Key Economic Issues in Nebraska: The Housing Market and Student Loans

Transcription

1 Key Economic Issues in Nebraska: The Housing Market and Student Loans Nebraska Investment Finance Authority 2015 Housing Innovation Marketplace Omaha, NE February 3, 2015 Dell Gines Federal Reserve Bank of Kansas City (prepared by Kelly D. Edmiston, Senior Economist)

2 Key Economic Issues in Nebraska The Housing Market and Student Loans RESIDENTIAL REAL ESTATE 2

3 140 Existing Home Sales (through Nov 2014) Index: Mar 2006 = Kansas City (82.6) U.S. (75.3) Omaha (108.9) Lincoln (97.6) Source: Area Realtors Associations February 3, 2015 K. Edmiston, FRBKC 3

4 14 12 Months Supply of Homes, Metro Omaha Months Supply (seasonally adjusted) Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 0 February 3, 2015 K. Edmiston, FRBKC Source: Area Realtors Associations 4

5 140 Home Prices Index: 2004 Q1 = 100 Index: 2004 Q1 = U.S. Kansas City Wichita Des Moines Omaha February 3, 2015 K. Edmiston, FRBKC Source: FHFA / Haver Analytics 0 5

6 Existing Single-Family Home Activity Demand Headwinds Economy/Financial Security Uncertainty about Market Homebuyer Traffic Household Formation 80 Index: 50 = Neutral 80 Credit Availability Investor Traffic Current Homeowner Traffic First-Time Homebuyer Traffic Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep February 3, 2015 K. Edmiston, FRBKC 6

7 Key Economic Issues in Nebraska The Housing Market and Student Loans (BRIEF) DISCUSSION OF THE STUDENT LOAN CRISIS Kelly D. Edmiston, Lara Brooks, and Stephen Shepelwich (April 2013, revised). Student Loans: Overview and Issues, The Federal Reserve Bank of Kansas City Research Working Papers No. RWP

8 Outstanding Student Loan Debt $1.2 trillions trillions $1.2 $1.0 $1.0 $0.8 $0.8 $0.6 $0.6 $0.4 $0.4 $0.2 $0.2 $ Source: Federal Reserve Bank of New York 8 $0.0

9 Capacity to Repay / Burden Individual Student Loan Debt Statistics Median $14,050; Average $25,745 25% under $5,824 25% over $31,001 > 3% with debt over $100, % over $200,000 Payments (in repayment): $197 median; < $97 for 25%; >$423 for 25% 40% of borrowers under 30 (1/3 over 40) Sources: Authors calculations using data from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax; Federal Reserve Bank of New York 9

10 Student Loan Delinquency 20% 4-month moving average 20% 17.4% Payment > $0 16% 23% delinquency for those in repayment, determined by eliminating loans with zero or increasing balances that are not past due All 13.6% 16% 12% 12% 9.7% 8% 7.9% 8% 4% 0% 1.9% 1.2% 1.1% 0.7% 0.2% 0.5% Past Due days days days 120+ days 4% 0% Sources: Authors calculations using data from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax 10

11 Cohort Default Rates 25% Share of cohort in default 22.4% 21.4% 25% 20% 20% 17.6% 17.2% 17.8% 15% 15.0% 15% 10% 11.6% 10.7% 10.4% 9.6% 8.8% 8.8% 9.1% 10.0% 10% 6.9% 6.7% 7.0% 5.6% 5.9% 5.4% 5.2% 4.5% 5.1% 4.6% 5.2% 5% 5% 0% Source: U.S. Department of Education, Office of Federal Student Aid Latest release: September 28, % 11

12 Issues Driving Delinquency Recession and Recovery Most over-due balances for those over 30 Unemployment 5.7 in December Alternative rate 11.2 in December Unemployment rate for young was 11.7 in December. Underemployment Slower wage and salary growth, esp. for young AP: 50% of young unemployed/underemployed Noncompletion Better prospects for completers (buying an asset; lifetime income) Especially high for for-profit (28% completion for-profit, 56% public, 65% private not-for-profit) No credit consideration Poor borrower information 12

13 Fiscal Impact Accrual-based budgeting NPV (incl disbursements, subsidies, payments) Federal Credit Reform Act (FCRA, 1990) method Federal Government Costs using FCRA FY2011: -$47.3b FY2012: -$34.3b (est.) FY 2013: -$32.2b (proposed) Updates vs. fair-value 13

14 Fiscal Impact Accrual-based budgeting (cont) Fair-value estimates CBO: 11 percent of disbursements Implies $13.3b (+$3b consolidation) Indirect Greater income tax revenues; lower costs Interest deductions Outlook Not expected to see much higher default rates Could see continued rapid increases in borrowing Reform options 14

15 More Student Loan Information Visit KCFed.org and type Student Loans in the Search Box 15

16 Contact Information: Dell Gines Senior Community Development Advisor Kelly D. Edmiston Senior Economist Community Development 2201 Farnam Street Omaha, NE (402) Memorial Drive Kansas City, MO (816) For more information and research on housing and community development visit kcfed.org/community 16