by Calculated Risk on 11/29/2009 03:30:00 PM

The week will start with questions about Dubai, and a Treasury announcement on Monday about a plan to put pressure on lenders to complete modifications.

Click on graph for larger image in new window.

This graph is from the most recent Making Home Affordable Program Report for October.

To put the numbers in perspective: as of the end of June (five months is up for those borrowers) there were 143,276 trial modifications, and a 50% conversion rate would be about 70,000 permanent modifications. Of course a 50% conversion rate would be considered dismal. So I'd expect the number of permanent modifications to be well in excess of 100,000 for those early trials, and if some later trial modifications were converted, perhaps many more. The data will probably be released the week of December 7th.

The big news later in the week will be the November employment report. In between will be the ISM reports (manufacturing and service), auto sales (on Tuesday), construction spending, other employment reports and more. An interesting week!

And a summary ...

Chicago Fed Activity Index

From the Chicago Fed: Index shows economic activity leveled off in October

The index’s three-month moving average, CFNAI-MA3, decreased to –0.91 in October from –0.67 in September, declining for the first time in 2009. October’s CFNAI-MA3 suggests that growth in national economic activity remained below its historical trend.

Click on table for larger image in new window.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed the index should move "significantly into positive territory a few months after the official NBER date of the trough" - and that hasn't happened yet.

Existing Home Sales increased Sharply in October

Here is the NAR report: Existing-Home Sales Record Another Big Gain, Inventories Continue to Shrink

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in Oct 2009 (6.10 million SAAR) were 10.1% higher than last month, and were 23% higher than Oct 2008 (4.94 million SAAR).

For graph on Not Seasonally Adjust (NSA) sales, inventory and months of supply, see: Existing Home Sales Graphs

New Home Sales increase in October

The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 430 thousand. This is an increase from the revised rate of 405 thousand in September (revised from 402 thousand).

This graph shows New Home Sales vs. recessions for the last 45 years. New Home sales fell off a cliff, but are now 31% above the low in January. For inventory, NSA sales, and months of supply, see: New Home Sales in October

Case-Shiller House Prices increased in September

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 29.9% from the peak, and up about 0.4% in September.

The Composite 20 index is off 29.1% from the peak, and up 0.3% in September.

More on house prices: Case Shiller Home Price Graphs

Other Economic Stories ...

FDIC Q3 Banking Profile: 552 Problem Banks

First American CoreLogic Negative Equity Report for Q3

"Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of September, 2009. An additional 2.3 million mortgages were approaching negative equity, meaning they had less than five percent equity. Together negative equity and near negative equity mortgages account for nearly 28 percent of all residential properties with a mortgage nationwide."

From the American Trucking Association: ATA Truck Tonnage Index Dipped 0.2 Percent in October

From the U.S. Courts: Bankruptcy Filings Up 34 Percent over Last Fiscal Year

$430 Billion in CRE Losses?

Scott Reckard at the LA Times has an overview: Few mortgages have been permanently modified

Unofficial Problem Bank List Increases Significantly

Best wishes to all.

by Calculated Risk on 11/29/2009 01:33:00 PM

From the NRF: Black Friday Verdict: As Expected, Number of Shoppers Up, Average Spending Down

... a National Retail Federation survey conducted over the weekend confirms the expected: more people spent less. According to NRF’s Black Friday shopping survey, conducted by BIGresearch, 195 million shoppers visited stores and websites over Black Friday weekend, up from 172 million last year. However, the average spending over the weekend dropped to $343.31 per person from $372.57 a year ago. ...

“Shoppers proved this weekend that they were willing to open their wallets for a bargain, heading out to take advantage of great deals on less expensive items like toys, small appliances and winter clothes,” said Tracy Mullin, NRF President and CEO.
...
“During a more robust economy, people may be inclined to hit the “snooze” button on Black Friday, but high unemployment and a focus on price caused shoppers to visit stores early in anticipation of the best deals,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch.

* NRF’s definition of “Black Friday weekend” includes Thursday, Friday, Saturday and projected spending for Sunday.

This is for "stores and websites" - not just brick and mortar.

by Calculated Risk on 11/29/2009 11:26:00 AM

Note: I'll have a Black Friday retail post in a few hours ...

From Bloomberg: U.A.E. Central Bank Stands Behind Lenders, Adds Funds

The United Arab Emirates’ central bank said it “stands behind” the country’s local and foreign banks, which face losses from Dubai World’s possible default, and offered them access to more money under a new facility.

And from the Financial Times: UAE central bank offers credit facility

“It’s a bit disappointing .... It’s obviously a welcome measure in itself but we want to see more from the central bank. We want to see that they will guarantee the capital position of any banks that have exposure and that they will ultimately be willing to buy out the debt,” one UAE analyst said on Sunday.
excerpted with permission

Apparently the hope is that a majority of the debt due on Dec 14th is held by banks in the UAE, and that by adding liquidity, the UAE Central Bank will make it easier for the bondholders to accept the deferral of payment. However this isn't just a liquidity crisis - this is a solvency crisis (the assets are almost certainly worth less than the liabilities) - and this does nothing to address the solvency issues.

by Calculated Risk on 11/29/2009 09:23:00 AM

From Alejandro Lazo at the LA Times: Falling rents aid homeowners in mortgage trouble

Southern California rents peaked at $1,501 in the third quarter of 2008 ... Since then, rents have fallen 4.9%, to an average of $1,427 in the third quarter of this year, according to a survey of larger apartment complexes by property research firm RealFacts. The drop came as the occupancy rate of the buildings ticked down 0.8% to 93.7%. The data don't include homes converted into rental units or smaller apartment buildings.
...
Job losses and competition from foreclosed homes have made concessions by large landlords common. Thomas Shelton, president of Western National Property Management in Irvine, said he was offering about a month of free rent for every 12-month lease signed.

Although falling rents and significant concessions are good news for renters, this will also lead to more apartment defaults, higher default rates for apartment CMBS, and more losses for small and regional banks.

And falling rents are already pushing down owners' equivalent rent (OER). Since OER is the largest component of CPI, this will apply downward pressure on CPI for some time. And lower rents will also put pressure on house prices, since renting is a competing product.

But renting is a relief to some:

Thomas DeLong walked away from the mortgage on his final home in September and began renting a house for about $1,400 a month, with utilities, in the high-desert area of Perris.

DeLong ... said renting was a relief after years of worry and a financial juggling act that came crashing down all around him.

by Calculated Risk on 11/28/2009 10:55:00 PM

From The Times: Abu Dhabi rides in to rescue Dubai from debt crisis

And from the Telegraph: Abu Dhabi will not race to Dubai's rescue

Actually both stories are pretty much the same. From The Times article:

An Abu Dhabi official said yesterday it would “pick and choose” how to assist its neighbour, a hint that the restructuring of Dubai’s debts may not be straightforward. “We will look at Dubai’s commitments and approach them on a case-by-case basis,” the official said. “It does not mean that Abu Dhabi will underwrite all their debts.”

Clearly Abu Dhabi will ride, but not race, to the rescue.