by Calculated Risk on 8/10/2009 11:58:00 PM

From HotelNewsNow.com: HIP increases by 1.6 in July; first sign of turning point

This morning, economic research firm e-forecasting.com, in conjunction with Smith Travel Research, announced that after 19 months of consecutive decline, HIP climbed 1.6 percent in July. HIP, the Hotel Industry’s Pulse index, is a composite indicator that gauges business activity in the US hotel industry in real-time. The latest increase brought the index to a reading of 82.2. The index was set to equal 100 in 2000.
...
“With HIP finally showing a slight improvement after 19 months of decline, it appears we may be seeing the light at the end of the tunnel” said Chad Church, Industry Research Manager at STR. “It will be important to monitor the pace of growth in the HIP over the second half of the year to see if July was an anomaly or a true turning point in this recession.”
...
The composite indicator is made with the following components: revenues from consumers staying at hotels and motels adjusted for inflation, room occupancy rate and hotel employment, along with other key economic factors that influence hotel business activity.

Click on graph for larger image in new window.

This index suggests that the cliff diving for the hotel industry might be over, although this is just one data point.

Over the last couple of years the hotel industry has been crushed. RevPAR (Revenue per available room) is off over 15% compared to the same period in 2008. And at the current occupancy and room rate levels, many hotels are losing money.

The end to cliff diving is not the same as new growth, but it is better than more cliff diving!

HIP historical data provided by HotelNewsNow.com and e-forecasting.com.

by Calculated Risk on 8/10/2009 09:35:00 PM

From the WaPo: Stimulus Funds Bring Relief to States, but What About 2010?

As states across the country grapple with the worst economy in decades, most have cut services, forced workers to take unpaid days off, shut offices several days a month and scrambled to find new sources of revenue.

The good news is that much of the pain this year has been cushioned by billions of dollars of federal stimulus money, which has allowed states and localities to avoid laying off teachers, prison guards, police officers and firefighters.

The bad news is that for the next fiscal year, beginning in July, the picture looks even bleaker. Revenue is expected to remain depressed, even if the national economy improves. There will be only half as much federal stimulus aid available, and many states have already used up their emergency reserves.

The article discusses the budget situations for a number of states. But here is a little positive news from California State Controller John Chiang today:

... When adjusting for Registered Warrants issued on personal income and corporate tax refunds, General Fund Revenue was 8% below July 2008. However, the pace of deterioration has slowed considerably relative to the 39.4%, 39%, and 17.7% deterioration in March, April, and May, respectively.

This slowing decline can be attributed to several factors ... First, the Governor signed a bill in October that imposes a 20% understatement penalty on corporate tax. Companies were given the option to avoid the penalty by filing an amended return and paying their actual tax liability by May 31, 2009. As a result, corporate taxes saw sharp increases as firms took action to avoid the penalty.

Second, the sales tax rate was increased on April 1 from 7.25% to 8.25%. This has helped to bolster the sales tax revenues collected by the State, which were up 20.8% from last July. Another policy change that has had a positive impact on California’s sales tax collections is the Federal Government’s “Cash for Clunkers” program. ... This program has been successful in boosting demand for new automobiles, and thus, generating additional tax revenues for California. Although this positive indicator is driven by economic incentives created by policy changes in Washington D.C. more than a genuine rebound in consumer activity, any encouraging signs in the economy were virtually nonexistent six months ago.

by Calculated Risk on 8/10/2009 06:11:00 PM

On Saturday I posted a graph and some analysis of Housing Starts and the Unemployment Rate

Today I received a request for a similar graph of auto sales and the unemployment rate.

Click on graph for larger image in new window.

This graph shows light vehicles sales including SUVs and small trucks, and the unemployment rate (inverted - see right scale).

Light vehicle sales usually bottom sometime before the unemployment rate peaks - just like for housing starts. This makes sense since the usual two engines of recovery are housing and personal consumption. See Business Cycle: Temporal Order

by Calculated Risk on 8/10/2009 04:20:00 PM

Click on graph for larger image in new window.

Instead of comparing the markets from the peak (See: the Four Bad Bears), Doug Short sent me this new graph matching up the market bottoms (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

Doug has probably jinxed the market!

by Calculated Risk on 8/10/2009 03:10:00 PM

From Crain's New York: Shadow units cast pall (ht Nick)

... In Manhattan in the first quarter, [condo] sales were halved from year-earlier levels even as more apartments flooded onto the market, leaving it choking on an 18.6-month supply of units. ...

As bad as those figures look, they may actually overstate the health of the market. Industry experts point to a growing mountain of so-called shadow inventory that is not reflected in the data. This includes units that are held by developers in soon-to-be completed buildings, as well as those kept off the market by banks and by individual owners who are waiting for conditions to improve before they tack up “For Sale” signs.

“We are undercounting the housing stock,” says Jonathan Miller, chief executive of appraisal firm Miller Samuel Inc. ... In a report on Manhattan residential real estate this spring, Mr. Miller estimated that in addition to the 10,445 condominiums that showed up in unsold inventory, there were as many as 7,000 shadow units.

There are plenty of details in the article. This shadow inventory is a significant issue, especially in areas with high rise condos.

Just a reminder - the Census Bureau new home inventory report does not include high rise condos, so if these units are not listed, they are not counted anywhere.