making sense of the u.s. economy and housing market (credit union webinar handouts)
DESCRIPTION
Genworth's economist, Nathan Struemph, discusses informative economic updates and forecasts. You get a 360 degree view on economic trends, including a deeper dive into the U.S. housing market and will walk away with the critical information you need to introduce stronger more definitive strategies at your credit union. Recording available at http://www.nafcu.org/genworth.TRANSCRIPT
©2012 Genworth Financial, Inc. All rights reserved.
Making Sense of the U.S. Economy
and Housing Market August 2012
1
Legal Disclaimer
“The materials presented in this webinar are intended solely for informational and illustrative
purposes to provoke thought and discussion among the participants. Webinar participants
should not rely on any of the information presented but should independently conduct their own
research and analysis before making any business decisions. Genworth makes no
representations or warranties as to the accuracy or suitability of any of the information contained
herein.”
2
Contents
Section Page
U.S. Economy 03
Labor Market 08
Housing 12
Hot Topics 23
3
U.S. Economy
Drought Conditions Will Pressure Food Prices
Source: NDMC; NOAA
4
93%
94%
95%
96%
97%
98%
99%
100%
0 3 6 9
12
15
18
21
24
27
30
33
36
39
42
45
48
51
54
57
60
Perc
en
tag
e O
f P
eak E
mp
loym
en
t P
rio
r T
o R
ecessio
n
Months Since Peak Employment
Perspective On The Employment Picture
1957 1960 1970 1974 1980
1981 1990 2001 2008
Recovery Has Been Weak
Source: BEA, BLS via IHS Global Insights
Balance Sheet Recession = Weak Recovery
Employment Following Path Of Prior “Jobless” Recoveries
0.95
1.00
1.05
1.10
1.15
1.20
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9
10
11
12
Ind
ex
, En
d o
f R
ec
es
sio
n =
10
0
Quarters from Trough
Recovery From Trough: Real GDP
1970 1975 1982 1991 2001 2009
5
Drivers of Growth
Source: BEA via IHS Global Insight
Consumption And Business Investment Have Driven Growth
Both Will Be Challenges in 2H2012
-3
-2
-1
0
1
2
3
4
5
6
7
3Q
20
09
4Q
20
09
1Q
20
10
2Q
20
10
3Q
20
10
4Q
20
10
1Q
20
11
2Q
20
11
3Q
20
11
4Q
20
11
1Q
20
12
2Q
20
12
Co
ntr
ibu
tio
n to
Gro
wth
(P
P)
Inventories
Consumption
Equip & Software
State & Loval Govt
Federal Govt
Net Trade
Residential
NonRes Struct
Change in Real GDP
Change in Final Sales
Consumption & Business Investment Lead the Recovery
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Du
rab
le G
oo
ds
Se
rvic
es &
No
n-D
ura
ble
s
Biz
Eq
uip
& S
oft
wa
re
No
n-R
esid
entia
l Str
uct
Re
sid
entia
l Str
uct
Go
ve
rnm
en
t
Inve
nto
rie
s
Tra
de
GDP Growth During Recovery
Contribution to Growth Share of Economy 2Q2012
6
Orders for Durable Goods Slow
Source: Conference Board, ISM, BEA via IHS Global Insight
With Uncertainty in the U.S. and Chaos in Europe
Businesses are Understandably Hesitant to Make Investments
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20
30
40
50
60
70
80
90
100
Ja
n-0
5
Ma
y-0
5
Se
p-0
5
Ja
n-0
6
Ma
y-0
6
Se
p-0
6
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
Ja
n-1
2
Ma
y-1
2
Qu
art
erl
y C
ha
ng
e
Dif
fus
ion
In
de
x
ISM Production (L) ISM New Orders (L)
New Orders Durable Goods (R) New Orders Non-Defense exAir Capital (R)
Uncertainty Saps Business Investment
20
30
40
50
60
70
Ja
n-9
0
Ja
n-9
2
Ja
n-9
4
Ja
n-9
6
Ja
n-9
8
Ja
n-0
0
Ja
n-0
2
Ja
n-0
4
Ja
n-0
6
Ja
n-0
8
Ja
n-1
0
Ja
n-1
2
Dif
fus
ion
In
de
x (5
0=
No
Ne
t C
ha
ng
e in
Co
nd
itio
ns
)(P
os
itiv
e R
es
po
ns
e +
.5
*No
Ch
an
ge
)
Diffusion Indices Of Business Conditions
Diffusion Index of Current Diffusion Index of Expectations
7
Consumer Pressured
Source: Federal Reserve, Census, Conference Board via IHS Global Insight
Lack of Confidence Also Saps Consumption
Drop in Gas Prices Will Help Mitigate But Not Overcome Weak Jobs Growth
0
20
40
60
80
100
120
-6%
-4%
-2%
0%
2%
4%
6%
Ja
n-0
7
Ap
r-0
7
Ju
l-0
7
Oct-
07
Ja
n-0
8
Ap
r-0
8
Ju
l-0
8
Oct-
08
Ja
n-0
9
Ap
r-0
9
Ju
l-0
9
Oct-
09
Ja
n-1
0
Ap
r-1
0
Ju
l-1
0
Oct-
10
Ja
n-1
1
Ap
r-11
Ju
l-11
Oct-
11
Ja
n-1
2
Ap
r-1
2
Ju
l-1
2
Ind
ex
Pe
rce
nta
ge
Ch
an
ge
3m
/3m
Retail Sales vs Consumer Confidence
Retail Sales ExGas - VPQ Consumer Confidence - Expectations
3
3.5
4
4.5
5
5.5
6
6.5
70%
1%
2%
3%
4%
5%
6%
7%
8%
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Ra
tio
to
Ho
us
eh
old
As
se
ts-t
o-G
DP
Sa
vin
gs
Ra
te
Savings Rate (L) Assets-to-GDP (R)
Household Asset Appreciation Important to Consumption
8
Labor Market Comes Back to Earth
Source: BLS via IHS Global Insight
Weakness No Longer Solely Attributable to Weather
0%
2%
4%
6%
8%
10%
12%
-1000
-750
-500
-250
0
250
500
Ja
n-0
6
Ma
y-0
6
Se
p-0
6
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
Ja
n-1
2
Ma
y-1
2
Payrolls & Unemployment
Change in Payrolls, M (L) Unemployment Rate, (R)
200
250
300
350
400
450
500
550
600
650
700
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Fo
ur
We
ek
Mo
vin
g A
ve
rag
e
Initial Claims
9
Leading Indicators Of Labor Market Conditions
Source: BLS, Institute for Supply Management via IHS Global Insight
While Job Openings Still Support Employment Growth,
Other Survey Measures Suggest Strong Growth Will Be Hard To Achieve
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Ja
n-0
1
Ju
l-0
1
Ja
n-0
2
Ju
l-0
2
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Ja
n-1
2
Openings Hires Seperations Quits
Job Openings Still Trending UpBut Hiring Remains Weak
-30
-20
-10
0
10
20
30
20
30
40
50
60
70
80
Ja
n-0
0
Ju
l-0
0
Ja
n-0
1
Ju
l-0
1
Ja
n-0
2
Ju
l-0
2
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Ja
n-1
2
Ju
l-1
2
Ne
t P
erc
en
tag
e o
f F
irm
s
Dif
fus
ion
In
de
x (
50
= N
o C
ha
ng
e)
Survey Employment Indices Moderating
ISM Manufacturing (L) ISM Non-Manufacturing (L)
Consumer Confidence Jobs (L) NFIB - Increase Employment (R)
10
Labor Market Depends On GDP Growth
Source: BLS via IHS Global Insight
Long-Term Unemployment Damages Workers’ Skills and Potential GDP
Weak Outlook for GDP Leads to Slow Growth in Jobs
0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
40
45
50
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
% o
f U
ne
mp
loye
d
We
ek
s
Long-term Unemployment
Mean Unemployment Duration
% Unemployed 27 Weeks+
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%-5.5%
-4.5%
-3.5%
-2.5%
-1.5%
-0.5%
0.5%
1.5%
2.5%
3.5%
4.5%
5.5%
6.5%
7.5%
8.5%
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
Yo
Y C
ha
ng
e
Yo
Y P
erc
en
tag
e C
ha
ng
e
GDP (L) Unemployment (R)
Divergence Between Growth & Employment is Abnormal
11
Bifurcated Labor Market
Source: BLS via IHS Global Insight
Structural Unemployment Will Remain High If the Current Job Creation
Pattern Persists
0
1
2
3
4
5
6
7
8
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Unemployed per Vacancy
0 5 10 15
Leisure & Hospitality
Education & Health
Prof. & Biz Services
Manufacturing
Construction
Trade
Unemployed per Job Opening
June 2012 Breakdown
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
Pro
fessio
na
l / B
usin
ess S
erv
ices
Le
isu
re &
Ho
sp
ita
lity
Ed
uca
tio
n &
He
alth
Fin
an
cia
l
Info
rma
tio
n
Tra
de
, Tra
nsp
ort
ation
, & U
tilit
ies
Ma
nu
factu
rin
g
Co
nstr
uction
Min
ing
& L
og
gin
g
Fe
de
ral G
ovt
Sta
te G
ovt
Lo
ca
l Go
vt
Oth
er S
erv
ice
s
Ch
an
ge
In
Em
plo
ye
d (
In T
ho
us
an
ds
)
Where are the Jobs?
Change During Recession Change During Recovery
-77 85 1,815 -499 -378 -1,391 -1,765 -2,010 106 69 -84 -391 -128Total Change
*Data Through July
*
12
Housing
Source: CoreLogic, Fair Issac
Credit Conditions Continue to Tighten
640
660
680
700
720
740
760
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Total Purchase
Average FICO Score of Originations
13
Leading Indicators Point To Increased Demand
Starts And Permits Beginning Slow Upward Trek
Existing Home Sales Stronger Source: NAHB, BLS, Census, NAR via IHS Global Insight
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Ex
isti
ng
Ho
me
Sa
les
Ra
tio
to
19
99
Sa
les
SA
AR
, In
Th
ou
sa
nd
s
Building Permits - Single Family (L) Starts - Single Family (L)
Existing Home Sales (R)
Permits & Starts Beginning Slow, Fragile Recovery
0
20
40
60
80
100
120
140
160
0
10
20
30
40
50
60
70
80
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Ind
ex
Dif
fus
ion
Ind
ex
Leading Indicators Rebounding Off The Bottom
NAHB Expected Sales (L) NAHB Home Traffic (L) Pending Sales (R)
Housing Trends Positive
14
Drivers of Demand: Affordability Skyrockets
Affordability Remains High Due To Low Rates And Home Prices
Survey Demand Finally Responding
-100
-80
-60
-40
-20
0
20
40
60
80
100
1Q
2005
3Q
2005
1Q
2006
3Q
2006
1Q
2007
3Q
2007
1Q
2008
3Q
2008
1Q
2009
3Q
2009
1Q
2010
3Q
2010
1Q
2011
3Q
2011
1Q
2012
Legacy Mortgage Measure Prime Alt-A
Net Percentage of Banks Reporting Stronger Demand:Mortgages
Source: Federal Reserve, NAR via IHS Global Insight
0
50
100
150
200
250
Ja
n-8
1
Ja
n-8
3
Ja
n-8
5
Ja
n-8
7
Ja
n-8
9
Ja
n-9
1
Ja
n-9
3
Ja
n-9
5
Ja
n-9
7
Ja
n-9
9
Ja
n-0
1
Ja
n-0
3
Ja
n-0
5
Ja
n-0
7
Ja
n-0
9
Ja
n-1
1
Home Affordability Index First Time Homebuyer Affordability
Housing Affordability
15
Drivers of Demand: Home Prices Normalizing
Source: Case-Shiller, FHFA via IHS Global Insight; Robert Shiller
Home Prices Are Closing In On Long-Term Averages When Compared To
Rental Rates And Inflation
80
100
120
140
160
180
200
Ja
n-9
1
Ja
n-9
2
Ja
n-9
3
Ja
n-9
4
Ja
n-9
5
Ja
n-9
6
Ja
n-9
7
Ja
n-9
8
Ja
n-9
9
Ja
n-0
0
Ja
n-0
1
Ja
n-0
2
Ja
n-0
3
Ja
n-0
4
Ja
n-0
5
Ja
n-0
6
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ho
me
Pri
ce
-to
-Re
nt
(In
de
x J
an
19
91
=1
00
)
Price-to-Rent
Case-Shiller 10 FHFA Purchase-Only
60
80
100
120
140
160
180
200
1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Real Home Price Index
Source: Robert Shiller's Research
16
Drivers of Demand: Pent Up Formations
•Missing 2.5 mm households over the last four years
Source: Census via IHS Global Insight
Household Formation Starting to Rebound;
Labor Market Woes Could Pose Risk
100
105
110
115
120
125
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ho
us
eh
old
s (
MM
)
Household Growth Has Been Well Below Trend
Actual Households Households Based on 2000-2007 Rate
2.5 Million Below Trend
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
-100%
-50%
0%
50%
100%
150%
200%
'71-'75 '76-'80 '81-'85 '86-'90 '91-'95 '96-2000 '01-'05 '06-'10 '11-2Q12
An
nu
ali
ze
d G
row
th R
ate
in
Ho
us
eh
old
s
Sh
are
of
Ch
an
ge
in
Ho
us
eh
old
s
Owner Rent Annual Growth Rate in Households
Sharp Increase In Owner Formation Share Ahead of Crisis
17
Demand Met With Higher Standards
Source: Federal Reserve, MBA via IHS Global Insight
Banks Tighten Standards As Borrower Interest Begins To Rebound
Purchase Applications Remain Near Same Level As Late 1990s
-20
0
20
40
60
80
100
1Q
2005
3Q
2005
1Q
2006
3Q
2006
1Q
2007
3Q
2007
1Q
2008
3Q
2008
1Q
2009
3Q
2009
1Q
2010
3Q
2010
1Q
2011
3Q
2011
1Q
2012
3Q
2012
Legacy Measure Prime Alt-A
Net Percentage of Banks Tightening Lending Standards:Mortgages
0
100
200
300
400
500
600
700
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Purchase Applications
Even Without Adjusting for Population,
Apps Back to Late 1990s Levels
18
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
1Q
20
05
3Q
20
05
1Q
20
06
3Q
20
06
1Q
20
07
3Q
20
07
1Q
20
08
3Q
20
08
1Q
20
09
3Q
20
09
1Q
20
10
3Q
20
10
1Q
20
11
3Q
20
11
1Q
20
12
HP
I V
PY
Home Prices Recovering
FHFA PO CS National Corelogic Corelogic exDistressed
1.8 Foreclosure Inventory
2.1 Existing Single
Family
2Q12 Supply (MM units)
0.3 Condos/Townhomes
0.8 Housing Starts
0.1 New, For Sale
1.4 90-day Delqs
2.5
MM
6M
os 5.1
MM
13M
os
6.5
MM
16M
os
“Shadow Inventory”
Source: Census, NAR, MBA via IHS Global Insight
Normal Inventory Nearing Stability
Shadow Inventory Continues To Weigh On Home Prices
Home Prices, However, Look To Be Stabilizing
Home Prices Stabilizing
Source: FHFA Case-Shiller via IHS Global Insight; Corelogic
0
5
10
15
20
25
0
1
2
3
4
5
6
7
8
9
1Q
00
1Q
01
1Q
02
1Q
03
1Q
04
1Q
05
1Q
06
1Q
07
1Q
08
1Q
09
1Q
10
1Q
11
1Q
12
Normal + Shadow
Normal
Shadow
Units MM Months
Housing Prices and Shadow Inventory
19
While Household Formations Have Started To Trend Up,
Shadow Inventory Exerts A Substantial Downward Pull On Homeownership Source: Census, MBA via IHS Global Insight
Homeownership Hit By Competing Forces
-500
0
500
1,000
1,500
2,000
-500
0
500
1,000
1,500
2,000
2,500
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Rolling 12mon Household Formations Multi-Family Starts Single-Family Starts
1965-1999 Average Formations
Household Formations vs New Homes Started
56%
58%
60%
62%
64%
66%
68%
70%
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Homeownership Rate
Homeownership Rate Homeownership Rate ex Delq
20
Ownership By Age
Source: BEA, BLS
Impact on Home Ownership Concentrated in 25 to 39 Cohort
Headship Rates Relatively Stable
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
20
01
20
03
20
05
20
07
20
09
20
11
Less than 25 years
25 to 29 years 30 to 34 years 35 to 39 years 40 to 44 years 45 to 49 years 50 to 54 years 55 to 59 years
Housing Characteristics By Age
Ownership Rate by Cohort Headship Rate by Cohort
21
Major Bifurcation in Time to REO Between Judicial and Non-Judicial States
Source: MBA, NAR, Census via IHS Global Insight
Foreclosure Processing is Slowly Improving
0
5
10
15
20
25
30
0%
2%
4%
6%
8%
10%
12%
1Q
19
91
1Q
19
92
1Q
19
93
1Q
19
94
1Q
19
95
1Q
19
96
1Q
19
97
1Q
19
98
1Q
19
99
1Q
20
00
1Q
20
01
1Q
20
02
1Q
20
03
1Q
20
04
1Q
20
05
1Q
20
06
1Q
20
07
1Q
20
08
1Q
20
09
1Q
20
10
1Q
20
11
1Q
20
12
Mo
nth
s o
f S
ha
do
w I
nve
nto
ry
% o
f L
oa
ns
90
+ D
elq
/Fo
rec
los
ure
United States: Seriously Delinquent
Seriously Delq (R) Months To Work Off 90+ Inventory (L)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
FL
NJ
NV IL
NY
ME
MD
CT
OH RI
IN MS
US
DE
GA
WA
SC HI
PA
MA
KY
LA
CA
DC
NM
OR MI
AZ
AR
NC
TN
OK
WI
VT
AL
UT ID NH
MO
KS
TX IA
WV
VA
MN
CO
NE
MT
SD
AK
WY
ND
Fo
rec
los
ure
+ S
eri
ou
sly
De
lin
qu
en
t (a
s a
% o
f lo
an
s)
Shadow Inventory by State
Judicial Non-Judicial Foreclosure Break
Fo
reclo
sure
90
+ D
elq
Reading the Columns
22
Source: NAR, MBA, Census via IHS Global Insight
Negative Equity Will Be a Problem for the Housing Market for Years to
Come
Negative Equity Hits Large Swaths of Population
0%
10%
20%
30%
40%
50%
60%
70%
US
NV
FL
AZ
GA MI
CA IL ID
OH
MD
VA
CO
UT
NH RI
WA
OR
SC
MN
TN
NJ
DE
WI
NC
MO
MA
AL
AR
NM
CT
NE
DC
KY IA IN TX
KS
OK HI
PA
MT
NY
AK
ND
Pe
rce
nta
ge o
f M
ort
gage
s
Negative Equity to Persist for Years
Near Negative Negative
0
10
20
30
40
50
60
70
80
90
FL
NJ
NV IL
NY
ME
MD
CT
OH RI
IN MS
US
DE
GA
WA
SC HI
PA
MA
KY
LA
CA
DC
NM
OR MI
AZ
AR
NC
TN
OK
WI
VT
AL
UT ID NH
MO
KS
TX IA
WV
VA
MN
CO
NE
MT
SD
AK
WY
ND
Mo
nth
s o
f In
ve
nto
ry
Months of Shadow Inventory by State
Judicial Non-Judicial Foreclosure Break
Fo
reclo
sure
90
+ D
elq
Reading the Columns
23
Topics of Conversation
24
Fiscal Cliff
Source: CBO
Fiscal Cliff = Recession
25
Debt Limit
Source: U.S. Treasury Department
Back By Unpopular Demand is the Debt Limit;
Last Year this Ended in a Debacle, Will a Lame Duck Congress Act?
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
7/0
1
1/0
2
7/0
2
1/0
3
7/0
3
1/0
4
7/0
4
1/0
5
7/0
5
1/0
6
7/0
6
1/0
7
7/0
7
1/0
8
7/0
8
1/0
9
7/0
9
1/1
0
7/1
0
1/1
1
7/1
1
1/1
2
7/1
2
$, T
rill
ion
s
End of Month
Debt Subject to Limit vs Statutory Limit
Debt Subject to Limit
Statutory Limit
26
•Greece will not be able to meet bailout requirements
•Spain weighed down by banking system and regions
Current:
40% at >= 400 bps spread to 10Y Bunds
Spain Teeters
Europe Lacks The Political Will To Act Proactively…Acting Reactively Has
And Will Continue To Make The Crisis More Costly Source: EuroStat, CIA Factbook, FRED
AustriaFinland
France
Germany
Netherlands
Italy
Greece
Ireland
Portugal Spain
Belgium
Share of Outstanding Euro -Area Debt-15%
-10%
-5%
0%
5%
10%
15%0%
50%
100%
150%
200%
250%
300%
Ja
pa
n
Gre
ece
Ita
ly
Ire
lan
d
Po
rtu
ga
l
Un
ite
d S
tate
s
Ice
lan
d
Be
lgiu
m
Eu
ro
Fra
nce
Un
ite
d K
ing
do
m
EU
Ge
rma
ny
Hu
ng
ary
Au
str
ia
Sp
ain
Ne
the
rla
nd
s
Po
lan
d
Fin
lan
d
De
nm
ark
Cze
ch
Re
pu
blic
Sw
ed
en
No
rwa
y
De
fic
it-t
o-G
DP
De
bt-
to-G
DP
Comparing Sovereign Balance Sheets
Others: Debt-to-GDP (L) Euro Members: Debt-to-GDP (L)
Others: Deficit-to-GDP (R) Euro Members: Deficit-to-GDP (R)
27
EU Banks Have Pulled Back During Crisis
Tightening Lending Standards Will Only Exacerbate Europe’s Growth and
Unemployment Problem Source: ECB, Eurostat
-30
-20
-10
0
10
20
30
40
50
60
70
80
Ja
n-0
3
Ju
l-0
3
Ja
n-0
4
Ju
l-0
4
Ja
n-0
5
Ju
l-0
5
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-11
Ja
n-1
2
Ju
l-1
2
Ne
t P
erc
en
tag
e T
igh
ten
ing
Sta
nd
ard
s
Euro Area Bank Lending Standards
Prior 3 Months Expectation
0%
5%
10%
15%
20%
25%
No
rwa
y
Ja
pa
n
Au
str
ia
Ne
the
rla
nd
s
Ge
rma
ny
Ice
lan
d
Cze
ch
Re
pu
blic
Be
lgiu
m
Fin
lan
d
Sw
ed
en
De
nm
ark
Un
ite
d K
ing
do
m
Un
ite
d S
tate
s
Po
lan
d
Fra
nce
EU
Ita
ly
Hu
ng
ary
Eu
ro
Ire
lan
d
Po
rtu
ga
l
Gre
ece
Sp
ain
Un
em
plo
ym
en
t R
ate
EU Unemployment
29
Data Source Statement
Includes data supplied by IHS Global Insights (USA)
Inc., an IHS company, its subsidiaries and affiliated
companies; Copyright 2011 all rights reserved.