by Calculated Risk on 12/30/2010 08:18:00 PM

A weekly update on hotels from HotelNewsNow.com: STR: US performance for week ending 25 Dec.

In year-over-year comparisons, occupancy increased 2.2 percent to 34.6 percent, average daily rate was up 1.4 percent to US$87.13, and revenue per available room finished the week up 3.6 percent to US$30.16.

The following graph shows the four week moving average for the occupancy rate by week for 2008, 2009 and 2010 (and a median for 2000 through 2007).

Click on graph for larger image in graph gallery.

Notes: the scale doesn't start at zero to better show the change. The graph shows the 4-week average, not the weekly occupancy rate.

This is the slow season for hotels, and the key will be if business travel picks up early next year.

When 2010 started, hotel occupancy was running about the same rate as in 2009 - the worst year for hotels since the Great Depression. In the spring, the occupancy rate increased, and by mid-year occupancy had caught up with 2008 (2008 was weak year for hotels). For the last couple of months the occupancy rate has been running ahead of 2008. The year-over-year comparisons will look great in early 2011, but an important comparison will be with the median for '00 through '07.

A few comments from Jeff Higley at HotelNewsNow.com: There’s more than one way to describe 2010

I don’t fall in the camp that believes the United States hotel industry is in the midst of a full recovery just yet.

Sure, there are signs the worst is over as hoteliers across the country are trying to dig out from the economic mess of the past two years. 2010 has been a year of extremes for the industry. It seems every week sends a different signal regarding the industry’s trek to recovery.
...
One full-service property I stayed at had a 7% occupancy rate on one of the nights of my visit; another property had 12 cars in the parking lot during the overnight hours. ... One the other hand, more roomnights were sold during July than any other month EVER, according to STR data.
...
In a nutshell, the hotel industry is seeing positive signs, but there’s still a long way to go before it can say it is in a true recovery. There are plenty of ways to measure success, but in this business there’s only one that truly counts: rates. When we see at least four months of year-over-year increases in rate and when the overall average daily rate gets to within five bucks of its $107 peak in 2008 (it’s about $10 off right now), it will be time to truly break out the recovery bubbly.

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

by Calculated Risk on 12/30/2010 04:05:00 PM

LPS Applied Analytics released their November Mortgage Performance data. According to LPS:

• The average number of days delinquent for loans in foreclosure is a record 499 days
• Over 4.3 million loans are 90 days or more delinquent or in foreclosure
• Delinquency rates are down across all products as more loans entered foreclosure and new delinquencies declined.
• Foreclosure inventory increases are being driven both by elevated levels of foreclosure starts as well as a very limited amount of foreclosure sale activity.

Click on graph for larger image in new window.

This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.

The percent in the foreclosure process is trending up because of the foreclosure moratoriums.

According to LPS, 9.02% of mortgages are delinquent (down from 9.29% in October), and another 4.08% are in the foreclosure process (up from 3.92% in October) for a total of 13.10%. It breaks down as:

• 2.61 million loans less than 90 days delinquent.
• 2.16 million loans 90+ days delinquent.
• 2.16 million loans in foreclosure process.

For a total of 6.92 million loans delinquent or in foreclosure.

Note: I've seen some people include these 7 million delinquent loans as "shadow inventory". This is not correct because 1) some of these loans will cure, and 2) some of these homes are already listed for sale (so they are included in the visible inventory).

Two key numbers to watch in 2011 are:
• New delinquencies. With falling house prices, delinquencies could start to increase again.
• Foreclosures. With the end of the foreclosure moratoriums, foreclosure sales should increase - and the number of homes in the foreclosure process should decline.  However REOs (Real Estate Owned) will increase unless the homes are sold.

by Calculated Risk on 12/30/2010 02:19:00 PM

A week ago I posted some questions for next year: Ten Economic Questions for 2011. I'm working through the questions and trying to add some predictions, or at least some thoughts for each question before the end of year.

4) Economic growth: After I took the "over" for 2011 back in November, a number of analysts have upgraded their forecasts. As an example, Goldman Sachs noted Friday, Dec 17th:

The US economic outlook for 2011 has improved further with enactment of the fiscal compromise, as well as a stronger trend in recent data. As we forewarned, we are revising up our forecasts to incorporate this news and now expect real GDP to rise 3.4% in 2011 and 3.8% in 2012 (up from 2.7% and 3.6%) ...

It does appear GDP growth will increase in 2011, although GDP growth will probably still be sluggish relative to the slack in the system. How much will the economy grow in 2011?

For 2010 there were a number of forecasts for a "V-shaped" recovery (4% to 6% real GDP growth range) - and also a number of forecasts for a double dip recession. Both wrong.

I took the boring middle ground: sluggish and choppy growth, but no double dip. The key reasons were 1) recoveries from financial crisis tend to be sluggish, and 2) the drag from residential investment (RI) would be less in 2010 (so a double dip seemed less likely).

There are still plenty of scars from the financial crisis (excessive debt, high unemployment, excess capacity, excess supply of housing, a large number of homeowners with negative equity, and high foreclosure activity), but the economy is slowly healing. And even though residential investment will be weak in 2011, I think RI will make a positive contribution to GDP growth for the first time since 2005. And another sector, non-residential investment in structures, will probably bottom in 2011 based on the Architecture Billings index.

There are still plenty of downside risks: financial contagion from Europe, budget problems at state and local governments, and falling house prices all could lead to slower U.S. growth.

However my guess is growth will be sluggish relative to the slack in the system, but above the 2010 growth rate. Usually I don't forecast a specific number, but for personal reasons I will this year (probably jinxing myself). For 2011 I'll take 3.7% real GDP growth. That is consistent with my employment / unemployment rate forecasts, and that would also be the highest growth rate since Clinton was President (not saying much because the '00s were so bad).

As a reminder - this will not feel like a recovery for the millions of unemployed workers, and for the millions more who are working part time or for lower wages. This will not feel like an economic recovery until the unemployment rate drops sharply and real income for the middle class starts to increase.

Ten Questions:
• Question #1 for 2011: House Prices
• Question #2 for 2011: Residential Investment
• Question #3 for 2011: Delinquencies and Distressed house sales
• Question #4 for 2011: U.S. Economic Growth
• Question #5 for 2011: Employment
• Question #6 for 2011: Unemployment Rate
• Question #7 for 2011: State and Local Governments
• Question #8 for 2011: Europe and the Euro
• Question #9 for 2011: Inflation
• Question #10 for 2011: Monetary Policy

by Calculated Risk on 12/30/2010 11:00:00 AM

From the Kansas City Fed: Survey of Tenth District Manufacturing

Tenth District manufacturing activity continued at a solid pace in December, and producers were increasingly optimistic about future activity. Price indexes in the survey rose further, with a marked increase in raw materials prices.

The net percentage of firms reporting month-over-month increases in production in December was 21, unchanged from 21 in November and up from 10 in October. ... The employment index increased to its highest level in three years, while the new orders for exports index edged down from 11 to 7.

This is the last of the regional Fed surveys for December. The regional surveys provide a hint about the ISM manufacturing index, as the following graph shows.

Click on graph for larger image in graph gallery.

The New York and Philly Fed surveys are averaged together (dashed green, through December), and averaged five Fed surveys (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

The regional surveys suggest an increase in manufacturing activity in December.

The ISM manufacturing index will released on Monday, Jan 3, 2011.

by Calculated Risk on 12/30/2010 10:00:00 AM

From the NAR: Pending Home Sales Continue Recovery

The Pending Home Sales Index,* a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October [revised down from 89.3]. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

This suggests existing home sales in December and January will be somewhat higher than in November.

Also ...

• The Chicago PMI for December (released this morning) was stronger than expected. The headline index was 68.6, well above the 62.5 expected.

The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER achieved its highest level since July 1988, expanding for the fifteenth consecutive month.

Production (at 74.0) "reached its highest levels since October 2004", and new orders (73.6) "improved to 2005 levels". The employment index increased to 60.2 from 56.3 in November. This continues the trend of stronger reports recently.

by Calculated Risk on 12/30/2010 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Dec. 25, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 34,000 from the previous week's revised figure of 422,000. The 4-week moving average was 414,000, a decrease of 12,500 from the previous week's revised average of 426,500.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 12,500 to 414,000.

Even though weekly claims are seasonally adjusted, sometimes data for holiday weeks can be a little off.

In general the four-week moving average has been declining and that is good news. If weekly unemployment claims remain below 400,000 that would suggest a better labor market.