Download Headwinds Fade…Tailwinds Develop MARK ZANDI,

Headwinds Fade…Tailwinds Develop
MARK ZANDI, CHIEF ECONOMIST
Fiscal Headwinds are Near Their Apex…
Contribution to real GDP growth, %
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
Private Economy
Federal Fiscal Policy
Total
'05
'06
'07
Source: Moody’s Analytics
'08
'09
'10
'11
'12
'13F '14F '15F
…and Fiscal Sustainability is Within Reach
Debt held by the public, % GDP
90%
85%
80%
75%
70%
65%
60%
55%
No Tax Increase/Sequester
Current Policy
Simpson-Bowles
50%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Sources: CBO, Moody’s Analytics
3
Banks are Well Capitalized and More Profitable…
Commercial banks
9.25
1.6
1.4
8.75
1.2
8.25
1.0
7.75
0.8
0.6
7.25
6.75
Core Capital Ratio (L)
0.4
Return on Assets (R )
0.2
6.25
0.0
'90
'92
Source: FDIC
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
…and Households Right the Wrongs
30-90 Day Delinquency Rate, % of $, SA
5.5
Non First Mortgage
5.0
First Mortgage
4.5
4.0
3.5
3.0
2.5
2.0
1.5
'06
07
'08
Sources: Equifax, Moody’s Analytics
'09
'10
'11
'12
'13
Housing Will Soon Be Undersupplied…
Vacant homes for sale, for rent and held off market, ths
11,500
Housing Supply
Single-family
Multifamily
Manufactured Housing
10,500
9,500
Housing Demand
8,500
Household Formations
Obsolescence
Second Homes
7,500
950,000
600,000
300,000
50,000
1,800,000
1,250,000
350,000
200,000
Trend
Vacancy
6,500
5,500
90
92
94
96
98
00
02
04
06
08
10
12
Sources: Census, Moody’s Analytics
6
…Fueling a Big Turn in Housing’s Contribution
Contribution to real GDP growth, %
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
Wealth Effect
Residential Investment
Total
-1.0
-1.5
-1.0
-1.5
-2.0
-2.0
'00
'02
'04
Source: Moody’s Analytics
'06
'08
'10
'12
'14F
Rising Rates Expose Financial Excesses
Federal funds rate
10
S&L Crisis
8
Orange County
Mexican Peso
Tech Bust
6
Housing Bubble Busts
4
2
0
'85
'90
'95
'00
'05
'10
Sources: Treasury, BEA, Moody’s Analytics
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