by Calculated Risk on 11/12/2010 04:11:00 PM

A few excerpts from home builder D.R. Horton's conference call:

CEO Don Tomnitz:

As we look to fiscal 2011, we ... expect another very challenging year for the homebuilding industry, as the fundamental drivers of demand, the overall economy, job growth, and consumer confidence are still very weak. In addition, we do not expect any stimulus in fiscal 2011 similar to the federal tax credits that were in effect last year.

All of these factors make it likely that our sales and closing volumes will be below our volumes in fiscal 2010.

And from the Q&A:

Based on current sales demand and the fact that the tax credits were supporting sales demand last year, we expect sales in the next two quarters to be lower than last year.
...
There are still challenges in the homebuilding industry. Rising foreclosures, significant existing home inventory, high unemployment, tight mortgage lending standards, and the weak consumer confidence ... the real key is that the traffic count in our sub-divisions is down, and I don’t think there is a lot of pricing adjustment that we can do, it’s just a function of the lack of traffic. So until there is some consumer confidence, until we start to grow jobs, I think we’re going to continue to be faced with rather flat demand just simply because buyers don’t feel confident about the future and they’re not going out there looking for a house in the numbers that they were certainly when the tax credits were there.

Until the excess housing inventory is absorbed, the home builders will be under pressure. There is still a long way to go ...

by Calculated Risk on 11/12/2010 12:50:00 PM

Just an update since I've been following this over the last few weeks ... the EU finance ministers issued a statement last night that pushed down the yields for Ireland and Portugal debt:

Whatever the debate within the euro area about the future permanent crisis resolution mechanism, and the potential for private sector involvement in that mechanism, we are clear that this does not apply to any outstanding debt and any programme under current instruments.

Any new mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements.

The EFSF (European Financial Stability Facility) is already established and its activation does not require private sector involvement.

The Ireland 10-year bond yield fell to 8.13% (from 8.9%).

The Portugal 10-year bond yield fell to 6.74% from 7.2%.

by Calculated Risk on 11/12/2010 09:55:00 AM

The preliminary Reuters / University of Michigan consumer sentiment index increased slightly in November to 69.3 from 67.7 in October.

Click on graph for larger image in new window.

This was a big story in when consumer sentiment collapsed again in July. Since then this measure of consumer sentiment has mostly moved sideways at a fairly low level.

In general consumer sentiment is a coincident indicator.

by Calculated Risk on 11/12/2010 09:00:00 AM

From Buck Wargo at the Las Vegas Sun: Condo sales at CityCenter a mixed bag

CityCenter projects it will have closed on 435 condominium units by the end of November out of 2,387 units it had on the market. ... even though it trimmed prices 30 percent a year ago
...
According to Las Vegas-based SalesTraq, more than 4,000 high-rise units remain unsold along the Strip.

The CityCenter (18% sold) is even doing worse than Trump Tower (25% sold). It will take years to clear this inventory.

Note: high rise condo units are not included in the new home inventory report from the Census Bureau, and they are also not included in the existing home inventory report from the NAR (unless they are list for sale). This is hidden inventory, and for certain cities like Las Vegas, this is significant.

by Calculated Risk on 11/11/2010 08:20:00 PM

Please don't miss my earlier post: Labor Force Participation Rate: What will happen?

From the Irish Times: Merkel refuses to back down over debt burden

The Irish Times has established ... that informal contacts are under way between Brussels, Berlin and other capitals to assess their readiness to activate the €750 billion rescue fund in the event of an application from Dublin.

Note: The European Financial Stability Facility (EFSF) is complicated and currently unfunded.

Also from the Irish Times (I noted the bank funding issue this morning based on information from a contact in Europe): Investor concern hits Irish banks as funding costs soar

INVESTOR CONCERN switched to the Irish banks yesterday as the cost of funding for AIB and Bank of Ireland rose to record levels and the credit-default swaps on Irish banks soared.

And from the Irish Times: G20 concern over Irish debt as bond yields pass 9%

Last night the rating agency Moody’s said it was awaiting the release of Ireland’s four-year fiscal plan later this month to decide whether to downgrade the country’s credit rating.

by Calculated Risk on 11/11/2010 06:15:00 PM

Hotel occupancy is one of several industry specific indicators I follow ...

Important: Even though the occupancy rate is close to the weak 2008 levels, and RevPAR (revenue per available room) is up 8.2% compared to the same week in 2009 - RevPAR is still down 3% compared to the same week in 2008 - and the 2nd half of 2008 was a very difficult period for the hotel industry.

From HotelNewsNow.com: STR: Midscale with F&B reports strong weekly results

Overall, the total U.S. hotel industry’s occupancy increased 6.2% to 58.2%, average daily rate was up 1.9% to US$99.29, and RevPAR ended the week up 8.2% to US$57.75.

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 new window.

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.

On a 4-week basis, occupancy is up 8.6% compared to last year and 5.8% below the median for 2000 through 2007.

The occupancy rate is slightly above the levels of 2008, but RevPAR is still down 3% compared to the same week in 2008.

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