by Calculated Risk on 6/30/2011 11:09:00 PM

From Edmunds.com: Ford: Industry Car Sales to Rise after June

Ford Motor Co.’s chief sales analyst predicts June car sales will be level with or somewhat better than those in May, but after June, the sales rate will begin to rise through year-end. “There are some indications that May and June could be the slowest sales rates of the year,” George Pipas told media Wednesday. “There are positive signs in June’s results that suggest at some point in the second half, we’ll return to a sales rate of the first half or better.”
...
Pipas said July should be improved but it won’t be until at least August before the U.S. industry returns to a 13 million or more SAAR due to inventory shortages of Japanese automakers caused by the March 11 earthquake.

June sales will be announced tomorrow and no one expects a huge rebound. A few estimates:

• From Bloomberg: Auto Sales at 12 Million Rate Slowed by Missing Inventory: Cars

June light-vehicle deliveries, to be released tomorrow, may have run at a 12 million seasonally adjusted annual rate, the average estimate of 12 analysts surveyed by Bloomberg. That would be an increase from 11.8 million in May

• From Edmunds.com:

The estimated sales volume translates to a Seasonally Adjusted Annualized Rate (SAAR) of 11.9 million in June, according to Edmunds.com analysts

• From TrueCar.com:

The June 2011 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 12.17 million new car sales, up from 11.83 million in May 2011 and up from 11.16 million in June 2010

• From J.D. Power and Associates:

[The] forecast by J.D. Power would mean a seasonally adjusted annualized rate ... for total light vehicles of 12 million

The rebound - according to Ford - should show up in July and August.

by Calculated Risk on 6/30/2011 07:59:00 PM

Here is the weekly update on hotels from HotelNewsNow.com: Orlando posts weekly decreases in all three key metrics

Overall, the U.S. hotel industry’s occupancy rose 2.8% to 71.6%, ADR increased 3.3% to US$102.33, and RevPAR finished the week up 6.2% to US$73.30.

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

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

Click on graph for larger image in graph gallery.

The summer leisure travel season is now starting, and the occupancy rate will increase over the next few of months. Right now the occupancy rate is tracking closer to 2008 than to 2010 - and well above 2009.

A reminder: the occupancy rate started to fall off in the summer of 2008, and really fell off a cliff in the fall of 2008. Who can forget the ruckus following the AIG post-bailout party at the St. Regis Monarch Beach Resort?

Travel was already declining, and then that scandal lead to a collapse in corporate travel ... so I expect the occupancy rate in 2011 to be above 2008 pretty soon.

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

Earlier today ...
• Kansas City Manufacturing Survey: Manufacturing activity rebounded solidly in June
• Weekly Initial Unemployment Claims decline slightly to 428,000
• CoreLogic: May Home Price Index increased 0.8%

by Calculated Risk on 6/30/2011 04:15:00 PM

The restaurant index is one of several industry specific indexes I track each month. The following report is for May.

From the National Restaurant Association: Restaurant Industry Outlook Softened in May as the Restaurant Performance Index Fell Below 100 for First Time in Six Months

The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.9 in May, down 1.0 percent from April’s level. May represented the first time in six months that the RPI stood below 100, which signifies contraction in the index of key industry indicators.
...
“Like the economy as a whole, the restaurant industry’s recovery hit a speed bump in May, with same-store sales and traffic levels softening from recent months,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, the overall economic fundamentals of the restaurant industry remain positive, which will likely lead to stronger performances in the months ahead.”
...
Restaurant operators reported softer same-store sales results in May. ... Restaurant operators also reported a net decline in customer traffic in May.

Click on graph for larger image in graph gallery.

The index decreased to 99.9 in May (above 100 indicates expansion).

Unfortunately the data for this index only goes back to 2002.

The economy clearly slowed in May, so a decline was expected. This is a minor report (really not even "D-List" data), but I'd expect discretionary spending to slow sharply if consumers become really worried - and that doesn't seem to be happening.

by Calculated Risk on 6/30/2011 01:40:00 PM

Fannie Mae reported that the serious delinquency rate decreased to 4.14% in May, down from 4.19% in April. This is down from 5.15% in May of 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate decreased to 3.53% in May from 3.57% in April. This is down from 4.06% in May 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 in graph gallery.

Some of the rapid increase in 2009 was probably because of foreclosure moratoriums, and also because loans in trial mods were considered delinquent until the modifications were made permanent.

Now the serious delinquency rate is falling as Fannie and Freddie work through the backlog of loans and either modify the loan, foreclose, short sale, or the loan cures.

The normal serious delinquency rate is under 1%, so this is still very high. At the current pace of improvement, it will take 3 or 4 years to get back to "normal".

Earlier today ...
• Kansas City Manufacturing Survey: Manufacturing activity rebounded solidly in June
• Weekly Initial Unemployment Claims decline slightly to 428,000
• CoreLogic: May Home Price Index increased 0.8%

by Calculated Risk on 6/30/2011 11:14:00 AM

From the Kansas City Fed: Manufacturing Sector Shows Rebound After Last Month's Slowdown

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity rebounded solidly in June after a brief slowdown last month, and producers remained generally optimistic about future activity.

“Factories in the region basically resumed their solid pace of growth from earlier in the year, following some disruptions in May,” said Wilkerson. “Also, hiring plans remain fairly solid for the second half of the year.”
...
The month-over-month composite index was 14 in June, up from 1 in May and equal to 14 in April. ... Most other month-over-month indicators also improved in June. The production index jumped from -2 to 22, and the shipments, new orders, and order backlog indexes also posted solid gains. The employment index increased from 9 to 17, and the new orders for exports index also edged higher.

This was a solid rebound from May.

Earlier, the Chicago PMI indicated a rebound in June with the index at 61.1 (SA), up from 56.6 in May. New orders were up sharply from 53.5 to 61.2, although employment was down a little to 60.8 from 58.7 (above 50 is expansion).

This is the last of the regional Fed surveys for June. The regional surveys provide a hint about the ISM manufacturing index - and the regional surveys were fairly weak this month 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 June), and five Fed surveys are averaged (blue, through June) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through May (right axis).

The regional surveys suggest the ISM manufacturing index will fall to the low 50s or so in June. After the NY and Philly Fed surveys were released, it seems that a reading below 50 was possible (and could still happen).

However the more recent surveys (Richmond, Dallas, Kansas City and Chicago PMI) all showed expansion in June. The ISM index for June will be released tomorrow, July 1st, and expectations are for a decrease to 51.7 from 53.5 in May.

by Calculated Risk on 6/30/2011 09:58:00 AM

Notes: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of March, April and May (May weighted the most) and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic® Home Price Index Shows Second Consecutive Month-Over-Month Increase

CoreLogic ... today released its May Home Price Index (HPI) which shows that home prices in the U.S. increased on a month-over-month basis. According to the CoreLogic HPI, national home prices, including distressed sales, increased by 0.8 percent in May 2011 compared to April 2011, the second consecutive month-over-month increase. On a year-over-year basis, home prices declined by 7.4 percent in May 2011 compared to May 2010 after declining by 6.7 percent in April 2011 compared to April 2010. Excluding distressed sales, year-over-year prices declined by 0.4 percent in May 2011 compared to May 2010 and by 0.8 percent in April 2011 compared to April 2010. Distressed sales include short sales and real estate owned (REO) transactions.

“Two consecutive months of month-over-month growth and continued relative strength in the non-distressed market segment are positive seasonal signs in the housing market. Slowly declining shadow inventory and stabilized negative equity levels are also positive signs. Nonetheless, the fragile economic recovery is still critical to the long-term recovery in the housing market,” said Mark Fleming, chief economist for CoreLogic.

Click on graph for larger image in graph gallery.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.8% in May, and is down 7.4% over the last year, and off 32.7% from the peak.

This is the tenth straight month of year-over-year declines, and the index is still 2.4% below the March 2009 low (the previous post-bubble low).

Some of this increase is seasonal (the CoreLogic index is NSA) and the index is still off 7.4% from last May (the largest year-over-year decline since Sept 2009).

by Calculated Risk on 6/30/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 25, the advance figure for seasonally adjusted initial claims was 428,000, a decrease of 1,000 from the previous week's unrevised figure of 429,000. The 4-week moving average was 426,750, an increase of 500 from the previous week's unrevised average of 426,250.

The following graph shows the 4-week moving average of weekly claims for the last 40 years.

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased slightly this week to 426,750.

This is the 12th straight week with initial claims above 400,000, and the 4-week average is at about the same the level as in January. This suggests the labor market weakness in May continued into June.

by Calculated Risk on 6/30/2011 02:49:00 AM

No "hate" for housing here ...

From David Streitfeld and Megan Thee-Brenan at the NY Times: Despite Fears, Owning Home Retains Allure, Poll Shows

Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll.

Here are the poll results. Unfortunately there is no history for this polling question. The question asked was: "How important a part of the American dream is owning a home – is it a very important part of the American dream, somewhat important, not too important, or not at all important?"

55% said important and another 34% said "somewhat important".

There are a series of new questions on housing (see questions 31 through 61). As an example, Question 54: "In the last three years, have you delayed selling your house because you are waiting for the housing market to improve, or are you not interested in selling your house now?"

Delayed 10%
Not interested 88%
NA 2%

That might indicate a fairly large number of homeowners are "waiting for a better market".

by Calculated Risk on 6/29/2011 06:01:00 PM

From Maryann Haggerty at the NY Times: The Post-Foreclosure Wait (ht Ann)

Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances.

Mortgage broker "Soylent Green is People" sent me this short summary last month (with many more details):

"Pre-Foreclosure" = Short Sale.

VA - immediate, providing you've got 12 months clean credit.
FHA - 3 years.
Conventional 4 years.

Foreclosure:

VA - 2 years, providing you've got 12 months clean credit AND the loan that was foreclosed was not a VA
FHA - 3 years, providing that the foreclosed loan was not an FHA mortgage
Conventional - 7 years.

Soylent Green is People thinks we will start seeing "bounce back buyers" later this year and in 2012.

by Calculated Risk on 6/29/2011 03:38:00 PM

This will never happen ...

A quote from Reuters: Exclusive: S&P to deeply cut U.S. ratings if debt payment missed

"If the U.S. government misses a payment, it goes to D," [Standard & Poor's managing director John Chambers told Reuters]. "That would happen right after August 4, when the bills mature, because they don't have a grace period."

That would be the first default in U.S. history.

Reuters quotes Chambers as saying that he views the likelihood of a U.S. default as "extremely low," and that he expects a last minute agreement.

Of course there will be a last minute agreement; the debt ceiling is all about political posing.

Here is what I wrote in early May:

Congress will probably push this to the brink, but they will raise the debt ceiling before the country defaults. The first rule for most politicians is to get re-elected, and the easiest way to guarantee losing in 2012 is to throw the country back into recession. If that happened, I believe the voters would correctly blame the leaders of Congress, and I think Congress knows that too. Therefore it won't happen. I'm not worried and neither are investors.