by Calculated Risk on 12/01/2009 10:00:00 AM

We started the year looking for two key construction spending stories: a likely bottom for residential construction spending, and the collapse in private non-residential construction.

It appears residential construction spending may have bottomed, although any growth in spending will probably be sluggish until the large overhang of existing inventory is reduced.

And the collapse in non-residential construction spending continues, and there will be further declines as projects are completed.

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 October, and nonresidential spending continued to decline.

Private residential construction spending is now 63% below the peak of early 2006.

Private non-residential construction spending is 20.6% below the peak of last October.

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

Nonresidential spending is off 20.6% on a year-over-year basis.

Residential construction spending is still off 23.6% from a year ago, although the negative YoY change will get smaller going forward.

Here is the report from the Census Bureau: October 2009 Construction at $910.8 Billion Annual Rate

by Calculated Risk on 12/01/2009 08:39:00 AM

UPDATE: Here is the document (pdf): Introduction of Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure

From Reuters: Treasury sets guidance to simplify "short sales" (ht Anthony)

Here are the basics of the Home Affordable Foreclosure Alternatives Program financial incentives for completing short sales or a deed-in-lieu transaction:

Borrowers would receive $1,500 from the government in relocation expenses.

Servicers receive $1,000 from the government.

Second liens holders can receive up to $3,000 of the sales proceeds for releasing their liens.

First lien investors can receive $1,000 from the government for signing off on payments to subordinate lien holders.

Borrowers must be fully released from any further liability.

by Calculated Risk on 12/01/2009 12:07:00 AM

Ok, one more post on Dubai before all the U.S. economic news this week ...

A couple of articles from the NY Times: Dubai Crisis Tests Laws of Islamic Financing

Shariah-compliant investments prohibit lenders from earning interest, and effectively place lenders and borrowers into a form of partnership. Yet there are no consistent rules about who gets repaid first if a company defaults on such debt, said Zaher Barakat, a professor of Islamic finance at Cass Business School in London.

And Andrew Ross Sorkin describes a recent trip to Dubai: A Financial Mirage in the Desert

One discussion was led by a British banker from Barclays who had moved to the region to create an entire Shariah-compliance team. He shared tips about various ways to create “structured products” that would pass muster with Muslim investors. (To me, the investments looked like bonds, walked like bonds and talked like bonds — but he never called them that.) Some of the bonds that Dubai World is in jeopardy of defaulting on, by the way, are Shariah-compliant sukuk. Just don’t call them bonds.

Oh great, more "structured products".

by Calculated Risk on 11/30/2009 08:58:00 PM

From The Times: Fear of creditor wipe-out as Dubai jettisons conglomerate

Dubai World, the state-owned conglomerate, was effectively abandoned to its fate by the Emirate's Government yesterday despite previous assumptions that Dubai would stand behind the company. That has raised the likelihood that lenders to Dubai World, which has liabilities of $60 billion, could lose billions of dollars.

Dubai World will be restructured and some of its assets ... are likely to be sold to pay down debt.

However, there is uncertainty over the robustness of creditor protection under Dubai law and lenders are understood to be concerned that they will get little or none of their money back.

Analysts at RBC Capital Markets said: “The bottom line is that creditors have almost no legal legs to stand on to maximise recovery values.”

This reminds me of a post by Rachel Ziemba in early 2008: Petrodollars: How to Spend It

Click on graph for larger image.

Rachel Ziemba writes:

2007 was the first year that spending growth outstripped revenues [growth] in the GCC and many other oil exporters. 2008 budget plans imply even higher current (especially wages and subsidies) and capital expenditures. Even countries that have traditionally saved more (Kuwait) are ramping up spending especially on capital projects and in some cases transfers to the population or pension funds. ... With megaprojects in the works in a variety of sectors including energy and other infrastructure, capital spending will likely continue to rise.

Further Ziemba argued - based on spending growth - that "many GCC countries might have very small current account surpluses" within 5 year, if oil prices hold steady.

And guess what? Oil prices fell - and spending continued to increase. And JA reminded me of this story earlier this month from Bloomberg: Qatar Bonds Gain After $28 Billion of Orders for Sale (ht JA)

Qatar’s bonds rose after the largest-ever sale of debt by an emerging-market government received $28 billion of orders, four times the amount issued.
...
“This is the largest debt deal from an emerging-market sovereign to date,” said Fabianna Del Canto, syndicate manager at Barclays Capital, a lead arranger for the sale, in London. “Qatar has firmly established itself as the premier borrower in the region.”
...
Qatar, the world’s biggest exporter of liquefied natural gas, will use the bond proceeds to provide “contingency funding” for state-owned companies, pay for infrastructure projects, and invest in the international oil and gas industry, according to the bond sale prospectus obtained by Bloomberg News.

Interesting. From lenders to borrowers ...

by Calculated Risk on 11/30/2009 06:01:00 PM

One year ago today, my friend and co-blogger Doris “Tanta” Dungey passed away.

This has been a very difficult couple of weeks for her family - Tanta's birthday was Nov 15th and she would have been 48. Cathy, Tanta's sister, asked me to pass along the gratitude of her family for all of your touching comments.

I first "met" Tanta in the comments to my posts in early 2005. She was clearly very knowledgeable about the mortgage industry - and extremely funny - and we shared concerns about the housing bubble and the eventual credit collapse. Tanta was a frequent participant in the comments all through 2005 and into 2006 - and then she disappeared for several months.

When Tanta eventually resurfaced, she revealed she had been seriously ill, and was no longer able to work (she was a mortgage banker). I approached her about writing for this blog, and at first she was hesitant - her health was her primary concern - but in December 2006 she finally agreed.

Tanta became well known for her brilliant posts (see the obituaries below), and she was also very witty and full of life. To understand the impact she had on readers, check out the comments to my post last year: Sad News: Tanta Passes Away

Sadly Tanta’s health declined in the summer of 2008, and she passed away last November. She left us many great posts and wonderful memories. Tanta was about getting the story right – and also having fun. I know this is a sad anniversary, but I think it is also a moment to once again celebrate her life.

Tanta Vive!

Click on photo for larger image in a new window. Here is more: In Memoriam: Doris "Tanta" Dungey Tanta playing guitar in 2002 (photo credit: family) From David Streitfeld in the NY Times: Doris Dungey, Prescient Finance Blogger, Dies at 47

For some reader remembrances, emails from Tanta and more, see Remembering Tanta Dance, Tanta, dance! (Photo credit: family) From Patricia Sullivan in the WaPo: Doris J. Dungey; Blogger Chronicled Mortgage Crisis