By: Anirban Basu Sage Policy Group, Inc. December 4, 2007 It was the Best of Times, Now What? On Behalf of FEI.

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Presentation transcript:

By: Anirban Basu Sage Policy Group, Inc. December 4, 2007 It was the Best of Times, Now What? On Behalf of FEI

University of Michigan Consumer Sentiment Survey September 2001 through November 2007 Source: University of Michigan; Dismal.com Between Aug and Sept. 2005, the consumer sentiment index dropped 12.2 points, the largest one-month decline since December 1980.

Retail & Food Services Sales January 2001 through October 2007 Source: Dismal.com

15-Year Fixed Mortgage Rates, January 1995 through October 2007 Source: Freddie Mac

U.S. New Home Sales January 1999 through September 2007 Source: Economy.com, Census Bureau

U.S. New Residential Construction January 1999 through October 2007 Source: Economy.com

U.S. Existing Home Sales September 2001 through September 2007 Source: Economy.com

Change in Maryland Housing Units Sold January 2002 through October 2007 Source: Maryland Association of Realtors

2006 Residential Building Permits per 100 Households (2006 estimates) by select Regions RegionPermits per 100 Households Las Vegas, Nevada5.15 Raleigh-Durham, North Carolina4.70 Loudoun County, Virginia3.41 Phoenix-Mesa, Arizona3.03 Richmond, Virginia1.72 Northern Virginia1.71 Washington, D.C.-MD-VA1.39 Washington, D.C. without Loudoun County, VA1.29 BW Corridor0.96 Wilmington, Delaware0.95 Baltimore, MD0.80 Philadelphia, Pennsylvania0.70 Pittsburgh, Pennsylvania0.58 BW Corridor includes: Anne Arundel, Howard, Montgomery and Prince George’s counties Source: U.S. Census Bureau

Current Hot Metro Housing Markets (154) Annual Existing Single-Family Home Price Appreciation 2007Q3 vs. 2006Q3 Source: National Association of Realtors Baltimore: 1.7% New York: -0.6% Philadelphia: 2.9% Boston: 0.6% Washington, D.C.: 1.3% U.S.: -2.0% in 2007Q3

Active Housing Inventory by Baltimore MSA Jurisdiction, October 2006 vs. October 2007 Source: Maryland Association of Realtors Maryland = October 2006: 40,083; October 2007: 49,136

Active Housing Inventory by Suburban MD Jurisdiction, October 2006 vs. October 2007 Source: Maryland Association of Realtors Maryland = October 2006: 40,083; October 2007: 49,136

Mortgage Banker’s Association Delinquency Rates, Prime Mortgage Loans, 2005Q1 – 2007Q2 Source: Economy.com

Mortgage Banker’s Association Delinquency Rates, Subprime Mortgage Loans, 2005Q1 – 2007Q2 Source: Economy.com

NYMEX Crude Oil Future Prices in U.S. Dollars January 1995 through November 20, 2007 Source: Energy Information Administration

U.S. Personal Savings Rate vs. NYMEX Crude Oil Prices, 2002 through 2006 Source: Bureau of Economic Analysis; Energy Information Administration

CPI October 2007 Source: Bureau of Labor Statistics CPI : +3.5% Core CPI*: +2.1% *Core CPI: All items less food and energy

U.S. Trade Deficit, January 2001 through September 2007 Source: Dismal.com

Value of the Dollar (Broad Dollar Index) January 1999 through October 2007 Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners. Source: Federal Reserve Board

U.S. Federal Budget Deficit, * * data are projections Source: Congressional Budget Office

Mr. Greenspan says…. “When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign, for example in the U.S., profit margins…have begun to stabilize, which is an early sign we are in the later stages of a cycle”; “While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008…with some slowdown”. Speech made February 26, 2007 at the VeryGC Global Business Insight Conference via satellite. Source: The Wall Street Journal

Dow Jones Industrial Average January 2003 through November 23, 2007 Source: Dow Jones

Gross Domestic Product 1990Q1 through 2007Q3 Source: Bureau of Economic Analysis 2007Q3: 4.92%

Contributions to GDP Growth by Component, 2007Q3 Source: Bureau of Economic Analysis

Contributions to Gross Investment Growth by Component, 2007Q3 Source: Bureau of Economic Analysis

Growth in Value of Private, Nonresidential Construction Put in Place, September 1994 through September 2007 Source: U.S. Census Bureau

Corporate Profits* (SAAR) 2001Q1 through 2007Q3 *With inventory valuation and capital consumption adjustments Source: BEA

Between March 2001 and July 2002, the nation lost nearly 2.4 million jobs. Source: Economy.com, Bureau of Labor Statistics Net Change in U.S. Jobs January 2000 through October /07: 166,000 Over the last 12 months (Oct. to Oct.) the U.S. added million jobs

National Nonfarm Employment by Industry Sector Groups October 2007 v. October 2006 Absolute Change Source: Economy.com, Bureau of Labor Statistics +1,676k All Told Bush Scorecard Private Sector: +4,453,000 Public Sector: +1,497,000 Total: +5,950,000

Maryland Nonfarm Employment by Industry Sector Groups October 2007 v. October 2006 Absolute Change MD Total: +29.0K; +1.1% US Total: +1,676K; +1.2% Source: Bureau of Labor Statistics

Baltimore MSA Nonfarm Employment by Industry Sector Groups (NSA) October 2007 v. October 2006 Absolute Change Source: Bureau of Labor Statistics Baltimore MSA Total: +12.9K; +1.0% MD Total: +29.0K; +1.1% US Total: +1,676K; +1.2%

Washington, D.C. MSA Nonfarm Employment by Industry Sector Groups (NSA) October 2007 v. October 2006 Absolute Change Source: Bureau of Labor Statistics DC MSA Total: +41.9K; +1.4% US Total: +1,676K; +1.2%

Office Space Under Construction in the Baltimore MSA, 2007Q3 Total square feet under construction in the Baltimore MSA: 2,608,759 Source: CB Richard Ellis

Office Space Under Construction in the Washington, DC Metropolitan Area, 2007Q3 Source: CB Richard Ellis Total square feet under construction in the Washington, DC MSA: 16,102,847

Unemployment Rates, U.S. States (SA) October 2007 Source: Bureau of Labor Statistics RankStateRateRankStateRateRankStateRate 1Idaho2.518Iowa3.933Washington4.8 2Hawaii2.719Maryland4.036Rhode Island4.9 3Utah2.820New Jersey4.137West Virginia5.0 4South Dakota2.920Texas4.138Nevada5.2 4Wyoming2.922Florida4.238Wisconsin5.2 6Alabama3.123Massachusetts4.340Illinois5.3 6Montana3.123Vermont4.341Oregon5.5 6New Mexico3.125Oklahoma4.442California5.6 6Virginia3.126Pennsylvania4.542Kentucky5.6 10Nebraska3.227Indiana4.642Missouri5.6 10New Hampshire3.227New York4.645Arkansas5.7 12Louisiana3.327Tennessee4.646District of Columbia5.8 13Delaware3.430Connecticut4.746South Carolina5.8 13North Dakota3.430Georgia4.748Ohio5.9 15Arizona3.530Minnesota4.749Alaska6.1 16Colorado3.733Maine4.849Mississippi6.1 17Kansas3.833North Carolina4.851Michigan7.7 * U.S. unemployment rate: October = 4.7%

Unemployment Rates (NSA), Maryland Counties September 2007 RankCountyRate 1Howard2.7 1Montgomery2.7 3Calvert2.8 4Carroll2.9 4Frederick2.9 6Charles3.0 6St. Mary’s3.0 6Queen Anne’s3.0 9Anne Arundel3.1 10Talbot3.2 11Harford3.5 12Kent3.6 RankCountyRate 12Wicomico3.6 Maryland3.6 14Baltimore3.7 14Worcester3.7 16Garrett3.8 17Prince George’s3.9 18Caroline4.0 19Cecil4.2 20Washington4.4 21Allegany4.9 22Somerset5.2 23Dorchester5.8 24Baltimore City6.0 Source: Bureau of Labor Statistics

Conclusions Chance of recession in U.S. in 2008 approaching 20-40%; Various risks remain (oil/energy, the dollar, interest rates/subprime, and the flu); U.S. macroeconomic imbalances are huge and widening; The Federal Reserve Chairman will continue to face enormous pressure; and 2010 and 2011 will be huge years...

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