent to 53.5 percent, average daily rate rose 6.0 percent to US$106.64 and revenue per available room increased 9.8 percent to US$57.06.

The 4-week average of the occupancy rate is close to normal levels.

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

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2013, yellow is for 2012, blue is "normal" and black is for 2009 - the worst year since the Great Depression for hotels.

The occupancy rate will continue to increase over the next couple of months as business travel picks up in the Spring. This is a key period for the hotel industry, and the occupancy rate has improved from the same period last year - and is close to pre-recession levels.

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

by Calculated Risk on 2/08/2013 02:57:00 PM

From the Association of American Railroads (AAR): AAR Reports Mixed Rail Traffic for January, and Week Ending February 2

Intermodal traffic in January 2013 totaled 1,168,630 containers and trailers, up 5.3 percent (58,303 units) compared with January 2012. Carloads originated in January totaled 1,339,604 carloads, down 6.3 percent (90,199 carloads) compared with the same month last year. Carloads excluding coal and grain were up 1.8 percent (12,731 carloads) in January 2013 over January 2012.

In January, six of the 20 commodity groups posted increases compared with the same month last year, including: petroleum and petroleum products, up 54.1 percent or 22,892 carloads; crushed stone, gravel and sand, up 6.1 percent or 4,732 carloads, and lumber and wood products, up 14.6 percent or 2,032 carloads. Commodities with carload declines in January were led by coal, down 14.5 percent or 91,593 carloads; grain, down 11 percent or 11,337 carloads, and iron and steel scrap, down 18.7 percent or 4,675 carloads.

“The New Year brought a continuation of an old pattern: weakness in coal, strength in intermodal and petroleum products, and mixed results for everything else,” said AAR Senior Vice President John T. Gray. “Railroads recently announced that they expect to reinvest significantly in 2013 — an estimated $24.5 billion for the year — back into their systems. They’re making these investments because they are confident that demand for freight transportation, over the long term, will continue to grow.”
emphasis added

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).  Green is 2013.

In non-seasonally adjusted terms, U.S. railroads averaged 267,921 carloads per week in January 2013 — for a total of 1,339,604 carloads for the month — down 6.3% (90,199 carloads for the month) from January 2012. In percentage terms, it was the biggest year-over-year monthly decline since November 2009.

If you’ve been paying any attention at all for the past year, you can probably guess the main reason why overall carloads were down in January. Coal carloads totaled 538,878 for the month, down 14.5% (91,593 carloads) from January 2012. ...

Excluding coal and grain, U.S. rail carloads were up 1.8% (12,731 carloads) in January 2013 over January 2012

Note that building related commodities were up.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is near peak levels (black line).

U.S. railroads originated 1,168,630 intermodal containers and trailers in January 2013, up 5.3% (58,303 units) over January 2012 and an average of 233,726 per week. That’s easily the highest weekly average of any January in history.

Intermodal will probably set a new record in 2013.

by Calculated Risk on 2/08/2013 12:58:00 PM

Just an update ... during the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then Las Vegas visitor traffic has recovered to a new record high in 2012.

However convention attendance was only up 1.6% from 2011 and is about 21% below the peak level in 2006.  Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale). 

There were 39,727,022 visitors to Las Vegas in 2012, just above the previous record of 39,196,761 in 2007.

Convention attendance was at 4,944,014 in 2012, still well below the record of 6,307,961 in 2006.

So it looks like the gamblers are back ...

by Calculated Risk on 2/08/2013 10:31:00 AM

Last week I posted an article from Trulia chief economist Jed Kolko: Here are the “Missing” Construction Jobs.  Here is another projection from Merrill Lynch economist Michelle Meyer: Construction Coming Back

One of the puzzles last year was the lack of hiring in the construction sector. Despite a 25% gain in housing starts, only a net 18,000 construction jobs were added for the year. This seemed too low, and we learned that evidently it was. The revisions yielded another 73,000 construction jobs in 2012 and 75,000 in 2011, bringing the total to 91,000 and 144,000, respectively.

We think construction hiring will ramp up this year. The best way to forecast construction jobs is to look at the lagged impact of housing starts or residential investment. This comparison is easiest if we adjust construction employment for the size of the labor force. We find that the correlation between construction jobs and housing starts is the highest at 72% when housing starts are lagged by five quarters (Chart 2). Since housing starts reached a trough in 1Q11, construction jobs should have turned higher last spring. We saw some gains, but only very modest ones (which we learned after last month’s revision). The gain in housing starts accelerated in 2012, suggesting a faster pickup in construction jobs this year.

Click on graph for larger image.

Timing the turn is much easier than estimating the magnitude, however. The historical comparison is imperfect because we are not controlling for variablessuch as the change in the average size of homes, types of properties (apartment vs. single family) and labor productivity. From the mid-1990s through the bubble, there was a shift toward greater single family homes, which tend to be more labor-intensive than apartments. During the last few years of the bubble, there was an increase in the share of “McMansions” that also required greater labor. As such, the gain in construction jobs outpaced housing starts during this period. We would argue the reverse is true today as households are looking to downsize, either into apartments or smaller single-family properties. The gain in construction jobs may therefore be slower than implied by the historical comparison.

Plugging in our forecast for housing starts through 2014 and lagging five quarters, we think it is reasonable to expect gains of about 225,000 to 250,000 construction jobs this year, which implies nearly 20,000 a month on average (again see Chart 2). We judge this to be a conservative estimate and see upside risk given improvement in renovation spending.

by Calculated Risk on 2/08/2013 08:26:00 AM

The Department of Commerce reported:

[T]otal December exports of $186.4 billion and imports of $224.9 billion resulted in a goods and services deficit of $38.5 billion, down from $48.6 billion in November, revised. December exports were $3.9 billion more than November exports of $182.5 billion. December imports were $6.2 billion less than November imports of $231.1 billion.

The trade deficit was much smaller than the consensus forecast of $46.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through December 2012.

Click on graph for larger image.

Exports increased in December, and imports decreased.

Exports are 10% above the pre-recession peak and up 4.8% compared to December 2011; imports are near the pre-recession peak, and down 2% compared to December 2011.

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

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.

The decrease in the trade deficit in December was due to both a decline in petroleum and non-petroleum products.

Oil averaged $95.16 in December, down from $97.45 per barrel in November. But most of the decline in the value of petroleum imports was due to a sharp decline in the volume of imports.

The trade deficit with China increased to $24.5 billion in December, up from $23.1 billion in December 2011. Most of the trade deficit is still due to oil and China.

The trade deficit with the euro area was $7.5 billion in December, down from $8.6 billion in December 2011.

Notes: The trade deficit might have been skewed by the LA port strike that started in late November and ended in early December. This does suggest an upward revision to Q4 GDP.

by Calculated Risk on 2/07/2013 09:00:00 PM

As expected, the payroll tax increase is impacting consumers, from the WSJ: Tax Holiday Ends, Consumers Scrimp

Some early signs suggest [consumers] are tapping the brakes. Surveys show the majority of Americans who are aware of the tax increase say they plan to cut spending, and consumer confidence has wavered. Companies like Target Corp. and women's clothier Cato Corp. say the tax increase has crimped sales.

And from Mark Thoma at EconomistsView: Fed Worried about Bubbles, Not Inflation

With fiscal policy moving in the wrong direction -- deficit reduction rather than employment enhancing stimulus, e.g. infrastructure -- if monetary policymakers begin getting skittish, then the unemployed will lose the one institution that seemed to actually care about their struggles. Not good.

A little less fiscal austerity now - or even some more fiscal stimulus - would take some pressure off of monetary policy.  But that doesn't seem likely.

Friday economic releases:
• At 8:30 AM ET, The Trade Balance report for December will be released. The consensus is for the U.S. trade deficit to decrease to $46.0 billion in December from $48.7 billion in November.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for December. The consensus is for a 0.3% increase in inventories.

by Calculated Risk on 2/07/2013 05:43:00 PM

From economist Tom Lawler:

DataQuick reported yesterday that both the number and the share of California home sales purchased with cash (meaning no mortgage was recorded at the time of sale) hit record levels in 2012. According to DataQuick, 145,797 California condos and homes were bought without mortgage financing last year, representing a record high 32.4% of all home sales, up from 30.4% in 2011 and more than double the average “all-cash” share since 1991. Based on mailing addresses vs. property addresses, DataQuick said that “investors and vacation-home buyers” represented “roughly” 55% of all California homes purchased with cash last year. Dataquick also reported that in 2012 there were “more than” 11,700 buyers who bought more than one home for cash, and that these “multi-home, all-cash” buyers combined purchased “about” 41,450 homes, representing “about” 9.3% of total sales.

Various MLS data on sales by financing indicate that the “all-cash” share of home purchases increased significantly in a wide range of markets starting in the latter part of decade, and remained high last year. Here are a few areas where either (1) local MLS produce annual stats which include data on financing type; or (2) where I went back to monthly reports.

All-Cash Share of MLS Home Purchases (Yearly Totals)
	Phoenix	Orlando	Tucson	Miami MSA: SF	Miami MSA: C/TH	Sacramento	Des Moines	Omaha
2002	14.1%	10.0%
2003	10.8%	9.4%	13.5%
2004	13.5%	10.5%	14.9%
2005	12.1%	9.3%	14.8%
2006	9.2%	6.6%	12.8%
2007	11.6%	9.0%	12.6%			4.4%
2008	12.6%	20.3%	18.8%			15.4%		12.1%
2009	37.2%	41.4%	23.9%			25.1%		11.8%
2010	41.8%	51.5%	28.3%			26.7%	20.1%	16.7%
2011	46.9%	52.9%	34.6%	43.8%	80.8%	30.1%	21.9%	20.2%
2012	46.0%	53.1%	34.4%	45.0%	79.8%	34.0%	21.5%	17.6%

All-Cash Share of MLS Home Purchases
	Dec-12	Dec-11	Dec-07
DC Metro	19.9%	20.3%	6.2%
Baltimore Metro	23.4%	22.5%	9.0%
Florida SF	47.2%
Florida C/TH	73.5%
Toledo	44.4%	45.3%
Akron	33.0%	39.4%	28.1%
Peoria	20.7%	19.9%	8.6%
Las Vegas	55.2%	50.8%
Memphis	39.8%	30.8%	22.6%

The surge in the all-cash share of home purchases in many areas reflects an increase in the investor share of total purchases, though there also appears to have been an increase in the all-cash share of owner-occupied purchases.

In the early-to-mid part of last decade the investor share of home purchases increased significantly in several areas, especially areas that experienced a sharp increase in home prices. However, back then, the bulk of investors buying homes used mortgage financing, often with as much leverage as allowable and often with loan features that many today would view as “risky.” In the early/mid part of last decade few investors bought homes because rental yields looked attractive, but instead the purchases were driven by expectations of price appreciation. When prices started to soften investor buying eased, many investors listed homes for sale at price levels above the new, lower “market-clearing” levels, home listings soared, mortgage defaults surged, and, well, ...

CR Note: This was from Tom Lawler.

by Calculated Risk on 2/07/2013 03:08:00 PM

I rarely mention consumer credit, but the amount of credit outstanding has been steadily increasing as is normal in a recovery. This is OK if the borrowers can repay the debt, unfortunately much of the recent increase has been related to student loans - and student loan defaults are increasing.

From the Fed:

Consumer credit increased at a seasonally adjusted annual rate of 6-1/2 percent during the fourth quarter. Revolving credit was little changed, while nonrevolving credit increased at an annual rate of 9-1/2 percent. In December, consumer credit increased at an annual rate of 6-1/4 percent.

Consumer credit increased $14.6 billion in December, with nonrevolving credit increasing $18.2 billion (this includes auto, student and other loans).

Also, talking about credit, from Fed Governor Jeremy Stein: Overheating in Credit Markets: Origins, Measurement, and Policy Responses

The question I'd like to address today is this: What factors lead to overheating episodes in credit markets? In other words, why do we periodically observe credit booms, times during which lending standards appear to become lax and which tend to be followed by low returns on credit instruments relative to other asset classes? We have seen how such episodes can sometimes have adverse effects on the financial system and the broader economy, and the hope would be that a better understanding of the causes can be helpful both in identifying emerging problems on a timely basis and in thinking about appropriate policy responses.

This is an important topic.

by Calculated Risk on 2/07/2013 10:39:00 AM

This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so all readings are very low.

From the NAHB: Builder Confidence in the 55+ Housing Market Ends Year on a Positive Note

Builder confidence in the 55+ housing market for single-family homes showed continued improvement in the fourth quarter of 2012 compared to the same period a year ago, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. The index increased 10 points to a level of 28, the fifth consecutive quarter of year over year improvements.
...
Although all components of the 55+ single-family HMI remain below 50, they have improved significantly from a year ago: present sales climbed 10 points to 27, expected sales for the next six months increased 12 points to 38 and traffic of prospective buyers rose nine points to 24.
...
“Like the overall housing market, the 55+ segment of the market is undergoing a slow but steady recovery,” said NAHB Chief Economist David Crowe. “That said, there are serious obstacles to a continued and stronger recovery. While problems with tight credit conditions for buyers and obtaining accurate appraisals are still lingering, new problems like spot shortages and rising costs for labor, materials and lots are beginning to emerge.”

Click on graph for larger image.

This graph shows the NAHB 55+ HMI through Q4 2012. All of the readings are very low for this index, and the index dipped in Q4 - but the general trend is up. Still, any reading below 50 "indicates that more builders view conditions as poor than good."

This is going to be a key demographic for household formation over the next couple of decades, but only if the baby boomers can sell their current homes!

There are two key drivers: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group.

The second graph shows the homeownership rate by age for 1990, 2000, and 2010. This shows that the homeownership rate usually increases until 70 years old or so.

So demographics should be favorable for the 55+ market.

by Calculated Risk on 2/07/2013 08:38:00 AM

The DOL reports:

In the week ending February 2, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 5,000 from the previous week's revised figure of 371,000. The 4-week moving average was 350,500, a decrease of 2,250 from the previous week's revised average of 352,750.

The previous week was revised up from 368,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.


Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 350,500.

Weekly claims were above the 360,000 consensus forecast, however the 4-week average is at the lowest level since early 2008.