by Calculated Risk on 11/06/2009 06:17:00 PM

Motor City crash.
Home Federal has spun out.
Bagholders totaled
by Soylent Green is People
From the FDIC: Liberty Bank and Trust Company, New Orleans, Louisiana, Assumes All of the Deposits of Home Federal Savings Bank, Detroit, Michigan

Home Federal Savings Bank, Detroit, Michigan, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 24, 2009, Home Federal Savings Bank had total assets of $14.9 million and total deposits of approximately $12.8 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.4 million. ... Home Federal Savings Bank is the 117th FDIC-insured institution to fail in the nation this year, and the third in Michigan. The last FDIC-insured institution closed in the state was Warren Bank, Warren, on October 2, 2009.

A small one ... but it counts.

by Calculated Risk on 11/06/2009 05:05:00 PM

"Feds!... Come and Take Them"
United Security
Sparta Bank is dead.
by Soylent Green is People
From the FDIC: Ameris Bank, Moultrie, Georgia, Assumes All of the Deposits of United Security Bank, Sparta, Georgia

United Security Bank, Sparta, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 14, 2009, United Security Bank had total assets of $157 million and total deposits of approximately $150 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $58 million. ... United Security Bank is the 116th FDIC-insured institution to fail in the nation this year, and the twenty-first in Georgia. The last FDIC-insured institution closed in the state was American United Bank, Lawrenceville, on October 23, 2009.

Off to a quick start ...

by Calculated Risk on 11/06/2009 03:00:00 PM

From MarketWatch: Consumer debt drops for record 8th straight month

Outstanding consumer debt fell at a 7.2% annual rate in September, the eighth consecutive decline, the Federal Reserve reported Friday.

Click on graph for larger image in new window.

This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.7% over the last 12 months - and falling fast. The previous record YoY decline was 1.9% in 1991.

Here is the Fed report: Consumer Credit

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent. In September, consumer credit decreased at an annual rate of 7-1/4 percent.

Note: The Fed reports a simple annual rate (multiplies change in month by 12) as opposed to a compounded annual rate. Consumer credit does not include real estate debt.

by Calculated Risk on 11/06/2009 01:47:00 PM

Update: A couple points: CRE is a lagging sector (see Business Cycle: Temporal Order), and I make some pretty optimistic comments in the middle of this post. I'll try to put some number togther on household formation and excess inventory.

From Carolyn Said at the San Francisco Chronicle: Gloomy times for commercial real estate

Values will plunge, vacancies will rise and rents will decrease across all types of commercial property before the market hits bottom in 2010, according to the "Emerging Trends in Real Estate" forecast from the Urban Land Institute and PricewaterhouseCoopers LLP.
...
No quick recovery is in store, the report said. "2010 looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders," it said. "The shake-out period may extend several years as even some conservative owners with well-underwritten loans from the early 2000s see their equity destroyed."

The report suggests the first sector to recover will be apartments as "people who were forced to move back in with their parents seek their own places as soon as they find jobs".

This household creation is really the key to entire housing market. During a recession people double up with friends or move into their parent's basements - and this is pent-up demand for housing units (mostly apartments) once these people find jobs and regain confidence about their future earnings.

All will not be grim forever. The number of housing units currently being completed (single family and apartments) is significantly below the level normally required for population growth. This level of completions would usually be reducing the excess inventory, however the improvement is being masked by the loss of households due to the recession. Once the job market starts to improve, I'd expect a surge in household creation (mostly renters).

Unfortunately there is a catch-22. Usually residential investment contributes significantly to job creation at the beginning of a recovery - and the excess housing inventory is holding down residential construction employment this time.

For the other CRE sectors the outlook is very grim. From the Urban Land Institute:

Among property sectors, the survey finds declines or near low record lows in investment sentiment for almost every property type. Only rental apartments register fair prospects and all other categories sink into the fair to poor range. Hotel and retail record the most precipitous falls. Development prospects are “largely dead” and drop to new depths and practically to “abysmal” levels for office, retail and hotels. Warehouse and apartments score only marginally better at “modestly poor.”

by Calculated Risk on 11/06/2009 10:29:00 AM

A few more graphs ...

Stress Test Scenarios

The economy is performing better that the stress test baseline scenario for GDP and house prices, but worse than the "more adverse" stress test scenario for unemployment.

Click on graph for larger image in new window.

This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).

This is a quarterly forecast: the Unemployment Rate for Q4 is just October at 10.2%. The unemployment rate is higher than the "more adverse" scenario, and much higher than the peak of the baseline scenario.

Unemployed over 26 Weeks

The DOL report yesterday showed seasonally adjusted insured unemployment at 5.75 million, down from a peak of about 6.9 million. This raises the question of how many unemployed workers have exhausted their regular unemployment benefits (Note: most are still receiving extended benefits, and President Obama signed a further extension of benefits this morning).

The monthly BLS report provides data on workers unemployed for 27 or more weeks, and here is a graph ...

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 a record 5.6 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 3.6% of the civilian workforce. (note: records started in 1948)

Diffusion Index

The third graph shows the BLS diffusion indexes for total private employment and manufacturing employment.

Think of this as a measure of how widespread the job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.

Both the "all industries" and "manufacturing" employment diffusion indices had been trending up - meaning job losses were becoming less widespread. However both turned down in October. This series is noisy month-to-month, but it still appears job losses are widespread across industries.

Earlier employment posts today:

Employment Report: 190K Jobs Lost, 10.2% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Record Part Time Workers, Weak Holiday Hiring