A Different World: Housing, Demographics and Technology

1
A Different World Housing, Demographics and
Technology

• Mid Columbia Workforce Housing Summit
• Hood River, Oregon
• April 6, 2007
• John Mitchell
• Economist Western Region
• U.S. Bank

2
Spring 2007

• Six Year Old Upturn
• Housing Contraction-Subprime Implosion
• Mixed Data
• Fed on Hold
• Global Strength
• Unemployment Rate at 4.5 Percent
• Wealth Increasing
• Regional Strength

3
Real GDP Growth-Year Six
4
The Last Six Quarters
05/Q3 05/Q4 06/Q1 06/Q2 06/Q3 06/Q4
GDP 4.2 1.8 5.6 2.6 2 2.5
Consumer 3.9 .8 4.8 2.6 2.8 4.2
Equip 11 2.8 15.6 -1.4 7.7 -4.8
Structures -7 12 8.7 20.3 15.7 .8
Residential 7.1 -.9 -.3 -11.1 -18.7 -19.8
Federal 9.6 -4.6 8.8 -4.5 1.3 4.6
SL -.1 1 2.7 4 1.9 2.7
Exports 3.2 9.6 14 6.2 6.8 10.6
Imports 2.5 13.2 9.1 1.4 5.6 -2.6
5
Wage and Salary Employment Changes 2003 to
20074.5 Unemployment Rate February
6
U.S. Employment Year to February 2007 (1.5)
7
Consumer Price Index and Core 2005-2007 Year over
Year February 2.4Annual Average 2006 3.2
8
Yield Curve What does it mean? Flight to
Safety-Sorry about the Adjustables!
9
2007 Coasting and Changing

• Changing Leaders, Capacity Constraints Growth
  Moderating to 2.5
• Inflation Back towards the Comfort Zone 2-2.5
  
• Rates Recent indicators have been mixed and
  the adjustment in the housing sector is ongoing.
  Nevertheless the economy seems likely to continue
  to expand at a moderate pace over coming
  quarters. ..In these circumstances the Committees
  predominant concern remains the risk that
  inflation will fail to moderate as expected.
  Future policy adjustments will depend on the
  evolution of the outlook for both inflation and
  economic growth as implied by the incoming
  information. 3/21/2007

10
2007 Questions

• How will the housing correction play out? What
  does the subprime implosion mean?
• Will business investment and trade hold up? The
  investment data has softened.
• Housing/auto adjustment, energy price
  increases-piling on?
• How tight are labor markets and how fast can we
  grow?

11
Residential Permits 2001-2007 (000,
SAAR)-14.9 in 2006 Bottom?
12
NAR Resales Q4 (SAAR)
Q4 2005 Q4 2006 Change
US 6,943,000 6,243,000 -10.1
Nevada 97,600 62,400 -36.1
Oregon 98,800 86,700 -12.2
California 553,200 435,400 -21.3
Arizona 188,800 138,000 -26.9
Washington 164,800 139,000 -15.7
Hawaii 32,400 27,000 -16.7
13
House Price Appreciation Annual to 12/31/2006 and
( Q4 06)

• Nevada 3.95 (-.16)
• Colorado 3.32 (.87)
• Iowa 3.07 (.9)
• Nebraska 2.61( -.24)
• Minnesota 2.47 (.86)
• Ohio 1.05 (.36)
• Massachusetts .45(.69)
• Michigan -.44 (.51)
• Kokomo, Indiana -5.3
• Source OFHEO
• NAR Q4 73 of 149 Metros down in Q4, 5 Unchanged,
  71 up

• OFHEO Q4/2006
• US 5.9 (1.1)
• Utah 17.55 (3.67)
• Wyoming 14.29 (3.28)
• Idaho 13.99 (2.14)
• Washington 13.7 (1.93)
• Oregon 13.49 (1.55)
• New Mexico 13.08 (2.14)
• Arizona 9.6 (1)
• Hawaii 7.33 (-.8)
• California 4.6 (-.38)
• Kansas 4.47 (1)

14
OFHEO House Price Appreciation to December 31,
2006
Year Quarter 5 Years
US 5.9 1.12 55.21
OR 13.49 1.55 68.91
Bend 21.39 1.73 104.45
Longview 16.02 1.89 52.58
Eugene 11.38 .31 65.51
Medford 3.45 .58 90.08
Portland-Van 13.45 1.51 66.86
Salem 14.73 1.19 50.97
15
Perspective and How Does it end?

• MBA 4.95 of Mortgages Delinquent in Q4 13.3 of
  Subprime
• Majority of Subprime have no escrow for INS and
  Taxes
• Fed 2004 Survey 69.4 of Homeowners have mortgage
  47.9 of all Families
• Mortgage Equity Withdrawal is Plummeting (-47
  Annual Rate in Q4 Greenspan and Kennedy)
• Construction Decline and Removal from Market
• Increased Affordability Prices, Rates, Income
• Changed Expectations

16
Job Growth Update January 2007 Data-49 States
Growing

• Louisiana 1
• Arizona 2
• Utah 3
• Idaho 4
• Nevada 5
• Wyoming 6
• Hawaii 7
• North Dakota 8
• New Mexico 13
• Washington 14

• Oregon 19
• California 20
• Florida 21
• New York 29
• Massachusetts 30
• Indiana 46
• Wisconsin 48
• Ohio 49
• Michigan 50

17
Oregon Job Change Year to February 2007 (2)
18
Oregon Long Run Employment Growth
19
Washington Employment Change Year to February
(2.1)
20
Washington Job Growth Year to February 2007
Metro Job Change Percentage
Spokane 5,900 2.8
Seattle 46,700 3.4
Olympia 2,700 2.8
Wenatchee 1,300 3.6
Tacoma 5.400 2
Tri Cities 2,000 2.4
Bellingham 3,300 4.1
Clark 3,300 2.5
21
Washington Long Run Employment Growth
22
Regional Job Growth and Population Changes
County Jobs 2006 Change 05-06 Pop 2006 Change 00-06
Klickitat 5,130 120 2.3 19,800 3.3
Skamania 2,170 30 1.4 10,600 7.4
Gilliam 770 35 4.8 1,885 -1.6
Hood River 9.980 330 3.4 21,335 4.5
Sherman 655 -5 -1 1,865 -3.6
Wasco 9,180 280 3.1 24,070 1.2
Wheeler 270 -25 -8.5 1,565 1.2
Sources Employment, PSU. DFM
23
Annual Average Wage and Salary Employment
2001-2006
24
Environment

• Adjacency To Portland One Metro County
• Regional Centers
• Falling Communications Costs-Maintain
  Infrastructure and Skills
• Amenities-Gorge, Mountains, etc.
• Dramatic Taxation Differences
• Regulatory Hangover
• Aging Crew

25
A Different World Monthly Labor Review 11/06
Average Annual Labor Force Growth Rates 2010-2020
16-24 -.8
25-34 .9
35-44 .3
45-54 -.8
55-64 2.1
65 plus 5.3