by Calculated Risk on 11/12/2009 01:20:00 PM

From HotelNewsNow.com: Boston leads RevPAR gains in STR weekly numbers

Overall, in year-over-year measurements, the industry’s occupancy fell 3.6 percent to 54.8 percent, average daily rate dropped 8.5 percent US$97.19, and RevPAR decreased 11.8 percent to US$53.29.

Click on graph for larger image in new window.

This graph shows the occupancy rate by week for each of the last four years (2006 through 2009 labeled by start of month).

Notes: the scale doesn't start at zero to better show the change. Thanksgiving was late in 2008, so the dip doesn't line up with the previous years.

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

This is a two year slump for the hotel industry. Although occupancy is off 3.6% compared to 2008, occupancy is off about 17% compared to 2006 and 2007.

The occupancy rate really fell off a cliff in October 2008, and the good news is the occupancy rate for 2009 is tracking closer and closer to 2008.

Smith Travel Research is now predicting a slight uptick in occupancy rates in 2010 to 55.8% from an estimate of 55.2% in 2009. However average daily room rates (ADR), and revenue per available room (RevPAR) are expected to continue to decline slightly in 2010. The "good news" for the hotel industry is supply coming online is dropping sharply, and is expected to stay low for a few years. Of course that is bad news for construction workers ...

by Calculated Risk on 11/12/2009 11:08:00 AM

From David Streitfeld at the NY Times: Housing Agency Says Cash Reserves Are Down Sharply

The Federal Housing Administration said Thursday morning that its cash reserves had dwindled significantly in the last year after a record drop in home prices.
...
The results of the F.H.A.’s annual audit showed the agency’s capital reserves to be 0.53 percent, far under the 2 percent minimum mandated by Congress. A year ago, the capital reserves were 3 percent.

From the FHA: Annual Actuarial Study Shows Capital Reserve Ratio Below Mandated Level; FHA Credit Policy Reforms Expected to Address Risk, Raise Reserve Levels

The independent study shows that FHA has sustained significant losses from loans made before 2009, and the capital reserve ratio has fallen below the congressionally mandated threshold, but concludes that under most economic scenarios considered FHA’s reserves would remain above zero.

FHA’s capital reserve ratio, which is determined through findings from the independent actuarial study, measures reserves held in excess of those needed to cover projected losses over the next 30 years. The review projects the capital reserve ratio to be 0.53 percent of total insurance in force this year, below the two-percent statutory threshold. This capital ratio fell from 3 percent in the fall of 2008, reflecting difficult conditions in the housing market. The 0.53 percent capital ratio (which represents the funds held in the Capital Reserve Account) is in addition to the auditor’s base case estimate of the 30-year reserves needed to pay for losses on existing loans (which are held in the Financing Account). Combining those two accounts, FHA holds $31 billion in its total reserves today, or more than 4.5 percent of total insurance-in-force.
...
As part of its efforts to manage risk, FHA is modeling more extreme scenarios than those used by the actuary, including scenarios showing the reserves going below zero. FHA is committed not only to understanding its risks, but also to developing policy responses appropriate to addressing that risk.
emphasis added

More links:

Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund

FHA Fiscal Year 2009 Actuarial Review Briefing

by Calculated Risk on 11/12/2009 09:05:00 AM

The MBA reports: Mortgage Refinance Applications Increase, Purchase Applications at Nine Year Low

The Market Composite Index, a measure of mortgage loan application volume, increased 3.2 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 11.3 percent from the previous week and the seasonally adjusted Purchase Index decreased 11.7 percent from one week earlier. The seasonally adjusted Purchase Index is at its lowest level since December 2000.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.90 percent from 4.97 percent, with points increasing to 1.03 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

It appears the post home buyer tax credit slump had started, although the tax credit will be extended and the eligibility expanded - so the slump might be delayed ... also existing home sales in October will probably be very strong - that is not good news for housing and the economy (since it was just demand from marginal buyers pulled forward at a very high cost).

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.

by Calculated Risk on 11/12/2009 08:30:00 AM

The DOL reports weekly unemployment insurance claims decreased to 502,000:

In the week ending Nov. 7, the advance figure for seasonally adjusted initial claims was 502,000, a decrease of 12,000 from the previous week's revised figure of 514,000. [revised from 512,000] The 4-week moving average was 519,750, a decrease of 4,500 from the previous week's revised average of 524,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending Oct. 31 was 5,631,000, a decrease of 139,000 from the preceding week's revised level of 5,770,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 4,500 to 519,750, and is now 139,000 below the peak in April. The significant decline from the peak strongly suggests that initial weekly claims have peaked for this cycle.

The level is still very high suggesting continuing job losses.

by Calculated Risk on 11/11/2009 10:08:00 PM

Yesterday I posted some excerpt from Freddie Mac's 10-Q:

We believe that several of our mortgage insurance counterparties are at risk of falling out of compliance with regulatory capital requirements, which may result in regulatory actions that could threaten our ability to receive future claims payments, and negatively impact our access to mortgage insurance for high LTV loans.

The WSJ has more tonight, including the risks to Fannie Mae: Fannie, Freddie Warn on More Losses

Fannie Mae has about $109.5 billion of mortgage-insurance coverage in force ... Freddie Mac had $63.4 billion in mortgage insurance and $12.2 billion in bond insurance.

And this a key sentence:

The reduction in private insurance coverage has contributed to the rise in the volume of loans backed by the Federal Housing Administration ...

Instead of using private mortgage insurance for loans greater than 80% LTV, low down payment borrowers are now using FHA insurance.

That will probably end well ...

Also - the WSJ has more on the new FDIC "Prudent Commercial Real Estate Loan Workouts" guidance issued Oct 30th: Banks Hasten to Adopt New Loan Rules. Here is the new FDIC guidance that states performing loans "made to creditworthy borrowers" will not require write downs "solely because the value of the underlying collateral declined".