by Calculated Risk on 9/20/2010 01:08:00 PM

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index declined 3.1% in July. This is a repeat sales measure of commercial real estate prices.

Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

It is important to remember that the number of transactions is very low and there are a large percentage of distressed sales.

Commercial real estate prices (as measured by this index) fell 7% combined in June and July.

The index is now down 43.2% from the peak in October 2007.

The index is only 0.9% above the October 2009 low.

by Calculated Risk on 9/20/2010 11:31:00 AM

From NBER: NBER Business Cycle Dating Committee Announces Trough Date

The Business Cycle Dating Committee of the National Bureau of Economic Research ... determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II.

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

This is somewhat subjective - and I thought they'd wait longer because the committee usually waits until some of the key indicators have returned to pre-recession levels. This time no indicator has reached the pre-recession level, and some are still very low (like personal income less transfer payments).

by Calculated Risk on 9/20/2010 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 13 in September. This is the same low level as in August and below expectations. The record low was 8 set in January 2009, and 13 is very low ...

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

Click on graph for larger image in new window.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the September release for the HMI and the July data for starts (August starts will be released tomorrow).

This shows that the HMI and single family starts mostly move in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Unchanged in September

Builder confidence in the market for newly built, single-family homes held unchanged in September from the previous month's low level of 13, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

"The stall in the nation's housing market continues," agreed NAHB Chief Economist David Crowe. "Builders report that the two leading obstacles to new-home sales right now are consumer reluctance in the face of the poor job market and the large number of foreclosed properties for sale."

by Calculated Risk on 9/20/2010 08:33:00 AM

From Mokoto Rich at the NY Times: For the Unemployed Over 50, Fears of Never Working Again (ht Ann)

Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.

After other recent downturns, older people who lost jobs fretted about how long it would take to return to the work force and worried that they might never recover their former incomes. But today, because it will take years to absorb the giant pool of unemployed at the economy’s recent pace, many of these older people may simply age out of the labor force before their luck changes.

It is hard for people in their 50s to change careers, or rebuild their savings after a long period of unemployment. And, as in the story, they may end up taking Social Security early - just to get by - and that means they will receive a significantly lower monthly payout than if they waited until 66. A very tough situation.

by Calculated Risk on 9/19/2010 08:47:00 PM

From the Financial Times: Junk bond prices hit pre-crisis levels

Strong investor demand for junk bonds has pushed the average price on such corporate debt to its highest level since June 2007, when companies could borrow with ease at the height of the credit boom.
except with permission

And from the WSJ: Bond Markets Get Riskier

Bond markets are growing riskier as investors seeking steady returns bid up prices and ignore some early warning signs similar to those that flashed during the credit bubble.

Last week, prices on high-yield, or junk, bonds, hit their highest level since 2007, nearly double their lows of the credit crisis. Nine months into the year, companies have sold $172 billion in junk bonds, already an annual record, according to data provider Dealogic.

This seems like investors chasing yield - and that is making it easy to sell junk bonds. Oh well ...