by Calculated Risk on 2/05/2009 05:37:00 PM

With crashing house prices in Dubai, the owners are "driving away" as opposed to walking away ...

From The Times: Driven down by debt, Dubai expats give new meaning to long-stay car park (hat tip James)

[F]aced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.

Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.
...
Those who flee the emirate are known as skips.
...
“There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.

by Calculated Risk on 2/05/2009 02:40:00 PM

From Bloomberg: Moody’s to Review $302.6 Billion in Commercial Debt (hat tip Bob_in_MA, Brian for the post title!)

Moody’s Investors Service is reviewing the ratings of $302.6 billion in commercial mortgage-backed securities as real-estate values drop and property owners fall behind on payments.

The review encompasses 52 percent of outstanding U.S. commercial mortgage-backed debt ranked by Moody’s ...

And so it begins for CMBS. First the reviews, then the downgrades, followed by the bank write-downs, and then more reviews ...

by Calculated Risk on 2/05/2009 12:30:00 PM

From a presentation this morning titled "Looking For a Bottom", Moody's Economy.com chief economist Mark Zandi projected:

House prices will fall "at least" another 10%.

Inventories have peaked.

Housing starts will bottom in the first half of 2009, but the rebound will be slow as excess existing home inventory is reduced.

I think it is a little early to call the peak in inventories, although this is something I've been watching. Here is graph from a previous post: Existing Home Sales (NSA)

This graph shows inventory by month starting in 2002.

Inventory levels were flat for years (during the bubble), but started increasing at the end of 2005.

Inventory levels increased sharply in 2006 and 2007, but have been close to 2007 levels for most of 2008. In fact inventory for the last five months was below the levels of last year. This might indicate that inventory levels are close to the peak for this cycle.

I agree with Zandi that housing starts will bottom in 2009. See: Looking for the Sun

However I think it is still too early to forecast the bottom in house prices, especially in the mid to high priced areas.

And it is important to note that Zandi might be starting to look for the bottom in some stats (like starts), but he is forecasting a very sluggish recovery.

by Calculated Risk on 2/05/2009 11:17:00 AM

From CNBC: White House Now Plans Limited Bank Aid Package

The Obama administration has decided on a new package of aid measures for the financial services industry, including a bad bank component, and is expected to announce them next Monday, according to a source familiar with the planning

The plan will be "smaller" than originally expected, said the industry source, and centered around government guarantees and insurance of troubled assets, what's called a "ring fence" concept.
...
Under the emerging plan, the government will buy toxic assets below the banks "carrying value," which is basically market value, but not at fire sale levels ...

If the government buys assets below the banks carrying value, then the banks will have to take additional write-downs and will need more capital. With this plan the taxpayers are still taking all the risk, and the shareholders of the banks receive the rewards. That still doesn't make sense.

by Calculated Risk on 2/05/2009 08:42:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 31, the advance figure for seasonally adjusted initial claims was 626,000, an increase of 35,000 from the previous week's revised figure of 591,000. The 4-week moving average was 582,250, an increase of 39,000 from the previous week's revised average of 543,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 24 was 4,788,000, an increase of 20,000 from the preceding week's revised level of 4,768,000.

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 582,250, the highest since 1982.

Continued claims are now at 4.79 million - another new record - just above the previous all time peak of 4.71 million in 1982.

The second graph shows the 4-week average of initial weekly unemployment claims (blue, right scale), and total insured unemployed (red, left scale), both as a percent of covered employment.

This normalizes the data for changes in insured employment.

A very weak report ...