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U.S. Business Insights: Housing Report March 2012


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Paul Ballew, D&B's Chief Economist, assesses the housing industry based on Dun & Bradstreet's proprietary data on delinquencies and failures.

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U.S. Business Insights: Housing Report March 2012

  1. 1. D&B U.S. Business Insights Monthly Report Published March 2012 by Paul Ballew, D&B Chief Economist D&B Housing Report Construction Delinquent Dollars: All States The current economic cycle has been the most unique in recent history due to the severe imbalances that preceded the downturn and drove the severity of the contraction. His- tory has shown that the process of correcting for extreme imbalances usually takes time and is not a linear journey.Among the imbalances during the current economic cycle,none was more disruptive than the run-up in housing andthe subsequent burst of the bubble. Home prices in some por-tions of the U.S. surged in excess of 150 percent between 2000 *and 2006. The resulting correction has resulted in historic levelsof foreclosures, declines in home values and a severe reductionin household net worth. The correction in housing has beena significant drag on the economic recovery and a primary fac-tor for its hesitant behavior, since to some degree the housing Real Estate Delinquent Dollars: All Statesindustry correlates with the U.S. economic recovery.Dun & Bradstreet has recently assessed the housing industryusing our proprietary data on delinquencies and failures. Thismonth’s report provides a perspective on the industry’s journeyback to health. The insights on the housing sector are broad-based, but two significant conclusions arose from the re-search on the sector: 1) the healing process is progressing, butthe sector is still going through the adjustment process andlikely will not return to full health until the middle stages ofthe decade at the earliest and 2) the challenges in housing areincreasingly becoming geographically concentrated with theworst-hit regions demonstrating few signs of improvementwhile other regions are shifting into a mild recovery.*Department of Planning and ©2012 Dun & Bradstreet
  2. 2. D&B U.S. Business Insights Monthly Report Housing Delinquent Dollars: The Troubled States *Delinquencies and Failure Data cies have been more prevalent in the Real Estate sub-sec- tor, which also shows slightly higher declines since 2010,are Insightful signifying a faster recovery compared to the Construc-Consistent with the belief that the worst is behind us, tion sub-sector.the percentage of dollars 91 days past due in the Con- A closer look at the states shows a fairly consistent pat-struction and Real estate sectors in the D&B database tern wherein Nevada and Arizona feature consistentlyshows a sharp downturn starting mid-2011. Delin- in the list of states (see tables in the appendix) projectingquency levels are considerably lower than the beginning the highest percent of delinquent dollars (91 days pastof 2010, suggesting the worst of the storm has clearly due) and the highest percent of businesses 91 days de-abated. Importantly, excluding four states (Arizona, linquent. In addition, the review of quarterly delinquentCalifornia, Florida and Nevada) that have been identified dollars and businesses between 2008 and 2011 identifyas hotbeds of the housing bubble and still struggling a few more problem states such as Utah and Illinois. Thepockets of the country, delinquency levels are consistent- better states include Alaska, Maine, North Dakota,ly lower than the peak in 2008 and 2009 and the trends West Virginia and Vermont. North Dakota and Kentuckyare positive. feature the fastest recovery rates in terms of, respective-One of the most startling elements of this pattern is ly, declining delinquent dollars and delinquent business-the gap in delinquencies between the upper and lower es. These states are also leading the economic recoverytiered sectors – the most severely impacted states have due in part to their dependency on the natural resourcesdelinquency rates almost six times higher than the best sector.performing states, confirming that the healing process Overall, from D&B’s perspective, the housing sector isin the most severely impacted states will take time. The showing signs of restoration compared to its recessionsame picture is also presented when the sub-sectors are days, with most of the recovery having taken place instudied individually including the Real Estate sub-sector. the past year. Nevertheless, the recovery will be incom-An investigation on failures and bankruptcies in the two plete until the troubled states are able to pull out ofHousing sub-sectors of Construction and Real-Estate their quandary, and this journey is still in its early stages.also shows signs of the upturn (see tables in appendix). So, some bright spots? Yes. However, in betting on aAlthough failures and bankruptcies are still considerably housing recovery it is important to focus on the oldabove 2006 pre-recession levels, the significant decrease adage, “location, location, location.”since 2010 is once again notable. Failures and bankrupt-*Department of Planning and ©2012 Dun & Bradstreet
  3. 3. D&B U.S. Business Insights Monthly Report APPENDIX Failures and Bankruptcy in Construction & Real Estate States with Lowest Delinquent Dollars * States with Lowest Delinquent Businesses States with Highest Delinquent Dollars*Department of Planning and ©2012 Dun & Bradstreet
  4. 4. D&B U.S. Business Insights Monthly Report States with Highest Delinquent BusinessesQuarterly Delinquent Businesses: 2008-2011 Quarterly Dollars 91 Days Past Due: 2008-2011 **Department of Planning and DevelopmentDun & Bradstreet is the world’s leading source of commercial information and insight on businesses, enabling companies to Decide with Confidence® for more than 170 years. D&B’s globalcommercial database contains more than 205 million business records, enhanced by our proprietary DUNSRight® Quality Process, providing our customers with quality business information.This quality information is the foundation of our global solutions that customers rely on to make critical business ©2012 Dun & Bradstreet