John Mitchell Presentation Oct 08 Ppt 2007
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The document summarizes the state of the US housing market and economy in October 2008 during the financial crisis. It notes the collapse of major financial institutions, falling home prices across most states, loose monetary policy and lending practices contributing to the crisis, and ongoing debates around government intervention and bailouts. It also provides economic indicators like GDP growth, unemployment, inflation projections, and discusses uncertainty around stabilizing financial markets and the housing market bottom.
John Mitchell Presentation Oct 08 Ppt 2007
- 1. Prudential Northwest Properties Sales Convention October 8, 2008 John W. Mitchell
- 2. Emergency Economic Stabilization Act of 2008-aka TARP, Bailout Credit Market Seizure Institutions Disappear-WAMU, Merrill, Bear Stearns, Lehman, Wachovia , IndyMac, Silver State, Countrywide etc.-The Landscape Changes High Stakes Drama New Regulatory World History Lessons Learned? Housing is at the Core! Middle of Election Campaign
- 6. 20 States Falling Prices Oklahoma 4.93% Wyoming 4.36% Montana 3.38% Idaho 1.18% Washington .56% Alaska -.18% Oregon -.53% New York -.81% California -15.8% Nevada -14.12% Florida -12.41% Arizona -9.18% Bend -7.15% Portland -.18% Medford -8.47% Merced -34.5% Case Shiller July 2008 Las Vegas -29.9% LA -26.2% San Diego -25% Portland -6.6% Seattle -8.2%
- 7. Monetary Policy-early in century-too low too long-Search for Yield Loose Underwriting/Value Not Ability to Pay Long Term Focus on Homeownership Regulatory/Political Failures Compensation Systems Ratings Agencies Speculation/Fraud Consumer Behavior-House as ATM Suppose Someone Said in 2004-2005-This has to stop? What would the outcome have been?
- 8. Affordability- Prices up faster than Incomes Credit Quality Deterioration/Tighter Credit Price Declines Disappearing Speculators Feedback from Falling Prices
- 9. Price Declines and Sales Gains The support system shrinks Intervention-FHA, Fannie and Freddie Actions, Renegotiations, Home Owners Loan Corporation Redo Declines in Construction-Consensus –No Change Next Year New Regulatory Environment Less Emphasis on Ownership? Bailout-Orderly Liquidation?
- 10. Mortgage Holders Lender Losses Capital Decline Compounded by Leverage Sell Assets Depress Prices Mark to Market Fear/Distrust-Cannot Roll Over Maturing Debt
- 11. Anger by Taxpayers-Bail out Institutions and People Systemic Risk Of Collapse Market Volatility in a World of Defined Contribution Retirement Programs Great Depression Metaphors Election Year Does Not Help Financial Markets and Main Street are Inextricably Linked
- 12. Secretary of the Treasury can buy troubled assets More Steps to Modify Troubled Loans Companies that sell provide warrants so that taxpayer can gain No Executive Windfalls Oversight Board and Special Inspector General
- 13. Calm the Financial Markets Reduce Fear and Increase Confidence Orderly Liquidation Process that will take years! The cost ( if any) is unknown and unknowable. In the tradition of Home Owners Loan Corporation, Chrysler Bail Out, Resolution Trust Company Generation Shaping-Great Depression, Pearl, 9/11
- 14. A National Economy Probably in Recession Inflation Fears Easing for the Moment Unemployment Rate of 6.1% with 9 Consecutive Months of Job Decline Fading Impact of Rebate Program Trade Strength Wealth Declines
- 16. Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 GDP 4.8% 4.8% -.2% .9% 2.8% Consumption 2 2 1 .9 1.2 Equip & Soft 6.9 3.6 1 -.6 -5 NR Structures 18.3 20.5 8.5 8.6 18.5 Residential -11.5 -20.6 -27 -25.1 -13.3 Federal 6.7 7.2 -.5 5.8 6.6 State and Local 2.4 1.9 1.6 -.3 2.5 Exports 8.8 23 4.4 5.1 12.3 Imports -3.7 3 -2.3 -.8 -7.3
- 22. GDP Growth 2008 and 2009 1-2% Inflation 4-4.5% falling to 3% in 2009-Lots of Uncertainty Rates: Fed has provided liquidity-at the last meeting expressed worry about growth and inflation-remained on hold-downside risks have increased-markets now bet on another cut
- 23. Housing Inventory Absorption Balance Sheet Repair- Financial Institutions and Consumers Credit Constraints Confidence Restoration
- 24. Will financial markets stabilize? Are there more bombs out there? How will the crisis unwind? How is the New Legislation going to work? Are we near the housing bottom? Will inflationary pressure abate or are we sowing the seeds of more down the road? Will fear and lack of confidence restrain activity? Policy changes after the election?
- 29. The Financial Turmoil The Energy Developments Setting In Motion Long Term Changes in Behavior How, where and in what we live? Savings Patterns? What we drive?
- 30. Recessions have always ended when the excesses are worked off. We tend to underestimate the resilience of the US economy. People will always need a place to live-Not necessarily a get rich program, A Savings Vehicle with Amortization not an ATM Wants and Needs will change and there will always be a need for people to facilitate the transaction. This too shall pass.