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Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC October 8, 2014 Dallas, TX THINGS ARE DEFINATELY GETTING BETTER, BUT…..

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Presentation on theme: "Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC October 8, 2014 Dallas, TX THINGS ARE DEFINATELY GETTING BETTER, BUT….."— Presentation transcript:

1 Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC October 8, 2014 Dallas, TX THINGS ARE DEFINATELY GETTING BETTER, BUT…..

2 Inflation? What Inflation!

3 Consumer Price Index: No Inflation Anywhere!!

4 Core PCE Price Index: No Inflation Anywhere!! If it hits 2% that would be good news and does NOT mean the Fed will slam the breaks!

5 Total Compensation: No Inflation Anywhere!!

6 Inflation Expectations? None, Anywhere!

7 Fed Balance Sheet Grows, But Not the Money Supply

8 Monetary Velocity Drops Like a Rock Corporation have huge cash hoards, etc…

9 Therefore Money Supply Growth is Flat

10 Federal Reserve Behavior Yellen & Fischer are excellent New appointees are possible more dovish – Bye bye Plosser and Fischer Tapering ends 10/29/14 Short-term rates zero “for a considerable time” after tapering ends meaning maybe 6/1/15. As long as: – inflation is “below 2% longer-run goal and inflation expectations remain well anchored.” And, what exactly does that mean?

11 Federal Reserve Behavior Short–term rates rise by 25 BP every 3 months starting 6/16/15. By 12/31/15 they reach 1.25%. By 12/31/ % Except for UK, Central Banks not raising rates Rates continue rising S-L-O-W-L-Y till they hit 3.75% by the end of The Fed will employ many tools to raise rates. The Fed will use them carefully. – Fed Funds and IOER, and also ON-RRP, – Balance Sheet shrinking will take till 2020! Via principal repayment only.

12 Thus Low, but Rising Interest Rates!

13 Refinance Activity is Just 50% of Total Applications! Down 76% from peak in 2013, lowest level since November Bye bye refi.

14 MBA Mortgage Purchase Apps – Very Weak 1 st time applications are weak, 4-week MA down 11% Y-o-Y, at level of the mid 1990!

15 Interest Rates & Volume (BANK) By Year end 10-Yr 2.75%. Thus……. Refi activity is temporarily dead but will return & Servicing rights will continue rising in value. Looking Forward I Think I See New Products!!!! Refi after closing, HELOCs, 10-Yr Mtgs, ARMs, Non-QM, Jumbos, New homes loans, LIHTC, MF rental/Condo, New products! Warehouses and Destination malls, (Volker & Basel III) Big data, Cyber threats, Compliance costs, Risk mgt! Capital erosion as rate rise, Ruinous competition Risks: US gets better faster, Geopolitcal problems, Europe, China, BRICs

16 The Economy? It’s Finally Improving!

17 GDP Growth Drivers – Contractionary Fiscal Policy

18 Fewer of Us are Working in State and Local Gov’t! But, These Losses are Now Reversing at both the state and local levels

19 But Not Quite Factory Utilization Rates

20 The Labor Market is Improving Very S-L-O-W-L-Y!

21 Historical Job Growth Y-o-Y Total Employment Change

22 STEADY Labor Market Improvement: Involuntary Separation Long Term Trends:

23 Working Part Time and Unhappy About It! Stubbornly high and a large percentage of all new jobs created

24 Hiring and Separation Rates Are Weak Openings, layoffs at pre-recession levels. Not so for hires and quits

25 Historical Rate of Change in Temporary Job Growth Month over Month Percent Change: Not a Good Leading Indicator

26 Households Get Stronger but Wages are Stagnant!

27 Households Deleveraging is Almost Done!!!!!! Lack of income growth is hurting

28 Households Deleveraging is Almost Done!!!!!! Household payment behavior returns to normal

29 Households are Repairing their Balance Sheets Trillions in Net Worth Recovered, at a New Record Level

30 Households are Repairing their Balance Sheets More Income to Spend Elsewhere

31 The Stock Market is Rocking

32 Real Per Capita Disposable Inc. is Slowly Growing

33 Median Household Income is Slowly Recovering!

34 Household Income Growth by Quintile

35 Household Income Growth by Education

36 Higher % of Workers with College and Grad Degrees!

37 Cumulative Change in Household Income

38 Change in Wealth by Median Household Credit Source: Russell Sage Foundation

39 Annual Y-o-Y Percent Change in PCE Disappointing growth of late

40 Annual Y-o-Y Percent Change in GDP

41 Best of All, No Recession is in the Cards! Yield Curve Inversion Test: 1-Year Treasury Yield – 10-Year Treasury Yield

42 Housing? It’s Improving but In Fits and Starts!

43 Household Formation is Not Happening

44

45 Credit is Very Hard to Get Especially Below 720 Lots of room for mortgage origination expansion if risk appetite grows. Credit is much harder to get now than it was in 2004!

46 Credit is Very Hard to Get Especially for Minorities Blacks and Hispanics are way behind, fair housing testing anyone?

47 Non Conforming MBS Market is Essentially Dead! In 2013 there was about $20 billion, yes $20 billion of Jumbo activity

48 House Prices Bottomed 2 Years Ago…….Really! Nominal house prices are now rising slowly

49 And, Median House Size is Growing Again! HOUSTSFLAM1FQ

50 New Home Prices Are Recovering Nicely

51 New Home Sales Are Up! Or They Were Up!

52 Single-Family and Multifamily Starts – Beginning a Recovery Lack of lots, gun shy lenders, high prices, higher rates, MF looks good

53 Multifamily Starts as a Percentage of all Starts Lack of lots, gun shy lenders, high prices, rising rates, MF is good including high end rentals!

54 Existing Home Sales Down 5.3% Y-o-Y from June 2013, first time buyers MIA! Also distressed sales way down

55 Existing Home Sales: Higher Priced Homes do Well

56 Not Much Inventory at Lower Price Points More inventory the higher the asking price, fewer with negative equity

57 Existing Home Sales & New Home Starts Converging Once Again, but now due to MF activity!

58 Existing Home Sales / New Home Sales Returning to historic ratio!

59 Negative Equity is Less and Less of a Problem Just 17% of Homeowners with a mortgage are currently underwater --- That’s 8,7 million!

60 Delinquencies & Foreclosures Trending Lower Delinquencies down 13% Y-o-Y Foreclosures down 27% Y-o-Y

61 Fannie, Freddie REO Inventory is Falling Slow moving judicial state are causing the slowdown

62 Existing Inventory is Now Really Rising!!!!!

63 Single-Family Net Charge-Offs are Declining

64 The U.S. Home Ownership Rate Falls!

65 Demographics helps Multifamily for a While More 5 million more youngsters in the pipeline

66 Millenials and Gen X’ers Have Less Wealth!

67 Minority Homeownership Rates are Low There will increasingly be minority headed households

68 New Renter Profiles By age, income and family size

69 Here s Why the Rate is Low!

70 Homeownership by Age of Householder Boomers are not moving out! Loss of first time buyers is painful.

71 Apartment Vacancy Rates The Multifamily Party is Beginning to Wind Down. Rate is returning to normal.

72 Housing Recovery Probably Has Legs!

73 What About Things Here?

74 Things May Not Be Great, But they Are Improving

75

76 The Future Looks So Bright, I’ll Need Shades

77 A Large Share of Mortgages Are Underwater, But Fewer % of Total Mortgages

78 Let’s Do this Without A Lawyer, Thank You!

79 State Unemployment Rates Significant differences exist: However, unemployment is below 8% everywhere!

80 12 Month Change in State Unemployment Rates Significant differences across states

81 Fast Growing MSAs

82 House Price Recovery: 6/13 – 6/14. Wide Variations

83 House Prices Change from Peak 6/06 to Current 6/14 * Normal is the average from Q to Q4 2003

84 The Uneven Younging of America * Normal is the average from Q to Q4 2003

85 The Uneven Aging of America * Normal is the average from Q to Q4 2003

86 Interstate Migration Patterns

87 Interstate Migration Patterns 2013

88 Elliot F. Eisenberg, Ph.D. Cell: Do you want to get my daily 70 word economics ? If so, please give me your business card Thank YOU all very very ANY QUESTIONS?


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