Robert A. Simons Ph.D. - Maxine Goodman Levin College of Urban
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Transcript Robert A. Simons Ph.D. - Maxine Goodman Levin College of Urban
Robert A. Simons Ph.D.
Professor
Levin College of Urban Affairs
Cleveland State University
[email protected]
With help from Arthur Schmidt
2013-2014 Housing
Forecast
Presented to Cleveland Homebuilders
Association (HBA)
November 8, 2012
CLEVELAND METRO IN THE STATE,
NATION AND WORLD
• We are nested in the world economy
• We have 11 fortune 500 companies in NE Ohio
• Our manufacturing is down
• Our medical is up
• Our housing prices are cheap
• Our bubbles, if we have them, are small
• Our local government is fractionalized and our local tax burden is
high
•
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We tend to lead nation into recession and lag them out
We now have shale-gas fracking as an engine, just emerging
US: LOOKING BACK TO 1999 AND BEYOND
Longer view: since @1970; recessions in 1974 (oil
shock) 1979-1981 (more oil and stagflation ) 1982
(double dip); 1986-1989 (real estate only – tax code
driven); 1991 (economic exhaustion) and 2001 (9-11)
Expansion from 2002 until 2007-2008 recession
(Financial rules and liquidity driven, FNMA, FMC, AIG)
7 recessions in 42 years=Average of a recession every
6 years
Since 1999=average cycle: 2 recessions in 12 years
Housing construction leads us out of a recession:
NOT!
US Employment Mix: since 1999: MFG.-32%; CONST.12%; SERV (except education) +4%; LEISURE +12%;
GOV’T +9%, HEALTH CARE +30%
INTERNATIONAL
THINGS TO WATCH
• ASIA / CHINA GROWTH
• EUROPE MELTDOWN
• MIDDLE EAST TURMOIL
• US SUSTAINED RECOVERY / FISCAL
CLIFF
WSJ OCTOBER 2012
Greek
Debt
is > 8%
over
German
rate
EUROPE - MONETARY UNION?
• EU IS AT A CRITICAL POINT
• NATIONAL FISCAL AND BANKING
SECTORS NEED TO BE MERGED
• GERMANY WOULD PAY THE BAILOUT BILL FOR WEAKER SISTERS
(Portugal, Ireland, Spain, Italy)
• EURO UNLIKELY TO COLLAPSE
(FEAR), BUT STRONG
ENFORCEMENT NEEDED
• FUTURE OF UNION STILL NOT
CLEAR, BUT RECESSION IS
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MIDDLE EAST
IRAN AND NUCLEAR SANCTIONS
SYRIA CIVIL WAR CONTINUES
PALESTINIAN INTERNAL DISCORD
EGYPT ARAB LEADER –PROGRESS?
ISRAELI-PALESTINIAN PEACE EFFORT
LEBANON –TINDERBOX
TURKEY AND THE KURDS, ARMENIANS
IRAQ, AFGHANISTAN WINDING DOWN
EFFECT ON INTERNATIONAL RELATIONS
AND ENERGY PRICES
US ISSUES
• 4 MORE YEARS OF DEMOCRATIC
PRESIDENT, AT LEAST 2 MORE
YEARS OF SPLIT CONGRESS
• MONETARY AND FISCAL POLICY
• ECONOMIC GROWTH
• CONSTRUCTION
FEDERAL FUNDS TARGET RATE
Fed target rates remain at all time lows
For how long? ANOTHER FEW YEARS
INTEREST RATES ARE SO LOW, ELDERLY
PEOPLE CAN’T EASILY LIVE OFF THEIR INCOME
THE ECONOMIST 11/3/12
2.2% GROWTH IS THE NEW NORMAL
BUT THE STOCK
MARKET
DROPPED 2+% !!
Demand side
• Borrowers are CLAWING THEIR WAY
BACK from underwater
• Still have artificial backlog of foreclosed
property
Percent of Homeowners Underwater, U.S.
35.00%
30.00%
28.60%
26.80%
2012 –
CLOSER
TO 2325%
25.00%
23.20%
22.30%
20.00%
Percent Underwater
15.00%
10.00%
5.00%
Source:
Zillow
0.00%
2009 Q1
2010 Q3
2011 Q2
2011 Q3
House prices are
firming
YEAR ON YEAR % CHANGE
And construction is
starting to pick up a bit
In OhioFRACKING
(shale gas recovery)
• Fracking will affect NE Ohio
• 2 shale layers, Marcellus and Utica
• Ohio unemployment rate 7%, <US
• Shale will be a substantial Driver of
growth
But….
• Banks are slow to pick up
• Fannie and Freddie are still in limbo
• And strengthening house sales will slow
rental growth
Simons 2013-2014 forecast
US GDP positive, relatively low @2.2% AND STEADY. No double dip
•
Consumer confidence mixed at best, stocks recovered @DJIA=
13,000. Firms doing better.
•
Little risk taking. STILL Lots of cash on sidelines. Short term rates
<1%. More savings healthy in long run. Reasonable consumption
also. Older folks need to work
•
Bouncing along the bottom, Jobless recovery, BUT UNEMPLOYMENT
RATE <8%.
•
Presidential election year 2012 ---- 4 more years of OBAMA. Fiscal
cliff gridlock?
•
Housing prices and re-sales stabilized at lower levels, inching up.
Continued residential foreclosures will hold prices down and
compete with existing inventory. Residential construction down
>70%, but glimmers of hope
Commercial refinancing issues have not been resolved. Retail sector
problematic, but improving slightly. Loan originations, servicing, new
commercial construction lending will be flat, at very low levels down
>90%. Hang on
Some housing niches still active. LIHTC, new location thrill/upper
end. MF/rental unit starts inching up, New micro-homes?
New construction: SOME ACTIVITY, STILL WON’T BE ROBUST FOR
next few years
Robert A. Simons Ph.D.
Professor
Levin College of Urban Affairs
Cleveland State University
[email protected]