Freddie Mac reported a href=”http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputWk.jsp?week=52ending=20081224″Long-Term Rates Fall for Eight Consecutive Week Setting Another New Low /a blockquoteFreddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.8 point for the week ending December 24, 2008, down from last week when it averaged 5.19 percent. Last year at this time, the 30-year FRM averaged 6.17 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971./blockquote The MBA reported: a href=”http://www.mbaa.org/NewsandMedia/PressCenter/66903.htm”Near Record Low Mortgage Rates Boost Mortgage Applications in Latest MBA Weekly Survey/a blockquoteThe average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.18 percent, with points increasing to 1.17 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate for 30-year fixed-rate mortgages is the lowest recorded in the survey since the record low of 4.99 percent for the week ending June 13, 2003./blockquote Note the surge in refinance applications too! br /br /However, Bloomberg reports: a href=”http://www.bloomberg.com/apps/news?pid=20601087sid=aHwIBpFQkEhM”Jumbo Mortgage Shoppers Get Little Relief From Rates/a blockquoteJumbo mortgage shoppers in the most expensive U.S. housing markets such as New York and San Francisco aren’t getting much relief from lower borrowing costs. br /br /The average 30-year fixed rate for home loans of more than $729,750 remains almost 2 percentage points above conforming rates and the spread between them may set a record this month, according to financial data firm BanxQuote. br /…br /The difference between the two averaged 2.13 percentage points in December, 10 times the spread from 2000 to 2006 and above last month’s 1.95 percentage points that was the highest on record./blockquoteIt’s jumbos rates that matter for most of California and other higher priced markets.
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From the Chicago Tribune: a href=”http://www.chicagotribune.com/business/chi-chicago-hotel-occupancy-dec23,0,2502268.story”Chicago hotel occupancy falls 13% in November/a blockquoteDowntown Chicago hotels saw a 13.1 percent dive in the average occupancy rate, to 69 percent last month from a year earlier, according to Smith Travel Research. Nationwide, occupancy dropped 10.6 percent, to a 51.9 percent rate.br /br /Pricing dropped as well, leading to double-digit declines in revenue per available room, a key measure of profitability. In downtown Chicago, the decline was 20.6 percent; nationally, it was 12.9 percent./blockquote A double digit RevPAR decline (revenue per available room) is stunning. br /br /Also, Deutsche Bank reported in their Commercial Real Estate Outlook: Q4 2008 (no link), that “hotel loan deterioration now beginning to take-off” and that the 30-day delinquency rate has risen from 6bp to 55bp in just the last three months. br /br /Falling hotel occupancy rates - leading to lower revenues and higher delinquency rates … what a surprise!
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Here is the Philadelphia Fed state coincident index a href=”http://www.philadelphiafed.org/research-and-data/regional-economy/indexes/coincident/2008/CoincidentIndexes1108.pdf”release/a for September.blockquoteThe Federal Reserve Bank of Philadelphia has released coincident indexes for all 50 states for November 2008. The indexes increased in eight states for the month, decreased in 37, and were unchanged in the remaining five (a one-month diffusion index of -58). For the past three months, the indexes increased in 11 states, decreased in 38, and remained unchanged only in Tennessee (a three-month diffusion index of -54)./blockquotea onclick=”window.open(this.href, ‘_blank’, ‘width=1415,height=1100,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://2.bp.blogspot.com/_pMscxxELHEg/SVFCZYRFpBI/AAAAAAAAEG0/CIa1MVnWR-g/s1600-h/PhillyFedMapNov2008.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Philly Fed State Conincident Map” src=”http://2.bp.blogspot.com/_pMscxxELHEg/SVFCZYRFpBI/AAAAAAAAEG0/CIa1MVnWR-g/s320/PhillyFedMapNov2008.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on map for larger image./span/b/ibr /br /Here is a map of the three month change in the Philly Fed state coincident indicators. Most states are in recession, although a portion of the central U.S. is still growing (from Texas up to Wymong). This might change with falling oil prices.br /br /This is what a recession looks like based on the Philly Fed states indexes.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1080,height=800,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/SVFBAi7iatI/AAAAAAAAEGs/MNrEEppfwP4/s1600-h/PhillyFedNovState.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Philly Fed Number of States with Increasing Activity” src=”http://4.bp.blogspot.com/_pMscxxELHEg/SVFBAi7iatI/AAAAAAAAEGs/MNrEEppfwP4/s320/PhillyFedNovState.jpg” border=”0″ //aThis is a graph of the monthly Philly Fed data of the number of states with one month increasing activity.br /br /span style=”font-size:85%;”Note: the Philly Fed calls some states unchanged with minor changes./spanbr /br /Most of the U.S. was has been in recession since late last year based on this indicator.
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I’ve spent time contemplating the highs and lows of my 2008, and so have the professionals. Here are a few highlights from the big guys (and my fellow bloggers)while I’m out cashing in my gift cards and workin’ on my fitness. Happy reading!br /br /Kiplinger: a href=”http://www.kiplinger.com/businessresource/forecast/archive/a_dozen_good_things_in_2009_081224.html”12 things to look forward to in 2009 /abr /br /US News and World Report: a href=”http://www.usnews.com/articles/business/your-money/2008/01/31/8-ways-to-cut-back-without-sacrificing.html”Eight ways to cut back without sacrificing/a br /br /Wall Street Journal: a href=”http://online.wsj.com/article/SB123041833857937379.html”Say good riddance to 2008/aspan class=”fullpost”br /br /Bible Money Matters: a href=”http://www.biblemoneymatters.com/2008/12/ten-people-all-personal-finance-junkies-should-follow-on-twitter.html”10 people all personal finance junkies must follow on Twitter/abr /br /WiseBread: a href=”http://www.wisebread.com/plan-for-your-wants”Plan for your wants/abr /br /OK, I was planning to list a bunch more articles, but my computer is crapping out and my internet connection is slow. I’ve been writing for more than an hour and have had to restart my browser at least five times. So read those for now, I’ll do some AdWare stuff and hopefully we’ll be back up and running shortly. Arg.br /br //span

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tabletbodytrtda onclick=”window.open(this.href, ‘_blank’, ‘width=830,height=775,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://3.bp.blogspot.com/_pMscxxELHEg/SVB1TirOLuI/AAAAAAAAEFM/eGuu2yv4jV0/s1600-h/LewisHoocoodanode.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: left; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Cartoon Eric G. Lewis” src=”http://3.bp.blogspot.com/_pMscxxELHEg/SVB1TirOLuI/AAAAAAAAEFM/eGuu2yv4jV0/s320/LewisHoocoodanode.jpg” border=”0″ //a/tdtdbr /br /ibspan style=”font-size:85%;”Click on cartoon for larger image in new window./span/b/ibr /br /Cartoon from Eric G. Lewisbr /br /a href=”http://www.EricGLewis.com/”www.EricGLewis.com/a (site coming soon)/td/tr/tbody/table
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From the WSJ: a href=”http://online.wsj.com/article/SB122998208060227699.html”U.S. State-to-State Migration Slowed, Census Reports/a blockquoteThe great migration south and west in the U.S. is slowing, thanks to a housing crisis that is making it hard for many to move.br /…br /Most southern and western states are not growing nearly as fast as they were at the start of the decade, pausing a long-term trend fueled by the desire for open spaces and warmer climates, according to population estimates released Monday by the Census Bureau.br /…br /”People want to go to where it’s warm and where there are a lot of amenities, that’s a long- term trend in this country,” said William Frey, a demographer at the Brookings Institution in Washington.br /br /”But people have stopped moving,” he said. “It’s a big risk when you move to a new place. You need to know that moving and getting a new mortgage is going to pay off for you.”/blockquote As I noted a href=”http://www.calculatedriskblog.com/2008/06/will-housing-bust-impact-geographical.html”early this year/a, approximately 1 in 8 households (the same proportion as with negative equity) will probably not accept a job transfer now because of depressed home values - and that is about 200,000 fewer households per year that will probably not move for better job opportunities. br /br /One of the strengths of the U.S. labor market has been the flexibility associated with labor mobility - households could easily move from one region to another for better employment. The housing bust is now limiting this flexibility.
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From the WSJ: a href=”http://online.wsj.com/article/SB122991429181825709.html”Developers Ask U.S. for Bailout as Massive Debt Looms/a blockquoteWith a record amount of commercial real-estate debt coming due, some of the country’s biggest property developers have become the latest to go hat-in-hand to the government for assistance.br /br /They’re warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years — with about $160 billion maturing in the next year./blockquote Although the headline says “developers” this is really about property investors who bought commercial buildings at the price peak and are now underwater. But say the owners default and the properties are transferred to the bondholders - what is the risk to the economy? None.br /br /With the automakers there was a concern that a large number of jobs would be lost without a bailout. How many jobs will be lost if the ownership of an office building or mall changes? Very few.br /br /The article suggests there is a concern that some owners will not be able to refinance because of the credit crisis, even though their properties have strong positive cash flow. But that seems like a liquidity issue for the Fed and the banks, and doesn’t seem to require a bailout from the Treasury. br /br /I don’t see the argument for a bailout.
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From Bloomberg: a href=”http://www.bloomberg.com/apps/news?pid=20601087sid=ac7awTOtQMZU”U.S. Retail Gasoline Falls to $1.66 a Gallon, Lundberg Says/a blockquoteThe average price of regular gasoline at U.S. filling stations fell to $1.66 a gallon as the nation’s recession sapped demand. br /br /Gasoline slipped 9 cents, or 5.1 percent, in the two weeks ended Dec. 19, according to oil analyst Trilby Lundberg’s survey of 7,000 filling stations nationwide./blockquote a onclick=”window.open(this.href, ‘_blank’, ‘width=1070,height=730,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://1.bp.blogspot.com/_pMscxxELHEg/SU7dtPZIYJI/AAAAAAAAEEU/RXSnDel5NgA/s1600-h/GasolinePricesDec2008.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Gasoline Prices” src=”http://1.bp.blogspot.com/_pMscxxELHEg/SU7dtPZIYJI/AAAAAAAAEEU/RXSnDel5NgA/s320/GasolinePricesDec2008.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span /b/ibr /br /This graph shows the nominal weekly U.S. gasoline prices since 1993 (a href=”http://tonto.eia.doe.gov/dnav/pet/hist/mg_tt_usw.htm”source: EIA/a)br /br /Gasoline prices are close to the 2000 through 2003 price range, when the median prices was just over $1.50 per gallon.
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From Bloomberg: a href=”http://www.bloomberg.com/apps/news?pid=20601080sid=a4YEcWlqs6cE”New York Oil Falls as Stockpiles at Cushing, Oklahoma, Climb/a blockquoteCrude oil dropped below $33 a barrel in New York as rising stockpiles at Cushing, Oklahoma, leave little room to store supplies for delivery next year. /blockquote UPDATE: For those that missed it, the article also mentions: blockquoteThe more-active February contract rose 69 cents, or 1.7 percent, to $42.36./blockquote But my key points concerning the economic impact are the same.br /br /For the U.S. economy, I think there are two points worth repeating: 1) this decline in oil prices will significantly reduce PCE for gasoline, oil and other energy goods - and provide a stimulus for U.S. household to either save more, or spend more on other items, and 2) the oil price decline will also impact investment in domestic oil production (also foreign oil production, but that doesn’t direclty impact the U.S. economy).br /br /The following graph shows the monthly personal consumption expenditures (PCE) at a seasonally adjusted annual rate (SAAR) for gasoline, oil and other energy goods compared to the U.S. spot price for oil (monthly).br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1050,height=760,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://2.bp.blogspot.com/_pMscxxELHEg/SUwYM4k4_VI/AAAAAAAAEDo/WJdKl_ymxNg/s1600-h/OilPricesPCE122008.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Oil Cushion” src=”http://2.bp.blogspot.com/_pMscxxELHEg/SUwYM4k4_VI/AAAAAAAAEDo/WJdKl_ymxNg/s320/OilPricesPCE122008.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span /b/ibr /br /At current oil prices, it appears oil related PCE could fall to $250 billion or so SAAR, from close to $500 billion SAAR in July. This is a savings of almost $20 billion per month compared to July. And that would be helpful and definitely provide some cushion for consumers. This might show up as more savings, as opposed to other consumption, but rebuilding savings is probably a necessary step towards rebuilding household balance sheets.br /br /span style=”font-size:78%;”Data sources: PCE from BEA underlying detail tables: /spana href=”http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=22amp;FirstYear=2007amp;LastYear=2008amp;Freq=Qtr”span style=”font-size:78%;”Table 2.4.5U. Personal Consumption Expenditures by Type of Product/span/aspan style=”font-size:78%;” line 117. Oil prices from EIA /spana href=”http://tonto.eia.doe.gov/dnav/pet/hist/wtotusaw.htm”span style=”font-size:78%;”U.S. Spot Prices/span/aspan style=”font-size:78%;”./spanbr /br /The second graph (repeated from earlier in the week) compares real oil prices (data from the St. Louis Fed, adjusted with CPI) and real investment in petroleum exploration and wells in the U.S. (data from the BEA).br /br /This doesn’t include investment in alternative energy sources.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1180,height=740,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://1.bp.blogspot.com/_pMscxxELHEg/SUcodsXRg9I/AAAAAAAAEA4/xsMwUhJ3JeY/s1600-h/OilPricesInvestment.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”Oil Prices and Investment” src=”http://1.bp.blogspot.com/_pMscxxELHEg/SUcodsXRg9I/AAAAAAAAEA4/xsMwUhJ3JeY/s320/OilPricesInvestment.jpg” border=”0″ //a Not surprisingly there is a strong correlation between oil prices and investment. With oil prices now in the $33 per barrel range, this suggests that domestic investment could fall under $20 billion per year or so. This is another area of non-residential investment that will probably see a significant decline in 2009.
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From MarketWatch: a href=”http://www.marketwatch.com/news/story/30-year-mortgage-lowest-37/story.aspx?guid=%7B1B978809%2D8856%2D4FA1%2DA367%2D2B0794F05294%7D”30-year fixed-rate mortgage at 37-year low/a blockquoteThe benchmark 30-year fixed-rate mortgage tumbled to a national average 5.17% this week, the lowest level since Freddie Mac began its weekly rate survey in 1971. br /…br /”Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971,” said Frank Nothaft, Freddie Mac chief economist. “The decline was supported by the Federal Reserve announcement on Dec. 16, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant.”/blockquote Yeah, but what about jumbo rates? br /br /As an example Wells Fargo is offering a 30 year fixed at 4.75% (up to $417K), but their rates are 7.375% for loans above that limit.
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