by Calculated Risk on 4/23/2009 03:36:00 PM

From the NY Times: U.S. Is Said to Prepare Filing for Chrysler Bankruptcy

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week ...

This appears to be a prepackaged bankruptcy with the U.S. government providing DIP (Debtor-In-Possession) financing.

It sounds like Fiat would buy Chrysler's assets out of bankruptcy and the U.S. would be responsible for pensions and retiree health care benefits. According to the article, the only unresolved issue is what happens to Chrysler’s lenders.

by Calculated Risk on 4/23/2009 01:55:00 PM

From HotelNewsNow.com: STR reports U.S. data for week ending 18 April 2009

In year-over-year measurements, the industry’s occupancy fell 10.7 percent to end the week at 57.4 percent. Average daily rate dropped 10.3 percent to finish the week at US$97.25. Revenue per available room [RevPAR] for the week decreased 19.9 percent to finish at US$55.83.
emphasis added

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 11.1% from the same period in 2008.

The average daily rate is down 10.3%, so RevPAR is off 19.9% from the same week last year.

When the Q1 advance GDP report is released on Wednesday (April 29th), I expect to see a sharp in decline in non-residential structure investment. The underlying details will be released a couple of days later, and I expect investment in lodging to be hit especially hard. Why build new hotels when the occupancy rate is 57%?

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

by Calculated Risk on 4/23/2009 12:22:00 PM

UPDATE: Here is the letter from Cuomo to Congress (2.0 MB PDF). (Updated - linked to wrong letter initially)

It was widely rumored that there was some sort of backroom deal holding the BofA and Merrill deal together. From CNBC: BofA's Lewis Says He Was Told To Be Quiet on Merrill

Bank of America Chief Executive Kenneth Lewis told the New York attorney general he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to keep quiet about the worsening terms of the bank's acquisition of Merrill Lynch, according to testimony reviewed by The Wall Street Journal.

Here are some excerpt of Lewis' testimony before New York's attorney general in February from the WSJ: 'It Wasn't Up to Me': Excerpts From Ken Lewis's Testimony

Mr. Lewis: I remember, for some reason, we wanted to follow up and see if any progress -- as I recall, we actually, had not agreed to call a MAC [material adverse condition] after the conversation that we had, and so I tried to get in touch with Hank, and, as I recall, I got a number that was somebody at the Treasury kind of guard-like thing. He had a number for Hank, and Hank was out, I think, on his bike, and he -- this is vague; I won't get the words exactly right -- and he said, "I'm going to be very blunt, we're very supportive of Bank of America and we want to be of help, but" -- I recall him saying "the government," but that may or may not be the case -- "does not feel it's in your best interest for you to call a MAC, and that we feel strongly," -- I can't recall if he said "we would remove the board and management if you called it" or if he said "we would do it if you intended to." I don't remember which one it was, before or after, and I said, "Hank, let's deescalate this for a while. Let me talk to our board." And the board's reaction was one of "That threat, okay, do it. That would be systemic risk."

Q: Did you ask for any agreement from them?

Mr. Lewis: There was a point after that that the board brought up the fact that we're relying on the words that obviously has some very prominent people and honorable people, but, boy, what if they don't come through? So I called Bernanke -- I don't know why I called him versus Hank -- and said, "Would you be willing to put something in writing?" And he said, "Let me think about it." As I recall, he didn't call me back, but Hank called me back. And Hank said two things: He said, "First, it would be so watered down, it wouldn't be as strong as what we were going to say to you verbally, and secondly this would be a disclosable event and we do not want a disclosable event."

This raises serious questions and will probably lead to shareholder lawsuits.

by Calculated Risk on 4/23/2009 11:12:00 AM

To add to the previous post, here is another way to look at existing homes sales - monthly, Not Seasonally Adjusted (NSA):

This graph shows NSA monthly existing home sales for 2005 through 2009. Sales (NSA) were lower in March 2009 than in March 2008.

Again - a significant percentage of recent sales were foreclosure resales, and although these are real sales, I think existing home sales could fall even further when foreclosure resales start to decline sometime in the future.

The second graph shows inventory by month starting in 2004.

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

Inventory levels increased sharply in 2006 and 2007, but have been below the year ago level for the last eight months. Inventory in March 2009 was below the levels in March 2007 and 2008 (this is the 2nd consecutive month with inventory levels below 2 years ago).

It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!

Note: there is probably a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. There is also the possibility of some REOs being held off the market.

The third graph shows the year-over-year change in existing home inventory.

This shows the YoY change has turned negative.

If the trend of declining year-over-year inventory levels continues in 2009 that will be a positive for the housing market. Prices will probably continue to fall until the months of supply reaches more normal levels (in the 6 to 8 month range), and that will take some time.

I'll have more on Existing Home sales tomorrow after New Home sales are released.

by Calculated Risk on 4/23/2009 10:00:00 AM

The NAR reports: March Existing-Home Sales Slip but First-Time Buyers Rise

Existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 3.0 percent to a seasonally adjusted annual rate of 4.57 million units in March from a downwardly revised level of 4.71 million in February, and were 7.1 percent lower than the 4.92 million-unit pace in March 2008.
...
Total housing inventory at the end of March fell 1.6 percent to 3.74 million existing homes available for sale, which represents a 9.8-month supply at the current sales pace, compared with a 9.7-month supply in February.

Click on graph for larger image in new window.

The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March 2009 (4.57 million SAAR) were 3.0% lower than last month, and were 7.1% lower than March 2008 (4.92 million SAAR).

It's important to note that about 45% of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is under 3 million units SAAR.

The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 3.74 million in March. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.

Typically inventory increases slightly in March, and then really increases over the next few months of the year until peaking in the summer. This decrease in inventory was small, and the next few months will be key for inventory.

Also, most REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs - this is possible, but not confirmed.

The third graph shows the 'months of supply' metric for the last six years.

Months of supply was up slightly at 9.8 months.

Even though the inventory level decreased, sales also decreased, so "months of supply" increased slightly.

I'll have more on existing home sales soon ...