THE UNIQUENESS OF THIS RECESSION

1
THE UNIQUENESS OF THIS RECESSION
2
FORECLOSED PROPERTY INVENTORYPercent of Total
Mortgage Loans
REO Foreclosures
Percent Unsold Foreclosures
Date
Source LoanPerformance-First American CoreLogic,
Inc.
3
U.S. HOME PRICESYear-Over-Year Change Case -
Shiller Index
Percent Change in Prices
Date
Source SP
4
JAPAN REVISITED?

• Aftermath of Japan's Burst Bubble
• 3 TRILLION IN BAD DEBTS
• DENIAL OF THE CRISIS ITS SEVERITY
• BY 1998 1 TRILLION HAD STILL NOT BEEN WRITTEN
  DOWN
• JAPAN'S ECONOMY SUFFERED THE LOST DECADE
• Comparison with Todays U.S. Meltdown
• 3 TRILLION IN POTENTIAL BAD DEBTS
• QUICKER GOVERNMENT RESPONSE/WRITE DOWNS
• BAD DEBT SPREAD ABROAD
• MISGUIDED POLICY INITIATIVES
• STIMULTANEOUS BURDENS (ENERGY, WAR)

5
TOKYO LAND PRICESComposite Land Price Index
Note In 1991 the average price of a home was
850/sq. ft. and the average price of prime
commercial land was 10,000 per sq. ft.
Land Price IndexYear 2000 100
Year
Source Statistics Bureau of Japan
6
EXCESSIVE EXUBERANCEJapanese Stock Market
Compared to GDP
Index 1970 1
Date
Source Japanese Central Bank, Finance.Yahoo.com,
UN Statistics Div.
7
EXCESSIVE EXUBERANCEThe U.S. Experience Stock
Values/GDP
Index 1975 1
Date
Source SP, BEA
8
THE LOST DECADEFrom Boom to Gloom - Japanese
Real Growth
Percent Gain in Real GDP
Year
Source U.S. Census Bureau
9
A REPEAT OF THE LAST U.S. HOUSING CORRECTION?

• SL Financial Crisis
• Fall in Home Prices
• Collapse in Home Construction

10
THE SL BAILOUT

• Preceded by poorly conceived deregulation
• Initial denial of problem - attempt to "save"
  SLs
• Insolvency of FSLIC in 1986
• Creation of Resolution Trust Corporation in 1989
• 1000 SLs with .5 trillion in assets are
  liquidated
• Tax Payer Cost exceeds 124 billion
• Housing market correction lasts 5 years

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TODAY'S VS. LAST HOUSING MARKET CORRECTION
Source BLS,BEA,SP,U.S. Census Bureau