by Calculated Risk on 2/05/2010 01:13:00 AM

Just a late night update. The U.S. futures are up ...

Futures from CNBC indicate the Dow up 40 and the S&P 500 up 4. All that will change with the employment report!

And here are the Bloomberg Futures.

The Asian markets are all down, with the Nikkei off 2.6% and the Hang Seng off 2.9%.

Best to all.

by Calculated Risk on 2/04/2010 07:42:00 PM

Short sales are a hot topic, and Jillayne Schlicke has an interesting post: Predatory Short Sale Negotiators

I received a call the other day from a consumer who was in the process of purchasing a short sale home. The homeowner has defaulted on her mortgage and the trustee sale auction has been postponed a few times now that this buyer’s firm offer has finally reached the lender’s loss mitigation decision-maker. Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator” who is charging an additional $9,000 fee on top of the real estate commissions paid to both the agent for the seller and the agent for the buyer. The Short Sale Negotiator is demanding that the homebuyer sign an agreement that the homebuyer will be responsible for paying the $9,000 fee. The homebuyer emailed me asking what I thought of this additional fee and could I offer some advice.

Jillayne walks us through the details of this deal and the regulations regarding a "short sales negotiator", as an example, in Washington, the "negotiator" has to be a "licensed real estate agent ... a licensed loan originator or otherwise exempt from licensing such as an attorney".

There is value to the buyer in having someone with experience negotiate with the banks. If the listing and selling agents don't have the necessary experience and contacts, using another agent (or lawyer) to negotiate the deal makes sense. However I'd suggest the agents pay for the "negotiator" since negotiating the deal is usually part of the agent's responsibilities.

If the agents won't pay, Jillayne suggests: "Ask for the negotiator’s [fee] to be put on the HUD I Settlement Statement as a seller’s closing cost. There’s a chance the lender will pay it." If not, the buyer has to decide if the house is worth the additional fee. But one thing is clear - no fee should be paid outside of the settlement statement so that all parties are aware of all the details.

by Calculated Risk on 2/04/2010 04:50:00 PM

Since there is some interest in the stock market, here is a different graph from Doug ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner). His comments:

This chart is an offshoot of my Four Bad Bears. It shifts the point of alignment from the pre-bear highs to the bear bottom in the Oil Crisis and Tech Crash, the first major low in the 1929 Dow, and the March 9th closing low for our current Financial Crisis.

As the chart illustrates, the S&P 500 lows in 1974 and 2002 marked the beginnings of sustained recoveries. The Dow low in 1929 failed 11 months later.

Here is the same chart adjusted for inflation.

The second graph shows the S&P 500 since 1990.

The dashed line is the closing price today. The S&P 500 was first at this level in March 1998; almost 12 years ago.

The market is off 7.6% from the recent peak - still not a "correction", but we almost had our Dow 10K hats on (the Dow dipped under 10,000, but closed at 10,002)!

The S&P 500 is up 57% from the bottom in 2009 (387 points), and still off 32% from the peak (502 points below the max).

by Calculated Risk on 2/04/2010 03:22:00 PM

The BLS will release the January employment report tomorrow morning, and the consensus forecast is for a small net gain in payroll jobs in January, on a seasonally adjusted (SA) basis, and the unemployment rate flat at 10.0%.

A few points on the employment report:

1) the annual benchmark revision for March 2009 will be released as part of the report. The preliminary estimate was for 824,000 more jobs lost than the original reports (my graphs will include the revisions),

2) January is heavily adjusted for seasonal factors - even in good years there are around 2.5 million payroll jobs lost in January. The SA number is the one to follow.

3) The ISM Manufacturing report suggested some small job gains in the manufacturing sector.

ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006.

4) The ISM non-Manufacturing report suggested more job losses in the service sectors.

Employment activity in the non-manufacturing sector contracted in January for the 25th consecutive month. ISM's Non-Manufacturing Employment Index for January registered 44.6 percent.

5) The ADP report showed private sector job losses of 22 thousand in January. Recently ADP has usually indicated more job losses than the BLS, but that isn't always true. Also the ADP report mix was inverted from ISM, with ADP showing job growth in the service sector and job losses in manufacturing:

Nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis ... January’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 38,000, the second consecutive monthly increase. However, this employment growth was not enough to offset continued losses in the goods-producing sector.

6) The initial weekly claims number this morning would suggest continuing job losses.

In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week ...

There other are factors too - like the weather (cold in early January), and Census Bureau hiring (probably minimal).

And finally, it is important to remember that the economy needs to add something close to 125,000 jobs per month just to keep up with the growth the working age population.

by Calculated Risk on 2/04/2010 12:25:00 PM

The good news for hotels is it appears the occupancy rate might be at or near the bottom. Of course - as I noted earlier - the bad news for hotels is the average daily rate (ADR) is still falling because the occupancy rate is so low. Therefore RevPAR (revenue per available room) is still falling.

From HotelNewsNow.com: Luxury leads chain scale segment increases in STR weekly numbers

Overall, in year-over-year measurements, the industry’s occupancy ended the week up 1.9 percent to 48.8 percent. Average daily rate dropped 5.6 percent to finish the week at US$94.92. Revenue per available room for the week fell 3.8 percent to finish at US$46.31.

Click on graph for larger image in new window.

The first graph shows the Year-over-year change in the occupancy rate using a 3 week average.

It is possible the occupancy rate has bottomed, but at a very low level.

The second graph shows the occupancy rate by week since 2000, and the rolling 52 week average occupancy rate.

Note: the scale doesn't start at zero to better show the change.

The graph shows the distinct seasonal pattern for the occupancy rate; higher in the summer because of leisure/vacation travel, and lower on certain holidays. Business travel will be the key over the next few months.

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