by Calculated Risk on 2/29/2012 09:04:00 PM

From the National Restaurant Association: Restaurant Industry Outlook Remains Positive Despite Slight Dip in Restaurant Performance Index

The outlook for the restaurant industry is positive for the coming months, as the National Restaurant Association’s Restaurant Performance Index (RPI) remained well above 100 in January. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.3 in January, down from December’s strong level of 102.2. Despite the decline, January represented the third consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“Although the Restaurant Performance Index dipped somewhat from December’s nearly six-year high, it remained solidly in positive territory,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators reported positive same-store sales for the eighth consecutive month, and a majority of them expect business to continue to improve in the months ahead.”
...
Restaurant operators reported positive same-store sales for the eighth consecutive month in January. ... Restaurant operators also reported positive customer traffic results in January.

Click on graph for larger image.

The index decreased to 101.3 in January from 102.2 in December (above 100 indicates expansion).

The data for this index only goes back to 2002.

This is "D-list" data (at best), but restaurant spending is discretionary and can tell us a little something about the overall economy. This index showed contraction in July and August, but is now solidly positive.

by Calculated Risk on 2/29/2012 04:31:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined in January to 3.90%, down from 3.91% in December. This is down from 4.45% in January 2011. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate increased to 3.59% in January, up from 3.58% in December. This is the fifth month in a row with a small increase in the delinquency rate. Freddie's rate is down from 3.82% in January 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The serious delinquency rate has been declining, but declining very slowly. The recent uptrend for Freddie Mac would seem to require an explanation (I have none). The reason for the slow decline is most likely the backlog of homes in the foreclosure process due to processing issues (aka robo-signing), and with the mortgage servicer settlement, I'd expect the delinquency rate to start to decline faster.

The "normal" serious delinquency rate is under 1%, so there is a long way to go.

by Calculated Risk on 2/29/2012 02:00:00 PM

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts suggest that overall economic activity continued to increase at a modest to moderate pace in January and early February. Activity expanded at a moderate pace in the Cleveland, Chicago, Kansas City, Dallas, and San Francisco Districts. St. Louis noted a modest pace of growth and Minneapolis characterized the pace of growth as firm. Economic activity rose at a somewhat faster pace in the Philadelphia and Atlanta Districts, while the New York District noted a somewhat slower pace of expansion. The Boston and Richmond Districts, in turn, noted that economic activity expanded or improved in most sectors.
...
Reports of consumer spending were generally positive except for sales of seasonal items, and the sales outlook for the near future was mostly optimistic.

And on real estate:

Residential real estate activity increased modestly in most Districts. Boston, Cleveland, Richmond, Atlanta, Kansas City, and Dallas reported growth in home sales, while New York noted steady to slightly softer home sales. Philadelphia reported strong residential real estate activity. In contrast, home sales declined in St. Louis and San Francisco noted that home demand persisted at low levels. Contacts' outlooks on home sales growth were mostly optimistic.
...
Commercial real estate markets displayed positive results in some Districts, as leasing showed overall improvement. Minneapolis, Richmond, Chicago, and Dallas noted increased leasing. Boston, however, reported mostly unchanged leasing fundamentals with some modest improvement since the previous report.

This was based on data gathered on or before February 17th. Mostly sluggish growth, but perhaps the most "positive" comments on residential real estate a long long time.

by Calculated Risk on 2/29/2012 12:20:00 PM

This morning Fannie Mae reported results for Q4 and all of 2011. Fannie reported that they acquired 47,256 REO in Q4 (Real Estate Owned via foreclosure or deed-in-lieu) and disposed of 51,344 REO. This has been the pattern all year; Fannie has sold more REO than they acquired (acquisitions slowed because of the process issues, but dispositions picked up sharply in 2011). Here is a table for the last two years:

Fannie Mae REO Acquisitions and Dispositions
	2011	2010
Acquisitions	199,696	262,078
Dispositions	243,657	185,744
Net	-43,961	76,334

This has been true for most lenders - they sold more REO than they acquired in 2011 - not just Fannie and Freddie. A common misperception is that when the lenders start foreclosing again at a higher level, that there will be a surge in REO sales. Fannie could increase acquisitions by 20%, and keep the sales pace the same, and their REO inventory wouldn't increase.

The following graph shows Fannie REO inventory, acquisition and dispositions over the last several years.

Click on graph for larger image.

When the blue line is above the red line, acquisitions are higher than dispositions, and REO inventory increases. In 2011 the opposite was true, and REO inventory declined by 27% from Q4 2010.

A few comments from Fannie:

Foreclosures generally take longer to complete in states where judicial foreclosures are required than in states where non-judicial foreclosures are permitted. For foreclosures completed in 2011, measuring from the last monthly period for which the borrowers fully paid their mortgages to when we added the related properties to our REO inventory, the average number of days it took to ultimately foreclose ranged from a low of 391 days in Missouri, a non-judicial foreclosure state, to a high of 890 days in Florida, a judicial foreclosure state. As of December 31, 2011, Florida accounted for 30% of our loans that were in the foreclosure process.

The non-judicial states will recover first.

The FHFA announced a pilot program to sell REO, and many analysts were surprised that most of the REO in the pilot were already leased. That will not continue since Fannie only has 9,000 leased properties:

We currently lease properties to tenants who occupied the properties before we acquired them into our REO inventory, which can minimize disruption by providing additional time to find alternate housing, help stabilize local communities, provide us with rental income, and support our compliance with federal and state laws protecting tenants in foreclosed properties. As of December 31, 2011, over 9,000 tenants leased our REO properties.

In February 2012, FHFA announced that it was beginning the pilot phase of an REO initiative that will allow qualified investors to purchase pools of foreclosed properties from us with the requirement to rent the purchased properties for a specified number of years. During the pilot phase, we will offer for sale pools of various types of assets including rental properties, vacant properties and nonperforming loans with a focus on the hardest-hit areas. The pilot transactions are expected to provide insight into how the participation of private investors can maximize the value of foreclosed properties and stabilize communities. We do not yet know whether this initiative will have a material impact on our future REO sales and REO inventory levels.

Freddie is expected to report results tomorrow.

by Calculated Risk on 2/29/2012 10:00:00 AM

Q4 GDP revised up to 3.0% from 2.8% in advance estimate.

Chicago PMI comes in at 64.0 well above expectations.

Chicago Purchasing Managers reported the February CHICAGO BUSINESS BAROMETER rose to its highest level in ten months. The barometer also marked a 29th month of expansion and its fourth consecutive month above 60. Increases were seen in six of eight Business Activity Indexes, highlighted by a very large advance in Employment. BUSINESS ACTIVITY: • EMPLOYMENT highest since May 1984; • ORDER BACKLOGS moved back into expansion; • INVENTORIES dipped; • NEW ORDERS highest level since March 2011:

Note: Testimony starts at 10 AM ET.

Here is the CSpan feed

Here is the CNBC feed.

Prepared testimony from Fed Chairman Ben Bernanke: Semiannual Monetary Policy Report to the Congress