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Navigating Housing Cycles: Impact on Economy & Solutions | Beacon Economics

Explore the intricate connections between housing cycles and the economy, unraveling key insights and solutions for navigating through uncertain times. Beacon Economics offers expert economic support services across the Western US.

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Navigating Housing Cycles: Impact on Economy & Solutions | Beacon Economics

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  1. Peering Over the Edge Housing and the economy Christopher Thornberg Principal Beacon Economic

  2. Where are we today?

  3. Last Year

  4. Why now?

  5. The 3 parts of a housing cycle • The transaction cycle The collapse of the pyramid • The building cycle The loss of jobs • The price cycle The impact on financial markets and consumer spending

  6. Transactions: Sharply down post-August

  7. Notices of Default

  8. The central issue? Prices Affordability based on FHA definition

  9. The Correction has begun LA -9% SD -13% SF -7.5%

  10. Who can help? The Fed? Only Indirectly The Paulson plan? Useless Fannie and Freddie? Probably not Congress? Yes, but at what cost

  11. So—what does it mean for the economy? • Can construction stop the economy? • No- its not big enough • Does the credit crunch matter? • Not as long as the Fed does its job as lender of last resort • What does matter? • The consumer

  12. It’s the Consumer!

  13. Recent GDP Growth Surge: Illusion Beacon Economics

  14. The Employment Report Beacon Economics

  15. Local Unemployment Change November 06 to Nov 07 Beacon Economics

  16. Economic Forecast Beacon Economics • Recession is starting now • Q4 or Q1 academic- depends on NBER • Negative growth through Q3 08 • Doldrums in 2009 • Recovery 2010 • Mild downturn • Worse if financial losses add up to more than expected • Worse if inflation creeps in to the economy

  17. So what does it mean for California?? The downside of Prop 13

  18. California Revenues Beacon Economics

  19. Summary Beacon Economics • Recession VERY likely • Consumer weakness coming to light • Business weakness to start on profit issues • Exports will not be able to carry the day • Housing to go into freefall in 08 • Price declines, bottom found in 09 to 10 • State Local Budgets are a mess • Actual deficit larger than $14 billion • No quick recovery in revenues—this is structural / not cyclical • Impact as large on local governments as state gov.

  20. Beacon Economics is an independent consulting firm providing a variety of economic support services to clients across the Western US. • Our Services Include • Custom Presentations for Public and Private Events • Litigation Support and Damage Estimation • Regional Economic Outlooks and Conferences • Market Analysis and Forecasts • Cost-Benefit Analyses • Public Policy and Development Studies For more information Go to: www.BeaconEcon.com E-mail: Chris@BeaconEcon.com Call: 310-739-3286

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