by Calculated Risk on 7/10/2008 09:38:00 PM

From Michael Rosenwald at the WaPo: Slide by Marriott Signals Distress for Hotel Industry (hat tip John)

Let there be no mistaking it now: The hotel boom is kaput.

Marriott International, one of the world's largest hotel operators, released a stream of unsettling news for the industry yesterday: Its second quarter profit fell 24 percent, to $157 million; it lowered yearly profit estimates again; and most importantly, it said revenue per available room, a key measure of hotel strength, could decrease this year in the United States by 1 percent.

"There's no doubt we are in a very turbulent period," said Thomas Baltimore, the president of Bethesda's RLJ Development, one of the largest owners of Marriott hotels. "Clearly we are seeing softening demand -- there's no doubt about that."
...
Chief executive Bill Marriott said in a statement that "while our hotels outside the U.S. continue to benefit from solid global demand, business conditions have deteriorated in the U.S. . . . We expect weak economic growth and soft U.S. lodging demand to persist into 2009."

This fits with my post yesterday: Hotel Vacancies Rising

by Calculated Risk on 7/10/2008 06:23:00 PM

Check out the ABX-HE-AAA- 07-2 close today. More Cliff Diving!

Note: The ABX indices are based on credit default swaps (CDS) for various tranches of subprime mortgage-backed securities (MBS). For some background, here is a post at the Cleveland Fed back in March, 2007.
Most of the CMBX indices are setting new record lows again.

Note: Up is down for the CMBX indices. The CMBX is quoted as spreads, whereas ABX is quoted as bond prices. When the spreads increase - chart going up - the bond prices are going down.

Check out the CMBX-NA-BB-4 close today.

The CMBX is a CMBS (Commercial Mortgage-Backed Securities) credit default index just like the ABX - except up is down.

by Calculated Risk on 7/10/2008 04:23:00 PM

From the LA Times: Countrywide takeover will pay off, BofA's CEO says

[Lewis] said Bank of America paid so little for the lender that once the books on the deal were closed, the Countrywide operation would immediately show a profit -- with the potential for huge growth in income when the mortgage industry recovers.
...
Lewis initially said he wanted to study whether to keep the Countrywide brand, which was extremely well recognized even if it was tarnished.

"I went in thinking that there would be some way to use the Countrywide name," he said Wednesday. But as the mortgage meltdown worsened, with Countrywide at its center, that possibility disappeared.
...
As for the housing market, Lewis said Bank of America's latest forecast called for a further 15% decline in home prices nationwide, with the decline going into at least the first quarter of next year.

In the case of California, Florida and other markets that had the biggest booms, a further 20% decline is more realistic, he said.

Isn't Lewis saying "Don't buy yet!"?

by Calculated Risk on 7/10/2008 03:00:00 PM

Peter Viles at LA Times brings us another of his series on foreclosed properties in the LA area.

Peter features one on his blog L.A. Land: In Fontana, foreclosure discounts hit 50%. Check it out.

Here is another example - this one is in Lake Elsinore, an exurb of Los Angeles. This is one of the areas getting hit hard by the housing bust and high gas prices (because of the commute).

3313 Banyon Circle, Lake Elsinore 92530

Agent's description: "This 5 Bdrm, 4 BA gem is located in the Alberhill Ranch community. Boasts granite countertops, upgraded cabinets & stainless steel appliances. Travertine tile throughout downstairs, bathrooms & laundry room."

• Sales history from Redfin.com: Sold for $570,000 in August 2006

• Current listing price: $349,500

• Discount from sales price: 38.6%

by Calculated Risk on 7/10/2008 01:38:00 PM

From the WSJ: Senate Housing Rescue Bill Edges Closer to Passage

The Senate voted resoundingly Thursday to push closer to passage a massive mortgage rescue to help hundreds of thousands of stressed homeowners, even as the bill faced new obstacles in the House.

By a vote of 84-12, the Senate cleared away the last procedural hurdle hindering the measure, putting the election-year aid package on track for approval as early as Thursday afternoon.

by Calculated Risk on 7/10/2008 12:04:00 PM

From Nemo, CNBC's David Faber reacts to the decline in the Freddie Mac share price (37 seconds):

by Calculated Risk on 7/10/2008 10:38:00 AM

From MarketWatch: Lehman shares dive on fresh credit, mortgage fears

Click on graph for larger image in new window.

Cliff diving from Yahoo Charts.

This isn't a stock blog, but these are three critical companies right now in the credit and mortgage crisis.

by Calculated Risk on 7/10/2008 10:06:00 AM

From the WSJ: Bernanke, Paulson Push For New Regulatory Powers

Treasury Secretary Henry Paulson ... made a point to address the issue of Fannie Mae and Freddie Mac.
...
They play an important role in our housing markets today and need to continue to play an important role in the future," Mr. Paulson said. He noted that the firms' regulator, the Office of Federal Housing Enterprise Oversight, stressed earlier this week that "they are adequately capitalized."

Mr. Paulson also said the collapse of Bear Stearns and the ongoing market turmoil have "convinced me that we must move much more quickly to update our regulatory structure and improve both market oversight and market discipline."
...
"For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available," Paulson said. Added Mr. Paulson, "For market discipline to effectively constrain risk, financial institutions must be allowed to fail."

Here is Bernanke's testimony (just a repeat of earlier comments)

Note: the collapse in Fannie (off 15%) and Freddie (off 23%) stock prices continues this morning.

by Calculated Risk on 7/10/2008 09:10:00 AM

From Bloomberg: U.S. Foreclosures Rose 53% in June, Bank Seizures Almost Triple

U.S. foreclosure filings rose 53 percent in June from a year earlier and bank repossessions almost tripled ... More than 252,000 properties, or one in every 501 U.S. households, were in some stage of foreclosure, [said] RealtyTrac Inc. ... Filings fell 3 percent from May.
...
``The foreclosure problem is getting worse and will stay with us well into the next decade,'' Mark Zandi, chief economist for Moody's Economy.com in ... said in an interview.

by Calculated Risk on 7/10/2008 12:23:00 AM

From Bloomberg: Fannie Mae, Freddie Losses Make Them `Insolvent,' Poole Says (hat tip Dwight)

Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae's assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.

``Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,'' Poole, 71, who left the Fed in March, said in an interview.

And Fannie and Freddie are on page 1 of the WSJ: U.S. Mulls Future of Fannie, Freddie

The Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter ... The government doesn't expect the entities to fail and no rescue plan is imminent ... Treasury officials are nonetheless talking about what the government could -- or should -- do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating.

It seems like everyone is piling on ...