December 9th2011 Part 1 – Employment & Real Estate: Wisconsin in Context Part 2 – We Have to...
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December 9th2011 Part 1 – Employment & Real Estate: Wisconsin in Context Part 2 – We Have to Grow Dr. Anthony Pennington-Cross Marquette University College
December 9th2011 Part 1 Employment & Real Estate: Wisconsin
in Context Part 2 We Have to Grow Dr. Anthony Pennington-Cross
Marquette University College of Business Administration 1
Slide 2
REAL ESTATE WHATS HAPPENING TO FORECLOSURE RATES? 2
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3 INCENTIVES TO DEFAULT BIG SHADOW INVENTORY
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4 BIG FUTURE INVENTORY
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5 SPEED MATTERS Source: Crews Cutts and Merrill Interventions
in Mortgage Default: Policies and Practices to Prevent Home Loss
and Lower Cost in Borrowing to Live, Retsinas and Belsky Editors
2008 Freddie Mac Data
Slide 6
6 SPEED MATTERS WI: 6 month pre foreclosure redemption period
Source: Crews Cutts and Merrill Interventions in Mortgage Default:
Policies and Practices to Prevent Home Loss and Lower Cost in
Borrowing to Live, Retsinas and Belsky Editors 2008 Freddie Mac
Data & Analysis
Slide 7
SUPPLY OF HOUSING 7 Govt Tax incentives
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SUPPLY OF HOUSING 8
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WHATS HAPPENING TO HOUSE PRICES? 9
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WHATS HAPPENED TO REAL HOUSE PRICES? ALMOST 400 YEARS IN
AMSTERDAM 10
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WHATS HAPPENED TO REAL HOUSE PRICES? 130 YEARS IN THE US
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WHATS HAPPENING TO REAL HOUSE PRICES? 12
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13 Source: www.fhfa.gov & P-Cwww.fhfa.gov
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14 Source: www.fhfa.gov & P-Cwww.fhfa.gov
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WHATS HAPPENING TO JOBS & HOW LONG IS THIS GOING TO TAKE?
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EMPLOYMENT LEVELS 16
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1983 LABOR FORCE PARTICIPATION 17
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LONG TERM UNEMPLOYED PROBLEM 18
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DOING BETTER THAN MOST - LAST MAY 19 WI MI IL & IN MN
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DOING BETTER THAN MOST - TODAY? 20 WI MI IL MN IN
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21 Source: Current Employment Statistics,seasonally adjusted
payroll, www.bls.gov Wisconsin Employment Trends The Lost Decade
The Lost Decade
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EMPLOYMENT & HOUSING TOGETHER SAY 22
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23 -- Employment - Down 5.2 % -- House Prices - Up 35% -- CPI
(excluding food and shelter) - Up 33% THE MILWAUKEE ISSUE 2000
THROUGH Q3 2011 **** Real house prices & jobs cant move in
opposite directions **** ** Less obvious housing bubble in
Milwaukee** *** The market will continue to correct the imbalance
*** ** In the very long run, real house prices constant at
best**
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24 Part 2 -- We have to grow Its the only solution
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25 GDP Growth Is Pretty Good Revised to 2%
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26 Is Inflation Coming Back? QE1, QE2, mortgage mkt i = 4.125%,
i rf = 0, negative equity refi
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27 Consumers Are Still Depressed
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28 Loans are Being Made
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29 Profits Are High
Slide 30
Corporate Balance Sheets & Cash In Europe... cash on
corporate balance sheets is almost a third higher than at any point
in the last economic cycle.... .... in the US, the proportion of
net debt to equity is the lowest for half a century.... .... cash
represents the biggest proportion of total assets (approximately $2
trillion) in the US than at any time in the past half century....
.... official interest rates in the US and UK are at or close to
record lows, meaning the returns on cash are close to zero,
providing a powerful incentive to use that money. efinancial News
September 14, 2011, (affiliate of the Wall Street Journal) and
Financial Times, Corporate Finance: Rivers of Riches, Richard Milne
and Anousha Sakoui, May 22, 2011. 30
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31 Investment Not Increasing
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Summary Employment is going to take time Milwaukee Metro Area
Weak Employment Output is growing Housing Market still sucks Lots
of foreclosures to come Dont expect solid price appreciation
Milwaukee is still out of equilibrium Government run mortgage
market? Please no inflation problems Please no more negative shocks
Oil Disasters, Wars, Natural Disasters, Euro & ER, etc A little
compromise ask Alexander Hamilton Govt Debt, Govt Spending, etc
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