by Calculated Risk on 3/11/2010 02:32:00 PM

Note: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008. My thanks to Jim Kennedy and the other Fed contributors for the previous MEW updates. For those interested in the last Kennedy data, here is a post, and the spreadsheet from the Fed is available here.

The following data is calculated from the Fed's Flow of Funds data and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity (hence the name "MEW", but there is very little MEW right now!), normal principal payments and debt cancellation.

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For Q4 2009, the Net Equity Extraction was minus $75 billion, or negative 2.7% of Disposable Personal Income (DPI). This is not seasonally adjusted.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding declined in Q4, and this was partially because of debt cancellation per foreclosure sales, and some from modifications, and partially due to homeowners paying down their mortgages as opposed to borrowing more. Note: most homeowners pay down their principal a little each month unless they have an IO or Neg AM loan, so with no new borrowing, equity extraction would always be negative.

Equity extraction was very important in increasing consumer spending during the housing bubble and I don't expect the Home ATM to be reopened any time soon. So any significant increase in consumer spending will come from income growth or a lower saving rate, not borrowing.

by Calculated Risk on 3/11/2010 12:14:00 PM

Update: corrected mortgage debt amount.

The Federal Reserve released the Q4 2009 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth is now off $11.8 Trillion from the peak in 2007, but up $5.0 trillion from the trough last year. A majority of the decline in net worth is from real estate assets with a loss of about $7.0 trillion in value from the peak. Stock market losses are still substantial too.

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This is the Households and Nonprofit net worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

Note that this ratio was relatively stable for almost 50 years, and then we saw the stock market and housing bubbles.

This graph shows homeowner percent equity since 1952.

Household percent equity (of household real estate) was up to 43.6% from the all time low of 40.8% last year. The increase was due to both an increase in the value of household real estate and a $72 billion decline in mortgage debt.

Note: something less than one-third of households have no mortgage debt. So the approximately 50+ million households with mortgages have far less than 43.6% equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP increased in Q3 because of an increase in real estate values.

Mortgage debt declined by $53 billion in Q4. Mortgage debt has now declined by $290 billion from the peak, but that seems insignificant compared to the $7 trillion decline in household real estate value.

by Calculated Risk on 3/11/2010 11:23:00 AM

From HotelNewsNow.com: STR: RevPAR increases in US weekly results

The United States hotel industry posted only its third revenue-per-available-room increase in 18 months for the week ending 6 March 2010, rising 0.9 percent to US$52.75, according to data from Smith Travel Research. It was the first time the increase wasn’t holiday-related.

Overall, the industry’s occupancy ended the week with a 4.0-percent increase to 54.9 percent and average daily rate dropped 3.0 percent to finish the week at US$96.05.

“The growth in year-over-year RevPAR is significant because the occupancies are clearly showing an improvement and the decline in rates is finally starting to slow,” said Randy Smith, co-founder and CEO of STR. “While the size of the RevPAR increase is not significant, it is a clear sign that the outlook for the industry is improving.

“We do expect to see positive weekly RevPAR performances for the industry through the end of April,” Smith added. “If gasoline prices hold steady, this positive RevPAR performance could be a good indicator of a better summer than we’ve had for the past couple years, which of course is the key season for most hoteliers.”

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

Click on graph for larger image in new window.

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.

It appears that occupancy rates may have bottomed, but the level is still very low - the average occupancy rate for this week is around 62%, well above the current 54.9%. This low occupancy rate is still pushing down room rates although revenue per available room (RevPAR) increased slightly.

The other good news for the industry (although bad news for construction employment) is that the pipeline of new hotel projects has slowed sharply, see: STR: US pipeline for February 2010

The total active U.S. hotel development pipeline includes 3,551 projects comprising 368,740 rooms, according to the February 2010 STR/TWR/Dodge Construction Pipeline Report released this week. This represents a 35.9-percent decrease in the number of rooms in the total active pipeline compared to February 2009. The total active pipeline data includes projects in the In Construction, Final Planning and Planning stages, but does not include projects in the Pre-Planning stage.

“We’re seeing comparable declines in room development across all regions of the country,” said Duane Vinson, vice president at STR. “The Mountain Region has posted the sharpest year-over-year decline due to a 75-percent (16,000-room) decline in the Las Vegas pipeline.”

The new supply is slowing sharply, and demand seems to have bottomed - but it is a long way up to normal.

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

by Calculated Risk on 3/11/2010 09:07:00 AM

The Census Bureau reports:

[T]otal January exports of $142.7 billion and imports of $180.0 billion resulted in a goods and services deficit of $37.3 billion, down from $39.9 billion in December, revised.

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The first graph shows the monthly U.S. exports and imports in dollars through January 2010.

Both imports and exports decreased in January. On a year-over-year basis, exports are up 15% and imports are up 12%. This is an easy comparison because of the collapse in trade at the end of 2008 and into early 2009.

The second graph shows the U.S. trade deficit, with and without petroleum, through January.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices increased to $73.89 in December - up 88% from the low in February 2009 (at $39.22). Oil import volumes declined in January.

In general trade has been increasing, although both imports and exports are still below the pre-financial crisis levels. China and oil account for most of the trade deficit.

by Calculated Risk on 3/11/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending March 6, the advance figure for seasonally adjusted initial claims was 462,000, a decrease of 6,000 from the previous week's revised figure of 468,000. The 4-week moving average was 475,500, an increase of 5,000 from the previous week's revised average of 470,500.
...
The advance number for seasonally adjusted insured unemployment during the week ending Feb. 27 was 4,558,000, an increase of 37,000 from the preceding week's revised level of 4,521,000.

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

The four-week average of weekly unemployment claims increased this week by 5,000 to 470,500.

The dashed line on the graph is the current 4-week average. The current level of 462,000 (and 4-week average of 470,500) is still very high, and suggests continuing job losses at the beginning of March.