by Calculated Risk on 9/01/2009 10:29:00 AM

Two of the key stories in 2009 are the probable bottom for residential construction spending, and the collapse in private non-residential construction. Both stories are still developing ... but this report shows further evidence of both stories.

Click on graph for larger image in new window.

The first graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Residential construction spending increased in July, and nonresidential spending continued to decline.

Private residential construction spending is now 63.7% below the peak of early 2006.

Private non-residential construction spending is still only 9.7% below the peak of last September.

The second graph shows the year-over-year change for private residential and nonresidential construction spending.

Nonresidential spending is off 8.3% on a year-over-year basis, and will turn strongly negative as projects are completed. Residential construction spending is still declining YoY, although the negative YoY change will get smaller going forward.

From the Census Bureau: July 2009 Construction at $958 Billion Annual Rate

by Calculated Risk on 9/01/2009 10:00:00 AM

From the NAR: Pending Home Sales on a Record Roll

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.
...
NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.
emphasis added

The increase in pending sales has been mostly from lower priced homes with demand from first time home buyers (taking advantage of the tax credit) and investors.

And look at the cost of the tax credit! If NAR is close to being correct, 2 million buyers will claim the tax credt - times $8,000 - is $16 billion. But this only resulted in "approximately 350,000 additional sales".

So this tax credit cost taxpayers about $45,000 per each additional home sold. Not very effective ... especially considering most of these are lower priced homes.

by Calculated Risk on 9/01/2009 08:50:00 AM

In my weekly posts on hotel occupancy and RevPAR (Revenue per available room), I've been noting:

Earlier this year business travel was off much more than leisure travel. So it was expected that the summer months would not be as weak as earlier in the year. September - after Labor Day (Sept 7th) - will be the real test for business travel, and for the hotel industry.

Here is an excerpt from some Morgan Stanley research released last week on hotels making the same point: A False Bottom in RevPAR? (no link).

"[W]e are in an operating environment in which a) group demand is significantly worse than transient demand, and b) leisure demand is holding up better than the other segments. Due to the seasonality of the lodging demand mix, we believe that July and August RevPAR improvement is partially a mirage created by a shift in the demand mix away from groups and toward leisure. As the demand mix shifts back away from leisure and toward group in September and October, we expect RevPAR trends to deteriorate from this false bottom. ... we expect ... RevPAR declines to be close to 20% for [September and October].
emphasis added

Last week, from HotelNewsNow.com: STR reports US performance for week ending 22 August 2009

Revenue per available room for the week decreased 16.7 percent to finish at US$57.84.

With the expected seasonal decline in leisure travel, I wouldn't be surprised to see RevPAR off 20% in September and October - and that will put additional pressure on hotels.

by Calculated Risk on 8/31/2009 10:48:00 PM

Hope Now released the July Mortgage Loss Mitigation Statistics.

Most of the data concerns modifications - and those are not encouraging - but here are couple of graphs on delinquencies and foreclosures.

Click on graph for larger image in new window.

There are now more than 3 million mortgage loans 60+ delinquent based on the Hope Now statistics.

The Hope Now program covers approximately 73% of the total industry, so the total delinquent is probably over 4 million now.

The second graph shows delinquent loans, and foreclosure starts and completions.

Foreclosure starts were above 283 thousand in July, and completions only 89 thousand. There is a lag between start and completion, and a number of loans cure or are modified.

But foreclosures are dwarfed by 60+ day delinquencies. Although there will probably be a surge in foreclosure sales later this year (based on the increase in foreclosure starts), the real question is how many of those delinquent loans will become foreclosures?

by Calculated Risk on 8/31/2009 08:23:00 PM

There is no question auto sales will decline sharply in September, but there is a pretty amazing range of estimates for August ... a couple of excerpts:

From the WSJ: Next for Auto Sector, Post-Clunker Hangover

Auto sales for August, due out by Tuesday afternoon, are expected to come in between 13 million SAAR, or the seasonally adjusted annual rate of car sales, and 16 million.

And from Bloomberg: U.S. Auto-Sales Rate May Be Highest Since April 2008

U.S. auto sales in August probably will run at the highest rate since April 2008 after the federal government’s “cash for clunkers” rebates fueled demand.

The so-called seasonally adjusted annual rate for this month will be 14.3 million, the average estimate of 10 analysts surveyed by Bloomberg.
...
August sales results, released tomorrow, will reflect more than three weeks of transactions under the clunkers program, which ran from July 27 through Aug. 24.

There probably were 550 thousand clunker related sales in August, but the question is the number of non-clunker sales. If there was little cannibalization of regular sales, non-clunker sales would probably be close to 800 thousand. August is usually a strong sales month, and adjusting for seasonal factors, this would suggest a sales rate close to 16 million SAAR.

From Dow Jones: Edmunds.com Sees Aug US Auto Sales Up 18%; Wary On Sept

Edmunds.com is projecting August U.S. new-vehicle sales of about 1.17 million and a seasonally adjusted annualized rate of slightly more than 13 million.

A sales rate of 13 million SAAR - although the highest rate since last August - would have to be considered very disappointing.