by Calculated Risk on 1/29/2009 01:56:00 PM

We rarely get advance notice for Bank Failure Friday, but this might be one ...

From the Baltimore Sun: Suburban Federal Savings Bank told to sell

Federal banking regulators have told Crofton-based Suburban Federal Savings Bank that it must be sold by Friday or face a possible government takeover.

The 53-year-old thrift has been trying to recover from losses on soured real-estate loans. In documents filed last week, the Office of Thrift Supervision ordered Suburban to merge with another institution or accept "appointment of a conservator or receiver."

If Suburban were to be seized, it would be the first bank to fail in Maryland since 1992, the tail end of the savings and loan crisis.

Suburban, which has seven branches and about $354 million in assets, was supposed to submit a binding merger agreement to the OTS by last Friday, but neither the regulator nor Suburban officials would say yesterday whether a plan was submitted.

by Calculated Risk on 1/29/2009 12:04:00 PM

Here is a new record that will never be broken! The Philly Fed index shows - for the first time ever - declining activity in all states in December (see bottom graph).

Here is the Philadelphia Fed state coincident index release for December.

The Federal Reserve Bank of Philadelphia has released the coincident indexes for all 50 states for December 2008. The indexes decreased in all 50 states for the month (a one-month diffusion index of -100). For the past three months, the indexes increased in three states, Louisiana, North Dakota, and Wyoming, and remained unchanged in one state, Alaska.

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Almost all states are showing declining activity over the last three months.

This is what a widespread recession looks like based on the Philly Fed states indexes.

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. For the first time ever, the Philly Fed index showed no states with increasing activity.

The indexes decreased in all 50 states for the month (a one-month diffusion index of -100).

Most of the U.S. was has been in recession since December 2007 based on this indicator - and now ALL states are see declining activity.

by Calculated Risk on 1/29/2009 10:00:00 AM

The Census Bureau reports, New Home Sales in December were at a seasonally adjusted annual rate of 331 thousand. This is the lowest sales rate the Census Bureau has ever recorded (starting in 1963).

Click on graph for larger image in new window.

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Notice the Red columns for 2008. This is the lowest sales for December since 1966. (NSA, 23 thousand new homes were sold in December 2008, 23 thousand were sold in December 1966).

As the graph indicates, sales in 2008 are substantially worse than the previous years.

The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff.

Sales of new one-family houses in December 2008 were at a seasonally adjusted annual rate of 331,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 14.7 percent (±13.9%)* below the revised November of 388,000 and is 44.8 percent (±10.8%) below the December 2007 estimate of 600,000.

And one more long term graph - this one for New Home Months of Supply.

The months of supply is at an ALL TIME RECORD 12.9 months in December (this is seasonally adjusted)!

The seasonally adjusted estimate of new houses for sale at the end of December was 357,000. This represents a supply of 12.9 months at the current sales rate.

The final graph shows new home inventory. For new homes, both sales and inventory are falling quickly since starts have fallen off a cliff.

Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels.

This is a another very weak report. Record low sales. Record high months of supply. Ouch. I'll have more on new home sales later today ...

by Calculated Risk on 1/29/2009 09:13:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 24, the advance figure for seasonally adjusted initial claims was 588,000, an increase of 3,000 from the previous week's revised figure of 585,000. The 4-week moving average was 542,500, an increase of 24,250 from the previous week's revised average of 518,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending Jan. 17 was 4,776,000, an increase of 159,000 from the preceding week's revised level of 4,617,000. The 4-week moving average was 4,630,000, an increase of 66,500 from the preceding week's revised average of 4,563,500.

Click on graph for larger image in new window.

The first graph shows weekly claims and continued claims since 1971.

The four week moving average is at 542,500; still below the recent peak of 558,750
in December.

Continued claims are now at 4.78 million - a new record - just above the previous all time peak of 4.71 million in 1982.

The second graph shows the 4-week average of initial weekly unemployment claims (blue, right scale), and total insured unemployed (red, left scale), both as a percent of covered employment.

This normalizes the data for changes in insured employment.

By these measures the current recession is already about the same severity as the '90/'91 recession.

by Calculated Risk on 1/29/2009 09:04:00 AM

From MarketWatch: Ford loses nearly $6 billion as revenue beats target

Ford Motor Co. reported Thursday a fourth-quarter loss of $5.9 billion ... Revenue dropped 34% to $29.2 billion as car sales dried up in the U.S. market.

And Ford is the healthiest of the U.S. automakers ...

by Calculated Risk on 1/29/2009 12:39:00 AM

Just a few more stories to discuss ...

From the WaPo: U.S. Aid Goes to Credit Unions

The federal government yesterday expanded its bailout to another vulnerable sector, saying it will inject $1 billion into a nonprofit company that provides banking services to the credit union industry.

The government also will guarantee tens of billions of dollars in previously uninsured deposits in a move that aims to forestall a crisis of confidence in a system once considered unshakable because of its conservative business practices.

The National Credit Union Administration ... said it was acting to protect the nearly 90 million Americans who use a retail credit union.

The story is interesting. Many Credit Unions send funds to U.S. Central Corporate Federal Credit Union to invest, and Central invested in ... what else ... mortgage-related securities!

From Bloomberg: Ford Credit Will Cut 1,200 Workers as U.S. Auto Sales Slide

Ford Motor Co.’s finance unit will eliminate 20 percent of its workforce, or about 1,200 workers, as part of a cost-cutting move as U.S. auto sales rate falls to the lowest since 1982.

Expect a huge loss tomorrow too!

From the WSJ: Agreement Boosts Citi Oversight

Citigroup Inc. has recently started operating under a regulatory agreement that could subject the company to greater restrictions on its operations.
...
In a contract spelling out terms of the government bailout package, Treasury required Citigroup to disclose whether it or any of its subsidiaries are subject to any cease-and-desist orders, memorandums of understanding, consent orders, or other enforcement actions or regulatory agreements.

In a document attached to the contract, Citigroup didn't check a box indicating that it isn't operating under any such directives. Instead, the document states: "Certain items previously disclosed to the company's appropriate federal banking agency."

That is a little vague ... but clearly there is a cease-desist-order, MOU, or some other directive.

by Calculated Risk on 1/28/2009 10:13:00 PM

Genworth sent out a notice of tighter guidelines for mortgage insurance today effective Monday February 2nd. Some of the changes are pretty significant.

As an example, loans over $417K in California are ineligible for MI. Period. The same with attached housing in Florida - ineligible.

Here are some of the rules:

Underwriting Guideline Changes – Effective February 2, 2009

• Minimum Credit Score = 680
• Maximum Debt to Income (DTI) = 41% regardless of AUS or Submission Channel
• High Cost Loans (> $417,000) Minimum Credit Score = 740

o Loan amounts > $417,000 in CA – Ineligible

• Cash Out Refinance – Ineligible
• Second Homes – Ineligible
• Manufactured Homes – Ineligible
• Construction to Permanent – Ineligible

Declining/Distressed Markets Changes – Effective February 2, 2009

• Minimum Credit Score = 700

o AZ, CA, FL, NV = 720 (as per existing guidelines)

• Maximum Debt-to-Income = 41% regardless of AUS or submission channel
• Additions to our Declining/Distressed Markets List

o 17 states added in their entirety
o 69 MSA/CBSA added
o Please see Attachment A for a complete list of new markets

You can see the old rules and guidelines here. You can type in your zip code and "discover if the property is in a Declining/Distressed Market". (I think this is the old rules and will change on Monday)

Here is the current list of distressed markets. This included the following entire states: Arizona, California, Connecticut, Delaware, Florida, Michigan, Nevada, and New Jersey.

The mailing today added many more MSAs and the following additional entire states: Colorado, Maine, New Hampshire, Rhode Island, Wisconsin, Hawaii, Maryland, New Mexico, Utah, Idaho, Massachusetts, Ohio, Vermont, Kansas, Minnesota, Oregon, Washington.

Just more tightening ...

by Calculated Risk on 1/28/2009 07:13:00 PM

From the NY Times: House Passes Obama’s Stimulus Package

Without a single Republican vote, President Obama won House approval on Thursday for an $819 billion economic recovery plan as Congressional Democrats sought to hold down their own difference over the enormous package of tax cuts and spending.
...
As Senate Democrats prepare to bring their version to the floor on Monday, Democrats from the House and the administration indicated they would ultimately accept a provision in the emerging Senate package that would adjust the alternative minimum tax to hold down many middle-class Americans’ income taxes for 2009.

The provision, which would drive the overall cost of the package to nearly $900 billion, was not in the legislation passed by the House.

It sounds like the stimulus package will pass the Senate and be signed into law by mid-Feb. The WSJ has some state by state stats and graphics (for those with access).

by Calculated Risk on 1/28/2009 05:59:00 PM

Back in 2005, Kermit Baker and Diego Saltes of the American Institute of
Architects wrote a white paper: Architecture Billings as a Leading Indicator of Construction

Here is a graph from their paper:

Click on graph for larger image in new window.

This graph from 2005 compares the Architecture Billings Index from the American Institute of Architects and year-over-year change in non-residential construction spending from the Census Bureau. The correlation is pretty strong (see the paper for more).

The second graph is an update through Dec 2008 for the ABI, and Nov 2008 for construction spending.

I've had to change the scale to fit the collapse in the ABI on the graph.

The ABI typically leads construction spending by about 9 to 12 months according to AIA chief economist Kermit Baker. This graph also suggests the collapse will be very sharp, and although there isn't enough data to know if this is predictive of the percentage decline in spending, it does suggest a possible year-over-year decline of perhaps 30% in non-residential construction spending.

In November, private non-residential construction spending was at $428.2 billion annual rate. A 30% decline would be to an annual rate of $300 billion or so. Ouch.

by Calculated Risk on 1/28/2009 05:19:00 PM

From the American Trucking Association: ATA Truck Tonnage Index Plummeted 11.1 Percent in December (hat tip Dave of SV)

Click on graph for larger image in new window.

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index plunged 11.1 percent in December 2008, marking the largest month-to-month reduction since April 1994, when the unionized less-than-truckload industry was in the midst of a strike. December’s drop was the third-largest single-month drop since ATA began collecting the data in 1973. In December, the seasonally adjusted tonnage index equaled just 98.3 (2000 = 100), its lowest level since December 2000. The not seasonally adjusted index edged 0.6 percent higher in December.

Compared with December 2007, the index declined 14.1 percent, the biggest year-over-year decrease since February 1996. During the fourth quarter, tonnage was down 6.0 percent from the same quarter in 2007.

ATA Chief Economist Bob Costello said the December reading confirms that the United States is in the thick of a recession. “Motor carrier freight is a reflection of the tangible-goods economy, and December’s numbers leave no doubt that the United States is in the worst recession in decades,” Costello said. “It is likely truck tonnage will not improve much before the third quarter of this year. The economy is expected to contract through the first half of 2009 and then only grow slightly through the end of the year.”