by Calculated Risk on 8/01/2009 10:28:00 PM

An update: the following graph shows the decline in real GDP (quarterly) from the previous peak since 1947. GDP is now 3.9% below the recent peak. In terms of declines in real GDP, the current recession is the worst since quarterly records have been kept (starting in 1947).

Note: This includes the downward revisions to the previous quarters.

When the red line is at zero it indicates that that quarter is at an all time high in terms of real GDP.

It will be interesting to see how long it takes for real GDP to reach the pre-recession peak. With a a sluggish recovery, and assuming no more cliff diving, it could take until sometime in 2011.

Click on graph for larger image in new window.

by Calculated Risk on 8/01/2009 06:30:00 PM

The big question of the week was: "Are house prices near the bottom?"

My feeling has been that house prices are probably close to the bottom in the lower priced bubble areas with heavy foreclosure activity (Lawler's "de-stickification"). Inventories are very low in many of these areas, and activity has been fairly high as first time buyers and investors buy distressed properties.

However it appears there are more foreclosures coming, and the level of inventory will be the key to future price declines.

My view is that mid-to-high priced bubble areas - with far fewer distressed sales than the low-to-mid priced areas, and much higher inventory-to-sales levels, and few move-up buyers - will see continued real price declines, although the pace of price declines will probably slow.

That still seems reasonable, and it depends on location. Here is a look as tiered house price indices from Case-Shiller to see if the lower priced areas have fallen further than the high priced areas.

All graphs use the seasonally adjusted indices and nominal prices (not inflation adjusted).

Click on graph for larger image in new window. The first graph is for Phoenix. The low priced tier has fallen the furthest, but the high tier price range isn't very high - and is impacted by the mix of houses sold. Note the price range of the tiers changes by city.

The second graph is for Miami. Here is appears that all tiers are now at about the same level.

The third graph is for Los Angeles. Once again the low end area has fallen the furthest, however the high tier starts pretty low for Los Angeles because of the mix of homes that are selling. So this might be misleading for the mid-to-high end.

This graph is for Washington, D.C.

This graph is for Boston. The pattern is slightly different - the low end is still above the mid and high tiers.

Next up is San Diego. Although the low end tier has fallen the furthest, the high end tier pricing is pretty low for San Diego because of the mix.

The last graph is for San Francisco and show the the low end has increased more than the mid-to-high tiers, and has also fallen further.

This was an interesting exercise (at least for me!), but I'm not completely comfortable with the tiered pricing because the buckets are impacted by the mix of homes sold.

by Calculated Risk on 8/01/2009 03:35:00 PM

From the NY Times: Prolonged Aid to Unemployed Is Running Out

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

... laid-off workers in nearly half the states can collect benefits for up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s. But unemployment in this recession has proved to be especially tenacious, and a wave of job-seekers is using up even this prolonged aid.

Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.

The National Employment Law Project report breaks down the extended benefit programs by state. The programs are triggered by the state unemployment rate. About half the states qualify for 53 weeks on top of the regular 26 weeks for unemployment benefits. Other states qualify for 46, 33 and 20 weeks of extended benefits.

From the report:

There are now an all-time high of 4.4 million Americans who have been out of work for more than six months, up dramatically from 2.6 million in February. That translates into 29% of jobless workers who have been out of work for six months, a record since data were first reported in 1948.

Here is a graph I posted earlier this week of the number of workers who have exhausted their regular benefits:

Click on graph for larger image in new window.

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are almost 4.4 million workers who have been unemployed for more than 26 weeks (and still want a job). This is 2.8% of the civilian workforce.

Right now very few workers have exhausted their unemployment benefits, but there is tidal wave coming. The Law Project estimates 0.5 million workers will have exhausted their extended benefits by the end of September, and close to 1.5 million by the end of 2009. Unless the unemployment rate starts to decline, the numbers will continue to grow rapidly in 2010.

by Calculated Risk on 8/01/2009 01:18:00 PM

From Costar: Post Office Looking at Consolidation of 3,243 of its 4,851 Largest Branches and Stations (ht John)

The Postal Service sent a notice to American Postal Workers Union executives this summer that it was considering consolidation options in every major metro market in the country and would consider closing 3,243 of its 4,851 largest branches and centers in the review process. ... The review process was to last most of the summer ... but they want the consolidation to occur by October 2010.
...
According to USPS records, it owns 8,546 facilities totaling 219.6 million square feet and leases another 25,272 locations totaling 912.2 million square feet. ...

[T]he USPS could be studying the consolidation of more than 14 million square feet of retail/office/industrial space across the country. To put that in perspective, 14 million square feet would be the equivalent of about all of the vacant retail space in a market such as Boston or Cleveland or Denver or the Inland Empire or Tampa.
...
In May, the U.S. Government Accountability Office (GAO) issued a report en titled "U.S. Postal Service - Network Rightsizing Needed to Help Keep USPS Financially Viable." The GAO study criticized the USPS for failing to take the necessary steps to remain viable, such as "rightsizing its retail and mail processing networks by consolidating operations and closing unnecessary facilities," and "reducing the size of its workforce."

Here is the GAO report:

Network rightsizing by consolidating operations and closing unnecessary facilities is likely to be only one of many steps that USPS will need to take to remain financially viable in the long run. ... We recognize that USPS faces formidable resistance to closing and consolidating facilities because of concerns about the effects of such actions on service, employees, and local communities.

Click on chart for larger image in new window.

The postal service has already reduced their footprint a little since 2003 as shown in the chart from the GAO.

But the GAO report suggests the next reductions may be much more significant. How about another 14 million square feet of vacant retail space on the market?

by Calculated Risk on 8/01/2009 08:00:00 AM

The FDIC closed five more banks on Friday, and that brings the total FDIC bank failures to 69 in 2009. The following graph shows bank failures by week in 2009.

Click on graph for larger image in new window.

Note: Week 1 on graph ends Jan 9th.

The pace has really picked up recently, with the FDIC seizing almost 5 banks per week in July, and with 5 months to go, it seems 125 to 150 bank failures this year is likely.

The current pace suggests there will be more failures in 2009 than in the early years of the S&L crisis. From 1982 thorough 1984 there were about 100 failures per year, and then the number of failures really increased as the 2nd graph shows.

There were 28 weeks during the S&L crisis when regulators closed 10 or more banks, and the peak was April 20, 1989 with 60 bank closures (there were 7 separate weeks with more than 30 closures in the late '80s and early '90s).

The 2nd graph covers the entire FDIC period (annually since 1934).

For a graph that includes the 1920s and early '30s (before the FDIC was enacted) see the 3rd graph here.

Of course the number of banks isn't the only measure. Many banks today have more branches, and far more assets and deposits.

With Colonial (about $25.5 billion in assets), Guaranty (Texas, with close to $15.4 billion in assets) and Corus ($7.7 billion) all on the ropes, the dollars could really add up later this year. Corus and Guaranty will probably be seized in the next few weeks.

The FDIC era source data is here - including by assets (in most cases) - under Failures and Assistance Transactions

The pre-FDIC data is here.