by Calculated Risk on 9/25/2009 08:33:00 AM

From the Census Bureau:

New orders for manufactured durable goods in August decreased $4.0 billion or 2.4 percent to $164.4 billion, the U.S. Census Bureau announced today. This was the second decrease in the last three months. This followed a 4.8 percent July increase. Excluding transportation, new orders were down slightly.

Transportation equipment, also down two of the last three months, had the largest decrease, $4.0 billion or 9.3 percent to $39.5 billion. This was led by nondefense aircraft and parts, which decreased $3.7 billion.

So excluding civilian aircraft, durable goods orders were only down slightly.

The manufacturers continue to work down their unfilled orders and inventory:

Unfilled Orders
Unfilled orders for manufactured durable goods in August, down eleven consecutive months, decreased $2.8 billion or 0.4 percent to $737.1 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 ...

Inventories
Inventories of manufactured durable goods in August, down eight consecutive months, decreased $4.2 billion or 1.3 percent to $308.9 billion. This followed a 1.1 percent July decrease.
emphasis added

by Calculated Risk on 9/24/2009 09:59:00 PM

Housing economist Thomas Lawler on CNBC this morning.

"It is virtual certainty that [foreclosure] sales will pick up. Various moratoria has actually diminished the pace of sales, but as people try to see who can qualify for the modification program. But the backlog of loans in foreclosure are rising, and foreclosure sales will 100% pickup, we just don't know when."

On tax credit: "It has been very very expensive, if you look at the number of people who have claimed the credit versus estimates of the incremental number of sales that wouldn't have occurred otherwise, looks it is costing the government about $40 thousand for every home sale generated."

by Calculated Risk on 9/24/2009 05:53:00 PM

From the FDIC: Credit Quality Declines in Annual Shared National Credits Review

Notes from the Fed:

A SNC is any loan and/or formal loan commitment, and any asset such as other real estate, stocks, notes, bonds and debentures taken as debts previously contracted, extended to borrowers by a supervised institution, its subsidiaries and affiliates. Further, a SNC must have an original amount that aggregates $20 million or more and either 1) is shared by three or more unaffiliated supervised institutions under a formal lending agreement or 2) a portion is sold to two or more unaffiliated supervised institutions with the purchasing institutions assuming their pro rata share of the credit risk.

Some key findings:

• Criticized assets, which included SNCs classified as special mention, substandard, doubtful, or loss, reached $642 billion, up from $373 billion last year, and represented 22.3 percent of the SNC portfolio compared with 13.4 percent in 2008.
...
• Classified assets, which included SNCs classified as substandard, doubtful, or loss, rose to $447 billion from $163 billion and represented 15.5 percent of the SNC portfolio, compared with 5.8 percent in 2008. Classified dollar volume increased 174 percent from a year ago.

• Special mention assets, which exhibited potential weakness and could result in further deterioration if uncorrected, declined to $195 billion from $210 billion and represented 6.8 percent of the SNC portfolio, compared with 7.5 percent in 2008.

• The severity of criticism increased with the volume of SNCs classified as doubtful and loss rising to $110 billion, up from $8 billion in 2008. Loans in nonaccrual status also increased nearly eight times to $172 billion from $22 billion. Nonaccrual loans included $32 billion in credits classified as loss and $56 billion classified doubtful.
...
• Criticized volume was led by the Media and Telecom industry group with $112 billion, Finance and Insurance with $76 billion, and Real Estate and Construction with $72 billion. These three groups also represented the highest shares of criticized credits with 17.3 percent, 11.7 percent, and 11.2 percent of criticized credits in the SNC portfolio, respectively.

Click on graph for larger image in new window.

A record $447 billion in assets were classified as substandard, doubtful, or a loss, almost triple the peak following the 2001 recession. As a percent of commitments, the current 15.5% of loans "classified" far exceeds the previous peak in 1991 of just under 10% of loans.

Also, according to the FDIC, nonbanks held 47 percent of classified assets despite owning only 21.2 percent of the SNC portfolio. American Banker has an excellent quote: Syndicated Loan Losses Skyrocket

"Anyone could get credit from banks because banks knew they would have ready and willing buyers of syndicated loans even if red lights were blinking when the loans were booked." ... said Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc.

by Calculated Risk on 9/24/2009 03:35:00 PM

The Federal Reserve released the Household Debt Service and Financial Obligations Ratios for Q2 today.

NOTE from Fed: "The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only a rough approximation of the current debt service ratio faced by households. Nonetheless, this rough approximation may be useful if, by using the same method and data series over time, it generates a time series that captures the important changes in household debt service payments."

Because of these limitations, the Financial Obligations Ratio (FOR) should be used to look at changes over time, not the absolute value of the ratio.

Click on graph for larger image in new window.

This graph shows the homeowner financial obligations for consumer and mortgage debt as a percent of disposable personal income (DPI) since 1980.

"The homeowner mortgage FOR includes payments on mortgage debt, homeowners' insurance, and property taxes, while the homeowner consumer FOR includes payments on consumer debt and automobile leases."

Consumer financial obligations are still a little high historically, but mortgage obligations are very high (especially considering the level of interest rates). Just like after the housing bubble of the late '80s/ early '90s, it will probably take some time for the mortgage FOR to decline to more normal levels.

by Calculated Risk on 9/24/2009 12:43:00 PM

We are now into the business travel season, and as expected, RevPAR is off sharply from 2008.

From HotelNewsNow.com: Oahu Island occupancy increases in STR weekly numbers

Overall the U.S. industry’s occupancy fell 8.6 percent to end the week at 59.6 percent. Average daily rate dropped 10.5 percent to finish the week at US$98.34. Revenue per available room for the week decreased 18.3 percent to finish at US$58.57.

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 8.4% from the same period in 2008.

The average daily rate is down 1.5%, and RevPAR is off 18.3% from the same week last year.

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

After Labor Day business travel becomes far more important for the hotel industry than leisure travel, and so far there is no evidence that business travel is recovering significantly - especially at the high end - from Bloomberg: Luxury Hotels in U.S. Risk Default as $850 Rooms Remain Empty

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, ... “All segments are showing signs of distress but the luxury segment carries much higher loan balances and is more clearly affected,” [said] Frank Innaurato [of] Realpoint ...

Occupancy among chains with the costliest rooms fell to 60 percent in the first half from 70 percent a year earlier, according to Smith Travel Research. The decline was the industry’s largest for that period. ...

The U.S. hotel loan-delinquency rate may climb to 8.2 percent by year-end, Morgan Stanley analysts led by Andy Day said in a June 23 report. That would match the peak from the last recession in 2001.

Upscale hotels are suffering from “a heightened focus on prudent corporate travel expenditures,” as well as the pullback in vacation travel, Day said.
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