1.  NIFA: 2009 Housing Innovation Marketplace  Ernie Goss Ph.D. Professor of Economics, Creighton University & MacAllister Chairholder  Websites:  www.ernestgoss.com www.outlook-economic.com www.ernestgoss.comwww.outlook-economic.com www.ernestgoss.comwww.outlook-economic.com  Podcast: Itunes http://coba3.creighton.edu/econoutlook/goss-rss3.xml http://coba3.creighton.edu/econoutlook/goss-rss3.xml The Recession of 2009: What Indicators Should We Watch?

3. Investment Climate Housing Job Market New jobs interest rates & competitiveness Short Term Drivers of U.S., and regional economies

4. Housing

5. U.S. home ownership and Fannie & Freddie interest proceeds, 1995-2008

6. U.S. housing vacancy rates and Housing price growth, 1999-2008 (Quarterly Case-Shiller Index)

7. U.S. Housing Affordability,1987-2008

8. How big is the problem (bailout)?  Homeownership rates:  1995 64.8%  2005 68.9% (highest ever)  Relaxing standards brought 4.5 million new and mostly unqualified buyers into market  With no growth in per capita income, housing prices would have to drop by another 14% by the end of 2009 to return to historical ratio  This estimates assumes housing prices do not plummet below pre-bubble trend  A partial solution: 1) Tax credit for all for home purchases, 2) Reduce the hours to achieve active home investor status (500 to 50)

9. Investment Climate

10. Stock values vs. U.S. economy, 1952-2008  Graph profiles value of S&P divided by value of U.S. economy (times 100) Carter Presidency begins Clinton Presidency begins

11. Housing Prices, Omaha v. U.S. 2006 - 2007

12. Oil prices, 1999-2008 $49 of the run-up in oil prices to $133 was due to decline in value of dollar

13. Jobs

14. The Mainstreet Economy  A monthly survey of community bank CEOS  Colorado, Illinois, Iowa, Kansas, Missouri, Nebraska, South Dakota, Wyoming  Intended to gauge the economic conditions in the non-urban areas of region  Average community size is 1,300 population  Available at:  www.outlook-economic.com www.outlook-economic.com  www.economictrends.blogspot.com www.economictrends.blogspot.com

15. The Mainstreet Economy (index over 50 indicates expansion) Jan-08Dec-08Jan-09 Area economic index 55.725.024.6 Loan volume 51.744.748.3 Checking deposits 70.062.960.8 Certificates of deposit 60.863.657.6 Farmland prices 81.037.136.6 Farm equipment sales 71.131.629.4 Home sales 24.615.926.7 Hiring in area 46.625.818.3 Retail business 42.420.924.2 Confidence index 43.215.625.9

16. The Mainstreet Economy, 2006-09

17. Other outcomes from recent surveys:  Less than 13 percent of bankers indicate that they will participate in the latest U.S. Treasury preferred stock “buyout” plan.  Farmland price growth turned negative for a third straight month.  Rural Mainstreet Economy slows to record low.  Bank indicators remain healthy.  Bankers expect high input prices to pose the biggest economic threat for 2009.  43.9% of the bankers have tightened credit standards

18. The Regional Economy: Survey of Purchasing Managers& Business Leaders  A Partnership Among Creighton University, and State Purchasing Management Associations

19. Monthly Survey of Business Conditions  Leading Economic Indicator  Released First Business Day of Each Month to Media  Released Via WWWeb:  www.outlook-economic.org www.outlook-economic.org  www.ernestgoss.com www.ernestgoss.com  Appears in media throughout U.S.  Survey of supply managers in over 900 firms

20. Business Conditions Index, 2003-08

21. Prices Paid Index, 2003-08

22. Outlook  Decline in output growth for U.S. and Mid-America until last quarter of 2009 (less negative for Mid-America) RECESSION  Negative employment growth for U.S. and Mid-America for all of 2009 (less negative for Mid-America) RECESSION  Mortgage rates will fall below 5.0% in the months ahead.  Housing prices will decline by another 14% by the end of 2009.  Advancing dollar will help restrain inflation next three months. (However, dollar will lose value in 2009)  Inflation is in the pipeline and significantly above Fed’s target for 2010  Decline in farm income will slow the Mid-American for 2009.  Outlook will be influenced significantly by oil prices.

23. Important indicators: keep an eye on:  The January PMI released February 2nd will be an economic indicator that will be very, very closely examined. ( www.outlook-economic.com and www.ism.ws ). Another index below 35.0 will be a very, very bearish sign. I expect the leading economic indicator to rise a bit to a still weak number. www.outlook-economic.com www.ism.wswww.outlook-economic.com www.ism.ws  4th Quarter advance GDP will be released by the Bureau of Economic Analysis on Jan. 30th (www.bea.gov). I expect the number to show that the economy declined at an annualized rate of 4.0%. www.bea.gov  The employment report for January will be released on Feb. 6th I expect the report to show job losses (and large) for a fourteenth straight month and an increase in the unemployment rate to 7.5%.. (www.bls.gov) www.bls.gov  First time and continuing claims for unemployment insurance. Released every Thursday. First time claims below 450,000 and continuing claims less than 3.3 million would be bullish. I don’t expect this though. They will be worse. (www.doe.gov ). www.doe.gov  Keep an eye on the yield for 10-year U.S. Treasuries. Current yields are artificially low and reflect unprecedented fear among investors. Large increases will tell us that either 1) global investors are taking funds out of the U.S. market, or 2) inflation expectations have increased, or 3) investors have reduced the risk perceptions and are pulling money out of treasuries and putting it into equity markets (http://finance.yahoo.com ) http://finance.yahoo.com

24. The Risk Factors (Long & Short Term)  International uncertainty—terrorism, tariffs and trade restrictions, abolition of 2001 and 2003 tax cuts, and even slower EU and Asian growth.  The biggest risk is housing prices dropping by another 25% for 2009 (overwhelming pessimism)  Dollar weakens dramatically (not likely in short-term )  Asian reduced buying of U.S. Treasuries (Chinese de-link their currency to dollar).