Economic Crisis of 2008
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Economic Crisis of 2008

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Presentation made to HRP Executive Committee (ExCom) on 17-Oct 08 by ODU Economic Professor Dr. Larry Filer on the current economic crisis and the relationship to Hampton Roads.

Presentation made to HRP Executive Committee (ExCom) on 17-Oct 08 by ODU Economic Professor Dr. Larry Filer on the current economic crisis and the relationship to Hampton Roads.

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Economic Crisis of 2008 Economic Crisis of 2008 Presentation Transcript

  • Dr. Larry Filer Associate Professor of Economics Old Dominion University Norfolk, VA 23529 Hampton Roads Partnership 10/17/2008
  • Hampton Roads Partnership 10/17/2008
  • The Housing Stock in August of 2008 Housing Stock $19.3 Trillion Outstanding • 91.6% Prime Debt • 8.4% Subprime $10.6 Equity $8.7 Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • Subprime Mortgage Originations Percent of Percent of Percent of Subprime Subprime Subprime MSA Originated Originated Originated Dec 2007 Dec 2006 Dec 2005 Hampton Roads 7.4% 29.5% 22.4% Richmond- 14.4 39.4 22.9 Petersburg Danville (VA) 8.1 41.1 25.7 Jacksonville (FI) 20.2 31.2 23.9 Charlotte 15.2 34.5 23.0 Orlando 9.3 27.4 19.6 Atlanta 14.9 32.5 25.4 Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • Subprime Loans per 1000 Units August 2008 Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • Share in Foreclosure August 2008 Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • ARM Resets August 2008 – August 2009 Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • ARM Resets Ending Early 2009 35 40 30.5% 34.1% 30 35 30 25 25 20 20 15 15 10 6.3% 10 7.4% 5 3.3% 5 3.6% 0 0 Next 12 12-23 24+ Next 12 12-23 24+ US VA Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • Median Monthly Payment as a Percentage of Median Monthly Household Income (Resale Home) 45 U.S. Hampton Roads 40 37.8 35.5 35.9 35 30.8 32.1 33.4 30.1 30 28 26.1 Percent 25 21.5 20 15 10 5 0 1979 1989 1999 2007 2008f Source: The Old Dominion University Forecasting Project Hampton Roads Partnership 10/17/2008
  • Hampton Roads Resale Homes Sold and Average Days on the Market 30,000 100 89 23,553 24,759 90 Average Days on The Market 25,000 80 67 65 Homes Sold 20,000 61 70 19,154 60 18,926 15,000 17,059 50 14,557 40 10,000 30 27 28 20 5,000 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008f Homes Sold Average Days on Market Source: Real Estate Information Network and Old Dominion University Forecasting Project Hampton Roads Partnership 10/17/2008
  • Price Changes Across MSA’s (Conforming Mortgages) MSA 1 Year change 2nd Quarter 5 Year change change Honolulu, HI -0.26% -1.22% 83.50% Va. Beach- -0.70 -1.21 78.75 Norfolk-NN Coeur d’Alene, ID -0.37 -0.94 77.46 Flagstaff, AZ -3.10 -1.50 76.83 Miami, FL -10.68 -5.48 75.38 Source: Office of Federal Housing Enterprise Oversight Hampton Roads Partnership 10/17/2008
  • Risk of Recession August 2008 MSA Classification Blacksburg-Christiansburg- In Recession Radford Charlottesville In Recession Danville Recovery Harrisonburg At Risk Lynchburg In Recession Richmond At Risk Roanoke In Recession Va. Beach-Norfolk-Newport News Expansion Washington-Arlington-Alexandria Expansion Winchester In Recession Source: Economy.com Hampton Roads Partnership 10/17/2008
  • Hampton Roads Partnership 10/17/2008
  • Securitization of Mortgage Debt 1980 2008 Securitized Held Securitized Held 16% 41% $958 Billion $11.3 Trillion 59% 84% Source: Federal Reserve, Milken Institute Hampton Roads Partnership 10/17/2008
  • Credit Default Swap Market CDS volume Trillions of $ 70 60 62.2 58 50 40 42 30 20 10 13.9 0 Dec-05 Jun-07 Dec-07 Sep-08 Source: International Swaps and Derivatives Association, Author’s calculations Hampton Roads Partnership 10/17/2008
  • The TED Spread Fed introduces Fed introduces PDCF TSLF Bear Stearns hedge funds file for bankruptcy Ownit Mortgage becomes first major subprime lender to file bankruptcy Fed cuts discount rate to 2.4% and Fed Funds rate to 2.25% Source: Economy.com, Author’s calculations Hampton Roads Partnership 10/17/2008
  • Commercial Paper Market Disintegrates Source: Federal Reserve, Paul Mizen Hampton Roads Partnership 10/17/2008
  • Senior Loan Officer Opinion Survey Net % of Banks Tightening 90 80 70 60 50 40 30 20 10 0 2007 Q4 2008 Q1 2008 Q2 2008 Q3 Large C&I Small C&I Prime Subprime Source: Federal Reserve Hampton Roads Partnership 10/17/2008
  • Hampton Roads Partnership 10/17/2008
  • House Price Indices 25 20 15 10 5 0 -5 -10 -15 -20 OFHEO Case-Shiller Source: OFHEO and S&P Hampton Roads Partnership 10/17/2008
  • The TED Spread Fed introduces Fed introduces PDCF TSLF Bear Stearns hedge funds file for bankruptcy Ownit Mortgage becomes first major subprime lender to file bankruptcy Fed cuts discount rate to 2.4% and Fed Funds rate to 2.25% Source: Federal Reserve, Paul Mizen Hampton Roads Partnership 10/17/2008
  • The World Slows Real GDP Growth (PPP basis) 3.5 US Euro Area Japan 3 2.5 2 1.5 1 0.5 0 2006 2007 2008f 2009f 2010f Source: World Bank Hampton Roads Partnership 10/17/2008
  • Policy Response  Government  Federal Reserve  HOPE Now  Fed Funds Cuts  Housing and  Multiple Lending Economic Recovery Facilities Act  Interest on Required  Troubled Asset Relief and Excess Reserves Program Hampton Roads Partnership 10/17/2008