Employment declined dramatically Nonfarm payroll employment (index=100 at peak of business cycle)

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1 Employment declined dramatically Nonfarm payroll employment (index=1 at peak of business cycle) Index Months since peak of business cycle 1 Source: Bureau of Labor Statistics, NBER, and authors' calculations

2 House Prices Peaked and Fell Precipitously (Shown through the end of 211) Index 2 Index Source: Haver Analytics/CoreLogic (Shading represents NBER Recessions) 2

3 Result was a Huge Decline in Owners Equity in HH RE Billions $(USD) 3, 8 25, Market Value of HH Real Estate (LH Scale) 7 2, 6 15, 5 1, 4 5, Home Mortgage Liabilities (LH Scale) Owners Equity as a % of HH Real Estate (RH Scale) Q1 2 Q2 21 Q3 22 Q4 24 Q1 25 Q2 26 Q3 27 Q4 29 Q1 21 Q2 211 Q3 212 Q4 214 Q1 Source: Flow of Funds/Haver Analytics (Shading represents NBER Recessions) 3

4 Stock Market Wealth also Fell Sharply (Shown through the end of 211) Billions $(USD) 12, Billions $(USD) 12, 1, Equity Shares at Market Value Directly Held 1, 8, 8, 6, 6, 4, 4, 2, 2, 1952 Q Q Q Q Q Q Q Q Q Q1 22 Q1 27 Q1 212 Q1 Source: Flow of Funds/Haver Analytics (Shading represents NBER Recessions) 4

5 Four-Quarter Cash Flow from Borrowing (Unrelated to Transfers of Homeownership) Billions $(USD) 6 Billions $(USD) : + $33 B : $15 B Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Q1 Source: FRBNY Consumer Credit Panel/Equifax (Shading represents NBER Recessions) 5

6 Banks and Lenders Imposed Tighter Mortgage Lending Standards (Shown through the end of 211) Res Mortgages: Net Share, Banks Tightening Q1 27 Q4 28 Q3 29 Q2 21 Q1 21 Q4 211 Q3 212 Q2 213 Q1 213 Q4 Source: FRS Senior Loan Officer Oppinion Survey (Shading represents NBER Recessions) 2 6

7 Origination by Risk Score - First Mortgages (Fannie Mae and Freddit Mac: US Figures) Proportion.7 Proportion <= Q121 Q122 Q123 Q124 Q125 Q126 Q127 Q128 Q129 Q121 Q1211 Q1212 Q1213 Q1214 Q1 Source: FRBNY Consumer Credit Panel (Shading represents NBER Recessions) 7

8 Stock Market Wealth also Fell Sharply (Shown through the present) Billions $(USD) 14, Billions $(USD) 14, 12, Equity Shares at Market Value Directly Held 12, 1, 1, 8, 8, 6, 6, 4, 4, 2, 2, 1952 Q Q Q Q Q Q Q Q Q Q1 22 Q1 27 Q1 212 Q1 Source: Flow of Funds/Haver Analytics (Shading represents NBER Recessions) 8

9 House Prices Peaked and Fell Precipitously (Shown through the present) Index 2 Index Source: Haver Analytics/CoreLogic (Shading represents NBER Recessions) 9

10 Result was a Huge Decline in Owners Equity in HH RE (Shown through the present) Billions $(USD) 3, 8 25, Market Value of HH Real Estate (LH Scale) 7 2, 6 15, 5 1, 4 5, Home Mortgage Liabilities (LH Scale) Owners Equity as a % of HH Real Estate (RH Scale) Q1 2 Q2 21 Q3 22 Q4 24 Q1 25 Q2 26 Q3 27 Q4 29 Q1 21 Q2 211 Q3 212 Q4 214 Q1 Source: Flow of Funds/Haver Analytics (Shading represents NBER Recessions) 1

11 Household Net Worth (percent of disposable income) Q1 2 Q2 21 Q3 22 Q4 24 Q1 25 Q2 26 Q3 27 Q4 29 Q1 21 Q2 211 Q3 212 Q4 214 Q1 Source: Board of Governors of the Federal Reserve System (Shading represents NBER Recessions)

12 Standards have Loosened since 211 on Non-Mortgage Products 5 5 Other CC Auto Q3 211 Q4 212 Q1 212 Q2 212 Q3 212 Q4 213 Q1 213 Q2 213 Q3 213 Q4 214 Q1 214 Q2 Source: FRS Senior Loan Officer Opinion Survey (Shading represents NBER Recessions) 12

13 Banks and Lenders Imposed Tighter Mortgage Lending Standards (Shown through 213 Q4) Res Mortgages: Net Share, Banks Tightening Q127 Q328 Q128 Q329 Q129 Q321 Q121 Q3211 Q1211 Q3212 Q1212 Q3213 Q1213 Q3214 Q1 Source: FRS Senior Loan Officer Opinion Survey (Shading represents NBER Recessions) 13

14 Total Debt Balance and its Composition Trillions of Dollars Trillions of Dollars 15 Mortgage HE Revolving Auto Loan Credit Card Student Loan Other 213Q4 Total: $11.52 Trillion Q3 Total: $11.28 Trillion (3%) (9%) (6%) (7%) (5%) (7%) Source: FRBNY Consumer Credit Panel/Equifax 14

15 Real Household Liabilities Per Capita age 7 Thousands $(USD) Level (RH Scale) Growth (%yr/yr) (LH Scale) Q Q Q Q Q Q Q Q3 2 Q1 25 Q3 211 Q1 216 Q3 Source: Flow of Funds, BEA, Census Bureau (Shading represents NBER Recessions) Note: 213Q4 value is an estimate based on FRBNY CCP 15

16 Proportion of Borrowers with Home-secured Debt at Age Student Loan Debt 32 3 No Student Loan Debt Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax. (Shading represents NBER Recessions) 16

17 REFERENCE 17

18 Even More Dramatic in Some Cities Las Vegas Miami 18

19 Result was a Huge Decline in Owners Equity in HH RE Billions $(USD) 2, 1 18, 9 16, 14, Owners Equity as % of HH RE (RH Scale) , 6 1, 5 8, 4 6, 3 4, 2 2, Owners Equity in HH RE (LH Scale) Q Q Q Q Q Q Q Q Q Q1 22 Q1 27 Q1 212 Q1 Source: Flow of Funds/Haver Analytics (Shading represents NBER Recessions) 19

20 Changes in the distribution of borrowing by type of loan 2

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