by Calculated Risk on 1/13/2009 10:27:00 AM

From Beazer Homes press release:

Home closings for the quarter ended December 31, 2008 totaled 938, a 53.2% decline from 2,006 homes closed during the same period in the prior fiscal year. Net new home orders totaled 551 for the quarter, a decrease of 56.0% from 1,252 net orders in the first quarter of the prior fiscal year. ... The cancellation rate for the first quarter was 45.6%, compared to 46.6% for the same period in the prior year.

It just keeps getting worse ...

by Calculated Risk on 1/13/2009 08:45:00 AM

Both exports and imports are declining, but the decline in the trade deficit was mostly about oil prices. Petroleum import prices fell from $92 per barrel in October to under $67 per barrel in November - and will fall further in December.

The Census Bureau reports:

[T]otal November exports of $142.8 billion and imports of $183.2 billion resulted in a goods and services deficit of $40.4 billion, down from $56.7 billion in October, revised. November exports were $8.7 billion less than October exports of $151.5 billion. November imports were $25.0 billion less than October imports of $208.2 billion.

Click on table for larger image in new window.

This graph from the Census Bureau shows that both imports and exports are declining.

Although the trade deficit is declining - and will probably decline further in December because of the continued decline in oil prices - growth in export related businesses will probably no longer be a positive for the U.S. economy as the global economy slides into recession too.

This graph shows the U.S. trade deficit through November. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. The current recession is marked on the graph.

The oil deficit declined sharply in November and will decline further in December. But even ex-petroleum, the trade deficit is still declining.

by Calculated Risk on 1/13/2009 12:06:00 AM

From the WaPo: Obama Shelves Jobs-Credit Proposal

Bowing to widespread Democratic skepticism, President-elect Barack Obama will drop his bid to include a business tax break he once touted in the economic stimulus bill now taking shape on Capitol Hill, aides said last night.

Obama suggested the $3,000-per-job credit last week as one of five individual and business tax incentives aimed at winning Republican support. He proposed $300 billion in tax relief in a bill that could reach $775 billion, and he resurrected the jobs-credit proposal from the campaign trail as one of his main provisions.
...
Obama advisers said further adjustments may be made to the president-elect's tax priorities, including to a proposed $500 payroll tax credit for individuals. ...

Obama also has suggested tax incentives for businesses to make capital investments. Such benefits are popular across party lines and have been successful in recent years. But another Obama proposal, to allow companies to deduct larger portions of recent losses, has raised eyebrows on the Hill, where lawmakers see it as a costly reward for behavior that was possibly irresponsible.

It's hard to analyze a plan without many details, but this seems like progress. The larger deductions for tax losses can be junked too, although the capital investment tax incentive is probably worthwhile since capital investment is falling off a cliff.

by Calculated Risk on 1/12/2009 05:18:00 PM

These will become too common to list them all ... the story also notes ShopperTrak is predicting that retail sales will likely drop 4 percent in the first quarter.

From Bloomberg: Shane Co., U.S. Jewelry Retailer, Seeks Bankruptcy

Shane Co., the family-owned jewelry retailer with 23 stores in 14 states, sought bankruptcy court protection blaming “disappointing” holiday sales and a “grim” outlook on the deepening U.S. recession.

The 38-year-old company, based in Centennial, Colorado, listed both assets and debt of $100 million to $500 million in Chapter 11 documents filed today in U.S. Bankruptcy Court in Denver.

Note: The Census Bureau will release Q4 retail sales on Wednesday, and those numbers are guaranteed to be UGLY.

by Calculated Risk on 1/12/2009 04:21:00 PM

From MarketWatch: Alcoa swings to loss as demand, sales slump

Alcoa said it lost $1.2 billion ... Sales fell to $5.7 billion from $7 billion. Alcoa is in the midst of cutting 15,000 jobs, curbing more production, and slashing its capital budget to make it through the downtrodden economy.

Alcoa announced the job cuts and the 50% reduction in planned capital expenditures (a reduction of $1.8 billion) last week. Still pretty amazing numbers ...

by Calculated Risk on 1/12/2009 03:55:00 PM

From Dow Jones: Apartment-Complex Developers Falling Behind On Loan Payments (hat tip Robert)

The rapid reversal of fortunes in commercial real estate is taking down yet another sector: multifamily housing.
...
While sharp declines in retail and office sectors of commercial real estate have commanded attention in recent months, some analysts say deterioration in the multifamily sector is quickly catching up. ... Much of the multifamily sector's problems center around troubles in converting apartments to condominiums, as is the case in Miami, or the challenges in converting rent-controlled units to market-rate apartments, as in Manhattan.

In Florida, California, Arizona and Nevada, the flood of unsold condominiums is entering the apartment market and the excess supply is lowering rents in those areas, Barclays Capital analysts say. That's resulted in lower revenues for owners, which in some cases is making it more difficult to keep up with mortgage payments.
...
In November, the delinquency rate on securitized loans to apartment and condominium properties rose to 1.9%, a dramatic jump from the 0.9% at the start of the year, according to Realpoint LLC ...

This is a great follow up to my post last Friday: The Residential Rental Market. I noted that despite the increase in demand for rentals, rents are now falling because of the rapid increase in supply due to condo "reconversions", builders changing the intent of new construction (started as condos but became rentals), and other reasons. And falling rents means rising delinquencies for properties purchased with overly optimistic pro forma projections.

by Calculated Risk on 1/12/2009 11:26:00 AM

WSJ Headline: Obama has asked Bush to request the remaining $350 billion in TARP funds from Congress.

UPDATE: From CNBC: Bush to Seek Rest of TARP Money At Obama's Request

President-elect Barack Obama asked President Bush to request the remaining $350 billlion of the Wall Street bailout fund, and the White House said Bush would do so.

"President Bush agreed to the president-elect's request," White House spokeswoman Dana Perino said in a statement.
...
The request would permit Obama's administration to have the ability to use the money shortly after taking office.

by Calculated Risk on 1/12/2009 10:03:00 AM

This is interesting because medical spending is frequently considered recession proof ...

From Hologic Press Release:

"This year will be challenging for our entire industry, as many drivers of our business remain uncertain," said Jack Cumming, Chairman and Chief Executive Officer. "The severe and rapid economic downturn, result[ed] in a decline in hospital spending ... we witnessed an unprecedented decline in demand for capital equipment at the end of the quarter ... Hospital systems across the country have responded to tightening access to capital by restricting capital expenditures, implementing tight spending controls and reducing personnel."
emphasis added

by Calculated Risk on 1/12/2009 12:28:00 AM

"It's sad to say, but we really went nowhere for almost ten years, after you extract the boost provided by the housing and mortgage boom. It's almost a lost economic decade."
Mark Zandi, chief economist of Moody's Economy.com

From the WaPo: Economy Made Few Gains in Bush Years

President Bush has presided over the weakest eight-year span for the U.S. economy in decades, according to an analysis of key data ...

We will probably see a slew of articles over the next ten days on the various failures of the Bush administration. I think the two worst economic mistakes were the Bush fiscal policies (creating a huge structural budget deficit) and the administration's ideological opposition to regulation and oversight that allowed the housing and credit bubbles to form.

The WaPo article outlines other failures.

by Calculated Risk on 1/11/2009 08:24:00 PM

From the WSJ: Wave of Bankruptcy Filings Expected From Retailers in Wake of Holidays

... U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings, altering the landscape at malls and on main streets across the country.

Retailers are particularly vulnerable in the current downturn after a decade of buoyant consumer spending, which encouraged them to overexpand and overborrow. Now, the banks and private investors who financed the boom are pulling back.

Several of the industry's biggest lenders, including General Electric Co.'s GE Capital, CIT Group Inc. and Wachovia Corp., are tightening lending terms and reducing exposure to retailers.

Their tougher terms are making it harder for retailers to find capital to reorganize under bankruptcy-court protection, as they were able to do in the past, meaning there are likely to be more liquidations.

Poor sales, too much debt and tighter lending standards ... the BK attorneys will probably be busy!