by Calculated Risk on 5/29/2011 11:03:00 PM

Another update on Europe - the IMF, the European Central Bank and the European Commission are trying to decide on the next step for Greece.

Lorenzo Bini Smaghi, an ECB executive board member told the Financial Times in an interview that a Greek "soft" restructuring is a "fairy tale". Here is quote:

LBS: There is no such thing as an “orderly” debt restructuring in the current circumstances. It would be a mess. And I haven’t mentioned contagion – which would come on top.

If you look at financial markets, every time there is mention of word like restructuring or “soft restructuring,” they go crazy ... “soft restructurings” “re-profilings” do not exist. They are catchwords that politicians have tried to use, but without any content.
excerpt with permission

And from the WSJ: Bond Auctions Set to Measure Contagion Fears

A team of European and International Monetary Fund officials is scheduled to conclude a closely watched examination of Greek government finances this week as bellwether bond auctions are expected to provide a sign of whether anxiety over Greece's debts is infecting investor appetite for sovereign bonds elsewhere in the euro zone.

Italy will seek to raise as much as €8.5 billion ($12.1 billion) from bond investors Monday, while Spain is seeking an estimated €3.5 billion ...

The crisis in Greece doesn't seem to be impacting Spain or Italy ... yet.

Yesterday ...
• Summary for Week Ending May 27th
• Schedule for Week of May 29th

by Calculated Risk on 5/29/2011 05:40:00 PM

From Eric Wolff at the North County Times: HOUSING: Builders feeling hopeful, opening lots for sale

The North San Diego County and Southwest Riverside County housing markets are glutted with bank-owned houses and short sales, which put a drag on local house prices. ... Yet builders opened 18 new communities in San Diego County in the first three months of 2011, five more than in the same period of 2010, and 16 opened in Riverside County, six more than during the same period last year, according to MarketPointe Realty Advisers.
...
Builders have also been able to slash costs: Many have laid off staff and found ways to become more efficient, and they're able to take advantage of reduced prices from contractors desperate to stay in business. ... Developers acquired unfinished communities at fire-sale prices from banks and desperate sellers.
...
"Every piece of property that we've bought in the last two years has been a distressed sale of some kind or another," said Brent Anderson, vice president for investor relations for Meritage. "All of these communities we're buying ---- they're distressed assets we're picking up for pennies on the dollar."

Cheap land, along with stiff competition among contractors, allows builders to slash their selling prices.

I've talked to builders in some other areas who are able to compete with distressed home pricing based on a combination of cheaper land prices, lower labor costs and also building smaller homes. (note: Eric didn't mention house size in his article).

These are still quite a few distressed homes available, but they don't appeal to every buyer. Perhaps the homes are too large, too beat up, or just too difficult to buy (short sales) - so there is still a market for new homes. I doubt this indicates a significant increase in new home construction, although we might see a little pick up later this year in a few areas as the local excess supply continues to shrink.

Yesterday ...
• Summary for Week Ending May 27th
• Schedule for Week of May 29th

by Calculated Risk on 5/29/2011 01:41:00 PM

Just a quick note: The publicly available S&P Case-Shiller release on Tuesday will include the two composite indexes (10 and 20 cities) for March, the National Index for Q1, and the indexes for 20 cities.

In nominal terms, the two Case-Shiller composite indexes for February were still above the previous post bubble lows set in April 2009. The Case-Shiller national index (released quarterly), hit a new post bubble low in Q4 2010.

I expect both the National Index and the Composite 20 index to be at new post bubble nominal lows in March. Radar Logic provides a forecast each month that has been pretty close. Here is their estimate for the March Case-Shiller indexes (Not Seasonally Adjusted, NSA):

Last month, we predicted that the S&P/Case-Shiller 10-City composite for February 2010 would be about 153 and the 20-City composite would be roughly 139. In fact, the 10-City composite was 152.70 and the 20-City composite was 139.27.

This month, we expect the March 2011 10-City composite index to be about 152 and the 20-City index to be roughly 138.

That would put the composite 20 at a new low (both NSA and SA), but the Composite 10 would still be about 1% above the low in April 2009.

by Calculated Risk on 5/29/2011 08:53:00 AM

From Bloomberg: Arizona Land Sells for 8% of Price Calpers Group Paid at Peak (ht Justin)

A 10,200-acre desert site in Arizona sold for $32.5 million this week, five years after a group with investors including the California Public Employees’ Retirement System paid $400 million for the land.
...
The site ... had been planned for a 42,000-home community by the Calpers- financed group when it was purchased in 2006.

This was one of those crazy deals that happened right at the peak.

I suppose paying under $10,000 per lot sounded good to someone in 2005, but the new owners are more realistic: “This won’t be developed in my lifetime.” said Kent Kleinman, a spokesman for the buyer ...

Yesterday ...
• Summary for Week Ending May 27th
• Schedule for Week of May 29th

by Calculated Risk on 5/28/2011 10:02:00 PM

Here is the weekly update on hotels from HotelNewsNow.com: US hotels post 11.6% weekly RevPAR gain

The U.S. hotel industry recorded an 11.6% revenue-per-available-room gain for the week ending 21 May 2011, according to data from STR.

The increase pushed RevPAR to US$67.52 for the week. The industry’s occupancy rose 6.2% to 65.4%, and its average daily rate increased 5.1% to US$103.23.

"The U.S. hotel industry reported its strongest weekly performance since early April," said Steve Hood, senior VP at STR.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

Click on graph for larger image in graph gallery.

This graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.

Back in March the four week average was almost back to 2008 levels, but then hotels hit a soft patch. Over the last couple of weeks, the occupancy rate has increased again - and the four week average is now back close to 2008 levels.

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

Earlier ...
• Summary for Week Ending May 27th
• Schedule for Week of May 29th

by Calculated Risk on 5/28/2011 05:25:00 PM

Earlier ...
• Summary for Week Ending May 27th

There will probably be a series of weak economic reports this week, including Case-Shiller house prices on Tuesday, the ISM manufacturing index on Wednesday, May vehicle sales also on Wednesday, and the May employment report on Friday.

----- Monday, May 30th -----
Memorial Day: All US markets will be closed in observance of the Memorial Day holiday.

----- Tuesday, May 31st -----
9:00 AM: S&P/Case-Shiller Home Price Index for March. Although this is the March report, it is really a 3 month average of January, February and March.

Click on graph for larger image in graph gallery.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

House prices have continued to decline, and the Composite 20 index will probably be at post-bubble low in March. The consensus is for prices to decline about 0.2% in March; the ninth straight month of house price declines.

9:45 AM: Chicago Purchasing Managers Index for May. The consensus is for a sharp decrease to 62.3, down from 67.6 in April.

10:00 AM: Conference Board's consumer confidence index for May. The consensus is for a slight increase to 66.5 from 65.4 last month due to slightly lower gasoline prices.

----- Wednesday, June 1st -----
8:15 AM: The ADP Employment Report for May. This report is for private payrolls only (no government). The consensus is for +178,000 payroll jobs in May, about the same as the 179,000 reported in April.

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through mid-year (not counting all cash purchases).

10:00 AM: Construction Spending for April. The consensus is for a 0.5% increase in construction spending.

10:00 AM: ISM Manufacturing Index for May. The consensus is for a decrease to 57.5 from 60.4 in April. Based on the regional manufacturing surveys, I expect the ISM index to be in the mid-50s.

All day: Light vehicle sales for May. Light vehicle sales are expected to decrease to 12.8 million (Seasonally Adjusted Annual Rate), from 13.1 million in April.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the April sales rate.

Edmunds is forecasting: "Edmunds.com analysts predict that May’s Seasonally Adjusted Annualized Rate (SAAR) will be 12.2 million, down from 13.2 million in April 2011."

The supply chain disruption is now impacting sales and I think the consensus is too high.

----- Thursday, June 2nd -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims increased over the last month. The consensus is for a decrease to 420,000 from 424,000 last week.

10:00 AM: Manufacturers' Shipments, Inventories and Orders for April. The consensus is for a 0.9% decrease in orders.

----- Friday, June 3rd -----
8:30 AM: Employment Report for May.

The consensus is for an increase of 190,000 non-farm payroll jobs in May, down from the 244,000 jobs added in April.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The estimate for May is in blue.

The consensus is for the unemployment rate to decline to 8.9% in May (from 9.0% in April).

The second employment graph shows the percentage of payroll jobs lost during post WWII recessions through April - aligned at maximum job losses.

This shows the severe job losses during the recent recession - there are currently 6.96 million fewer jobs in the U.S. than when the recession started in 2007.

Once again I think the consensus is too high.

10:00 AM: ISM non-Manufacturing Index for May. The consensus is for a slight increase to 54.0 in May.

Best wishes to All!