Reaching The U.S. Employment Increase 'Tipping Point'

REACHING THE U.S.
EMPLOYMENT INCREASE TIPPING POINT

THE POSITIVE EFFECTS ON THE DRAMATIC IMPROVEMENT IN STATE MORTGAGE MARKETS DURING THE FIRST QUARTER OF 2012, AND ON THE PROSPECTS FOR SINGLE-FAMILY HOUSING CONSTRUCTION, 2012 TO 2015
EXECUTIVE SUMMARY
Doug Smyth and Associates

June, 2012
EXECUTIVE SUMMARY TABLE OF CONTENTS

PART ONE
THE EFFECT OF MAJOR MANUFACTURING-RELATED INDUSTRIES ON THE SURGE IN TOTAL NONFARM EMPLOYMENT IN THE UNITED STATES, JANUARY, 2010 TO MAY, 2012
The effect of major manufacturing-related industries on the surge in total nonfarm employment in the United States, February, 2010 to May, 2012 The acceleration of total nonfarm month-to-month employment growth, February to November, 2010 and 2011 February to November, 2011 The accelerating rate of year-over-year increases in total nonfarm employment in the United States, 2010 to 2012 The manufacturing-led increase in total payroll employment in the United States, December, 2009 to December, 2011 The recovery of the 2008-2009 job losses during 2010, 2011 and 2012 Future employment in 2010-2015: productivity losses versus onshoring increases The sustainability of improvements in durable goods manufacturing employment 2 2 3 4 5 1 1 2
Part One: Appendix A

The impact of the recovery of the U.S. auto and light truck manufacturing industry on durable goods manufacturing employment and on economic growth, 2010 - 2012 The multiplier effect of improved motor vehicle industry employment on the durable goods manufacturing industry and on the broader economy The demise and recovery of the housing-related industry sectors 6 7 6
PART TWO
THE EFFECT OF RISING EMPLOYMENT LEVELS IN THE UNITED STATES ON THE RECENT MORTGAGE MARKET CRISIS AND SINGLE-FAMILY HOUSING CONSTRUCTION, 2010 TO 2013
The effect of rising employment levels in the United States on the recent mortgage market crisis and single-family housing construction, 2010 to 2013 The impact of the rapid recovery of the national job market on recession job losses, January, 2010 to May, 2012 The effect of individual state employment trends on the mortgage market crisis 8 8 9
Key mortgage market indicators The impact of declining mortgage originations on mortgage delinquency statistics The effect of employment increases in the major job-creating states on the surge in total U.S. nonfarm jobs, December, 2009 to December, 2012 Employment shares of the top 20 states Positive effect on the mortgage market Key mortgage indicators: 90-day plus delinquent loans The effect of rising employment levels in the United States on the single-family home mortgage market crisis, 2010 to 2013 The role of employment income factors in repairing the mortgage-financing system The underwater mortgage myth The lending standards factor in declining mortgage delinquencies Winding down the foreclosure inventory The effect of the decline in purchase mortgage originations on key mortgage market indicators in the United States, 2005 to 2011 The impact of declining mortgage originations on mortgage delinquency statistics: absolute number changes versus percentage rates Epilogue: Reaching the employment increase tipping point: the dramatic improvement in the key mortgage market indicators during the first quarter of 2012 The recovery in the nationwide mortgage market, first quarter, 2012 Shutting down the mortgage foreclosure process: eliminating the 90-day plus mortgage pool The State-by-State Progress Report What ever happened to subprime mortgages? The effect of subprime mortgage foreclosures on Hispanic homeowners in the United States, January 1, 2007 to January 1, 2010 The banks subprime mortgage fraud The impact of the recovery of the subprime mortgage market on the overall mortgage market indicators, first quarter, 2010 to first quarter, 2012 The recovery of the subprime mortgage market, first quarter, 2010 to first quarter, 2012 The subprime mortgage driver of the improving overall mortgage market, first quarter, 2010 to first quarter, 2012 The positive impact of the improving mortgage market on U.S. house prices and home sales
10 10 11 11 11 11 12 12 12 13 13 14 15 15 16 16 17 18 18 19 20 20 21 21
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PART THREE
THE EFFECT OF THE SURGE IN THE UNAUTHORIZED HISPANIC IMMIGRANT POPULATION OF THE UNITED STATES ON THE SINGLEFAMILY HOUSING BOOM, 2002-2006, AND THE POSITIVE IMPLICATIONS FOR 2012-2015
Introduction The impact of the massive inflow of Mexican and Hispanic immigrants on the U.S. labor market What do we mean by employment? The effect of unauthorized immigration on the labor force and the unemployment rate Unlocking the starter-home bottleneck in 2012-2015: the role of unauthorized Hispanic first-time home buyers in 2002-2006 The contribution of Mexican immigrants to the population explosion in the United States, 1991-2011 Gross annual arrivals of Mexican and Hispanic immigrants into the United States, 1991-2011 The effect of emigration back to Mexico on the net immigration of Mexicans into the United States, 1995-2010 The effect of Hispanic immigrants on employment and incomes in the United States, 2000-2010 The first-time home buyer surge in the United States, 1995-2006 The effect of the demographic profile of Mexican immigrants during 2011 on the future market for starter homes, 2012-2015 The Hispanic first-time home buyer contribution to the single-family house construction boom, 2003 -2006 The young Hispanic age factor The impact of the arrivals of Hispanic immigrants on single-family housing starts and the purchase of starter homes in the United States, 2000-2006 The effect of the plunge in unauthorized immigrants from Mexico on the immigrant population in the United States, 2007-2011 The impact of improving employment prospects for Hispanic families on the starter-home market for single-family houses in the United States Improving employment prospects for Hispanic workers, 2010-2013 32 33 32 31 28 29 29 30 30 27 27 28 26 25 25 25 24
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Long-term trends The impact of pent-up demographic demand on single-family housing construction in the United States, 2003-2012 The 2002-2006 single-family housing boom The real demographic demand factor for single-family housing to mid-2005 The effect of financial market fraud on the collapse of the single-family housing market, 2008-2011 The strong Hispanic contribution to the growth in total U.S. employment and incomes, 2000-2011 Improving Hispanic employment prospects in early 2012 The effect of declining future immigration inflows on total U.S. employment, 2012-2015 Finding jobs for unemployed Hispanics already in the country, 2012 - 2015 Total nonfarm employment, 2012-2015 Summarizing the Hispanic demographic potential for purchasing single-family starter homes, 2012-2015 The confidence factor The banks unrealistically high mortgage underwriting standards The rising employment solution to the mortgage banking confidence problem The effect of homebuilder confidence on single-family housing starts, 2012 The durable goods manufacturing industry driver of the U.S. economy The impact of the decline in unauthorized immigration inflows on the pent-up demand for single-family housing, 2012 - 2015 The return of single-family housing construction to real demographic demand levels, 2012 - 2015 Epilogue: the effect of a revival of single-family housing starts on the softwood lumber and other wood-products industries
34 34 34 35 35 36 37 37 38 39
40 41 41 42 42 43 44
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EXECUTIVE SUMMARY
PART ONE
THE EFFECT OF MAJOR MANUFACTURING-RELATED INDUSTRIES ON THE SURGE IN TOTAL NONFARM EMPLOYMENT IN THE UNITED STATES, JANUARY, 2010 TO MAY, 2012
In January, 2010 total nonfarm payroll employment in the United States plunged to 127.3 million jobsthe lowest level in the decade. That drop resulted from the severe recession, which began in January, 2008 and continued until its official end in June of 2009. However, the nations jobs total continued to decline until the first month of 2010.
The acceleration of total nonfarm month-to-month employment growth, February to November, 2010 and 2011
In February, 2010 the job market began its long road to recovery. February is traditionally the month when the economy begins to recover from the seasonal decline in the number of non-seasonally adjusted jobs between November of the preceding year and January of the current year. Therefore, in order to correctly gauge the effect of the economic recovery on total nonfarm employment it is necessary to begin the month-to-month comparisons in February and measure the total changes through November of the current year, just before the traditional Winter downturn begins again.
February to November, 2011

The industry pattern of increases in total nonfarm jobs between February and November, 2011 was similar to what had taken place during the same period the year before. However, during 2011 the pace of the overall improvement greatly accelerated over the sharp rate of increase during 2010. During the 2011 February-to-November period, the nations jobs total soared by a whopping 4.0 million, 250 thousand greater than the strong 3.8 million surge
during the same period in 2010. The discussion on page three explains why the 2011 rise is understated, just as the 2010 increase was. Between February and November, 2011 total manufacturing maintained its strong pace of job creation, with a 577 thousand combined jump in permanent and temporary help service jobs. Altogether, during the February-to-November period in 2011 total manufacturingrelated industries boosted employment by 1.69 million jobsjust -25 thousand fewer than the 1.71 million surge during the same period the year before. The group includes retail and wholesale trade, and transportation and warehousing.
THE ACCELERATING RATE OF YEAR-OVER-YEAR INCREASES IN TOTAL NONFARM EMPLOYMENT IN THE UNITED STATES, 2010 TO 2012
The previous section of this summary examined the rapidly accelerating rate of month-tomonth increases in total nonfarm employment in the United States between February and November, 2010, and during the same period of 2011. It was important to compare those two periods in order to appreciate the fast rate of recovery in nationwide jobs as each month passed. However, in order to understand the true long-term gains in employment it is necessary to examine the year-over-year increases between the same months in succeeding years. The year-to-year drops between 2008 and 2009 were so severe that it would take many months before the economy could recover those losses. However, by December, 2010 the year-over-year gap had surged to 1.0 million, thanks to the 3.8 million month-to-month jump in the number of jobs created between February and November of that year. Between 2010 and 2011 the year-over-year increases in total nonfarm employment between 2010 and 2011 soared upward at a rapidly accelerating rate. During the first 5 months of 2012 the year-over-year increases averaged a whopping 2.0 million over the same 2011 months. That jump exceeded the average year-toyear increases for the last four months of 2011 by a strong 258 thousand, or 15 percent! Even more importantly, during the first five months of 2012 the two-year samemonth increases over the 2010 levels surged by an average of 3.3 million jobs. That rapidly accelerating rate of rise late in 2011 and in early 2012 shows that the broader economy is expanding at a healthy pace, led by durable goods manufacturing employment and a steady resurgence of consumer spending. In the fourth quarter of 2011 the durable goods component of the personal consumption expenditures sector of the economy surged by 15.3 percent. That jump signifies a rapid rise in the rate of consumer spending. The surge in the number of purchases of high-cost durable goods was fueled by the sharp rise in household incomes earned by newly-employed individuals.
The manufacturing-led increase in total payroll employment in the United States, December, 2009 to December 2011
Between December, 2009 and December, 2011, total nonfarm payroll employment in the U.S. soared by a whopping 2.8 million jobs. That two-year period included the low for the decade of 127.3 million in January of 2010the first monthand in December, 2011 the second-highest number since December, 2008. That was a dramatic recovery in just 23 months time! Total manufacturing alone accounted for 807 thousand of the 2.8 million nationwide total rise, or 29 percent. The lions share (94 percent) of the credit goes to the durable goods sector, with a 756 thousand jump over the two-year period. Altogether, employment in the 3 major manufacturing-related industriesincluding retail and wholesale trade, and transportation and warehousingsoared by 1.5 millionwell over half of the 2.8 million net increase in total nonfarm jobs. It must be noted that the 2.8 million increase in total nonfarm jobs is conservative because of the under-reporting problem with the BLS employment survey in a rapidly-rising job market. The full study explains the reasons for that phenomenon. In January, 2012, the BLS benchmarked its employment survey numbers to the July, 2011 census figures from the state unemployment insurance systems. The revised national numbers for 2010 showed that several key industry sectors enjoyed significant upward revisions, which came to a combined increase of 135 thousand for the period between December, 2009 and December, 2010. The same pattern is expected for 2011 when its numbers for the last 9 months are benchmarked in early 2013. The upward revision for just the first six months of 2011 is already at 96 thousand, for a whopping 15-month total revision of 231 thousand, or 15 thousand a month on average. As a result, the full two-year rise in total nonfarm jobs between December, 2009 and December, 2011 is predicted to be 2.9 million, 100 thousand greater than the 2.8 million originally reported.
THE RECOVERY OF THE 2008-2009 JOB LOSSES DURING 2010, 2011 AND 2012
The total reported loss in national nonfarm employment during the recession is -8.5 million jobs. It is the calculated change between the January, 2008 non-seasonally adjusted number of 135.8 million and the January, 2010 low for the decade of 127.3 million. Over the two-year period beginning in January, 2010, total employment surged following the pattern predicted in our detailed standalone studies of the motor vehicle and parts and total durable goods manufacturing industries which were published in April, 2011. As a result, between December, 2009 and December, 2011 the nations jobs total surged by
2.8 million: by 1.0 million in the first year, and by 1.8 million in the second. In turn, the number of jobs recovered from the -8.5 million recession loss jumped to 6.0 million in November, 2011or 70 percent of the original total that had been lost. However, between November, 2011 and May, 2012 total nonfarm jobs surged by an additional 595 thousand. As a result, the total increase from the January, 2010 decade-low to this May was a whopping 6.6 million. Because of that 6.6 million surge, a full 77 percent of the -8.5 million jobs lost during the recession had been recovered approaching four-fifths! However, by early 2010 a substantial 630 thousand Mexicans who had been employed members of the U.S. workforce in 2005 had returned to their home country. Since those 630 Mexicans have left the U.S. permanently, their former jobs can no longer be counted as part of the original -8.5 million job losses between January, 2008 and January, 2010. The two-year loss figure then shrinks to -7.9 million. As a result, the real recovery share comes to a whopping 6.6 million, or 83 percent well over four-fifths.
FUTURE EMPLOYMENT IN 2012-2015: PRODUCTIVITY LOSSES VERSUS ONSHORING INCREASES

It is clear from the preceding discussion that, since the decade-low in total nonfarm employment was reached in January, 2010, the total numbers of jobs in the U.S. has soared at a rapidly-accelerating rate on both a month-to-month and a year-over-year basis. However, it is important to understand that, of the -1.3 million positions yet to be restored as of May, 2012 in order to recover the full -7.9 million jobs lost during the recession, many would have been lost anyway to ongoing improvements in productivity, or output per hour worked. Fortunately, over the past two years a strong countervailing trend has been building up steam. Known popularly as onshoring, it simply means that companies who once sourced from or located new manufacturing plants overseas in order to take advantage of much cheaper hourly labor costs have now been bringing back many of those factories to the United States. As a result, what used to be a strong trend toward offshoring has begun to be converted to onshoring. The reason for this new trend is simple. U.S. companies have discovered that, although hourly wage rates in Asia are much lower than in the U.S., substantially higher output per hour worked in North America has dramatically reduced the gaps in unit labor coststhe hourly compensation rate divided by the number of units of output produced by an hours work. When the much closer proximity to the U.S. companies customer base and savings on delivery time and transportation costs
are factored in, the typical North American factory base has become much more competitive over the past few years. Moreover, recent pattern-setting collective agreements in major U.S. durable goods manufacturing industries such as motor vehicles and parts, airplanes, rubber tires and steel have all resulted in enormous savings in unit labor and total production costs. Those labor contracts not only dramatically reduced hourly compensation costs for new employees, they also provided for the implementation of new work rules in order to overcome obstacles that had hindered improvements in efficiency and productivity. All of those cost-saving moves were instrumental in saving the Detroit Three auto and light truck manufacturing industries from bankruptcy in 2010. They also have made the U.S. auto company manufacturers so competitive that they have rapidly been taking away market share from offshore imports and vehicles manufactured on U.S. soil by foreign companies. At the same time, between 2010 and 2011 total U.S. production of cars and light trucks surged by 869 thousand, or 11.2 percent. And during the first 4 months year-to-date of 2012 output surged by 218 thousand over the same-period 2011 total, or 33 percent! All of those developments have already permitted U.S. durable goods manufacturers to greatly expand their employment rolls. Auto companies have not only opened new plants in the U.S., but they have also moved production of some key components back from their offshore locations. The employment gains which will continue to accrue from onshoring will go a long way toward offsetting the job losses to productivity increases in durable goods manufacturing during 2012, and for several years to come. When the large numbers of temporary help service employees are added in, the improvement in total durable goods manufacturing employment is much better than the slower track record of permanent workers has implied in the popular press.
The sustainability of improvements in durable goods manufacturing employment

Our detailed examination of the future prospects of several durable goods manufacturing industries shows that it is highly likely that the strong pace of job growth set in 2010 and 2011 will be sustained for some time to come. To put it simply, the typical U.S. durable goods manufacturer is now in a much more competitive position in world markets. As a result, the prospects for continued strong growth in the job markets over the next few years are very good. Time and space do not permit a detailed discussion of the progress being made by the individual durable goods manufacturing industries in this summary. Readers who are interested in that information should consult the full study.
PART ONE: APPENDIX A
THE IMPACT OF THE RECOVERY OF THE U.S. AUTO AND LIGHT TRUCK MANUFACTURING INDUSTRY ON DURABLE GOODS MANUFACTURING EMPLOYMENT AND ON ECONOMIC GROWTH, 2010 - 2012
Our detailed April, 2011 study (41 pages) with a similar title documented the beginnings of the dramatic recovery of the U.S. motor vehicle and parts industry, following a brush with near-bankruptcy in the Summer of 2009. That report correctly predicted the 1.2 million surge in total U.S. vehicle sales between December, 2010 and December, 2011 to 12.8 milliona 10.3 percent increase. Total U.S. production, which determines changes in industry employment, jumped by 869 thousand, or an even greater 11.2 percent rise, to 8.6 million cars and light trucks. As a result, our prediction that by the end of 2011, total employment in the motor vehicle and parts industry will have risen by at least 200 thousand from the December, 2009 level was accurate.
THE MULTIPLIER EFFECT OF IMPROVED MOTOR VEHICLE INDUSTRY EMPLOYMENT ON THE DURABLE GOODS MANUFACTURING INDUSTRY AND ON THE BROADER ECONOMY
The motor vehicle and parts industry has already had a large multiplier effect on the broader U.S. economy, and particularly on the local and regional economies of the midwest and the south. The roughly 200 thousand additional incomes that were created by the industry between December, 2009 and December, 2011 have strongly bolstered the demand for other consumer goods and services. Moreover, the demand for various manufactured inputs into the motor vehicle and parts industry has been sharply boosting employment in several other durable goods industries. General Motors has calculated that, during each of the last 5 months of 2011, at least 100 thousand auto-related jobs were createdfor a total increase of 500 thousand from August through December, 2011. That is the longest stretch of consecutive month-to-month increases since 2006, when the economy was booming. This means that the motor vehicle and parts industry had an enormous multiplier effect on its major supplying industries in both durable and nondurable goods
manufacturing. And when those employees spent their paychecks, that boosted the number of jobs in the broader service-providing sector as well.
The demise and recovery of the housing-related industry sectors

It is easy to see which are the worst losers among the ten durable goods industries. The reason for that miserable showing, of course, is the long-term plunge in residential construction since early 2007. It is obvious that the wipeout in construction employment had a disastrous negative multiplier effect on jobs in its three major allied industrieswood products (lumber), furniture and the non-metallic mineral products industries. Altogether, those three housing-related industries lost -43 thousand jobs between December, 2009 and December, 2011. That decrease stood in stark contrast to the 800 thousand combined surge in total employment in the seven non-housing-related durable goods sectors. That increase accounted for a whopping 29 percent of the 2.8 million jump in reported total nonfarm jobs during that period. It is five times the durable goods sectors small 6 percent share of the absolute total number of nonfarm jobs in the U.S. When the residential construction industry revives, those three housing-related sectors will join the other 7 durable goods industries that have been enjoying solid employment increases over the past two years. The acid test of whether or not the U.S. durable goods manufacturing industry has become cost-competitive with its foreign rivals is the positive effect on that sectors employment numbers. If that were not true the rapid expansion of employment opportunities and the onshoring phenomenon would not be taking place.
PART TWO
THE EFFECT OF RISING EMPLOYMENT LEVELS IN THE UNITED STATES ON THE RECENT MORTGAGE MARKET CRISIS AND SINGLE-FAMILY HOUSING CONSTRUCTION, 2010 TO 2013
Between early 2008 and late 2009 the United States suffered a steep downturn in new singlefamily home construction and existing-home sales. That development was caused by a severe crisis in the market that supplies mortgage financing for home purchases. Millions of homeowners began to experience a serious loss of equity in their properties, as -8.5 million job losses from January, 2008 through January, 2010 led to major reductions in household incomes. As a result, plunging home sales caused house prices to drop to the point where it became impossible to sell without suffering an enormous loss of equity. And given that millions of home mortgages that had been originated during the boom period from 2003 through 2007 were seriously flawed by low and fraudulent underwriting standards, many households were forced into mortgage foreclosures by their banks. As a result, the absolute numbers of foreclosures and foreclosure rates in several large states soared dramatically.
The impact of the rapid recovery of the national job market on recession job losses, January, 2010 to May, 2012
After total nonfarm employment in the U.S. had plunged by -8.5 million jobs between January, 2008 and January, 2010, the total number of jobs surged by a whopping 2.8 million positions between December, 2009 and December, 2011. However, between November, 2011 and May, 2012 total nonfarm jobs jumped by an additional 595 thousand. As a result, the total increase from the January, 2010 decade-low to this May was a whopping 6.6 million. Because of that sharp 6.6. million increase in employment, as well as the permanent return of 630 thousand Mexican job-holders to their home country, the real recovery share of the net -7.9 million hobs that had been lost during the recession now comes to a whopping 83 percentwell over four-fifths. Given that encouraging trend it is now time to take stock to determine what the positive impact has been on the mortgage market for residential housing.
The effect of individual state employment trends on the mortgage market crisis
There is an old saying that all real estate is local. Given the truth of that axiom, it is extremely important to understand that all real estate statistics are also local. This is one U.S. statistical series for which national average data are much less meaningful than individual state numbers. The reason is that the factors that control the local mortgage market vary widely from state to state. The first of those is the legal framework that each state provides to control the foreclosure process. Twenty-one states use a judicial system for processing foreclosures, which is much slower than the non-judicial systems employed by the other 29 states. Because of the technical complexity of court proceedings, substantial delays are common. But during late 2011 the 29 states with non-judicial foreclosure systems were successfully clearing their foreclosure inventory backlogs so rapidly that the groups average percentage rate of total foreclosures to total mortgage loans outstanding fell to just 2.8 percent in the fourth quarter of 2011only three-fifths of the 4.38 percent national average. However, the percentage of loans in foreclosure in the judicial system states hit an all-time high of 6.8 percenta whopping two and a half times higher than the rate for non-judicial states. Most importantly, the employment recovery trends that have resulted from the rapidly-rising durable goods production factors have been crucial to the recent substantial improvements in the mortgage markets in each major state. The evidence clearly shows that, between January, 2008 and early 2010, the serious income losses which resulted from severed employment were the direct cause of rising mortgage delinquencies, bank foreclosure actions and evictions of owners from their homes, and a vicious cycle of plunging house prices from closeby neighborhoods to cities and regions. Of the three facets of U.S. demographics that create healthy mortgage markets and determine single-family housing startsincreases in population, household formations and employmentthe number of jobs that people hold is by far the most important. As the employment tide rises, all the other boats rise with it. Mortgage foreclosures disappear, household formations increase, and consumers begin to spend freely. This is exactly what is happening in the U.S. economy now. Fortunately, this summary will show that the lions share of the large states that had also experienced the greatest surges in the absolute numbers of foreclosures between early 2008 through late 2011 now lead the nation in terms of the absolute numbers of jobs being created and the biggest improvements in key mortgage market indicators.
Key mortgage market indicators

In order to analyze the health of the mortgage market in each state, it is first necessary to provide a brief description of the stages that a mortgage must go through in order to proceed from being in a current payment status to being in the foreclosure process. When a homeowner fails to make his monthly mortgage payments on time, there are three delinquency categories. A thirty-day delinquency is for a mortgage for which a payment was scheduled for March 1st, for instance, but has not been paid by March 31st. A sixty-day delinquency applies to a mortgage for which the regular March 1st payment still has not been paid by April 30th. When measuring the impact of the increases in the national employment totals on the housing market, it is the absolute number of foreclosures that counts, not the percentage foreclosure rate. The impact of declining mortgage originations on mortgage delinquency statistics The discussion in this first section of this summary will show that the state of the mortgage market had already improved dramatically between the beginning of 2010 and the end of 2011 prior to the spectacular boost during the first quarter of 2012. The improvements in the absolute numbers of the key delinquency and foreclosure indicators have been quite substantial. However, the gains in the percentage rates for all of those barometers at the 2011 yearend and during the first quarter of 2012 have been grossly understated. The reason is that each quarterly rate is calculated by dividing the absolute number of problem loans in that category by the total number of existing first-lien mortgages in the national or state inventory. Naturally, as the denominator continues to shrink substantially as purchase mortgage originations decline, the calculated percentage rate will increase, even if the absolute number of problem loans in the category remains the same! The improvements in the various delinquency rates for each category shown in the appendix tables for the individual states result from the interplay between large decreases in the denominator due to falling mortgage originations and the rapidly declining absolute number of delinquent loans in the numerator. To put it simply the problem since 2007 is that the denominator has been shrinking much faster than the numerator!
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THE EFFECT OF EMPLOYMENT INCREASES IN THE MAJOR JOB-CREATING STATES ON THE SURGE IN TOTAL U.S. NONFARM JOBS, DECEMBER, 2009 TO DECEMBER, 2011
Employment shares of the top 20 states

Between December, 2009 and December, 2011, total nonfarm employment in the U.S. surged by 2.8 million jobs. The top-18 job-creating states accounted for 1.9 million of that jumpwell over two-thirds. It is remarkable that less than one-fifth of the 50 states accounted for over two-thirds of the 2.8 million total jobs created in the U.S. between December, 2009 and December, 2011.
Positive effect on the mortgage market

As a result, the substantial improvements in the mortgage market indicators in those states went a long way toward bringing about positive gains in the total U.S. barometer numbers. Given the overwhelming shares of the total employment and population bases accounted for by the top 20 job-creating states, any improvements in their key mortgage market indicators will have a substantial impact on the national averages for those same indicators.
Key mortgage indicators: 90-day plus delinquent loans

By far the most important indicator of housing market financial health is mortgages that are 90 days or more delinquent. The reason is that they are in the last stage of delinquency before a foreclosure start is initiated to place those mortgages into the formal foreclosure process. As a result, this category provides the pool from which problem loans will move into the foreclosure inventory. Between the first quarter of 2010 and the fourth quarter of 2011 the number of 90-day plus delinquent loans in the U.S. plunged by -933 thousandalmost a million in just under two years! While some of that drop went into the foreclosure process, much of it is explained by mortgage modifications and pre-foreclosure sales. A pre-foreclosure sale is a sale that occurs while the property is actively in default or is scheduled for a foreclosure auction. The top 20 job-creating states contributed a -747 thousand reduction in the 90day plus category, a full four-fifths of the total U.S. drop. Given the large -933 thousand decrease in the 90-day plus category since the first quarter of 2010, the number of prospective entrants into the foreclosure inventory has been dramatically reduced. Since this category provides the pool from which delinquent problem loans move into the foreclosure inventory, such a large reduction means that other avenues are successfully being pursued. As a result, residential properties with problem loans
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are being removed from the market, where they have had the effect of dragging down prices and making it difficult for existing homeowners to recover their equity and move up the tradeup chain. It also means that fewer mortgages remain at risk for being underwater because homeowners have been able to do a preforeclosure or short sale. The term underwater means that the value of the house has fallen below the amount of mortgage principal balance that remains to be paid.
THE EFFECT OF RISING EMPLOYMENT LEVELS IN THE UNITED STATES ON THE SINGLE-FAMILY HOME MORTGAGE MARKET CRISIS, 2010 TO 2013
After laying the groundwork in the preceding discussion, it is now time to examine the impact of the sharp increase in employment levels over the past two years on the most important key mortgage delinquency indicator, the 90-day plus category. As total payroll employment in the U.S. surged by an enormous 2.8 million jobs between December, 2009 and December, 2011, the top 20 job-creating states accounted for an overwhelming four-fifths of the -933 thousand total plunge in 90-day plus loans nationwide. All-in-all, there was a strong general correlation between the dramatic increases in total employment in the top 20 job-creating states and the size of the decreases in 90-day plus loans.
The role of employment income factors in repairing the mortgage-financing system

While many other factors also played a significant role in bringing about improvements in each states key mortgage market indicators, the improvement in the employment situation was by far the single most important factor. Without the extremely healthy increases in jobs, the increased incomes required to repair the severe damage to the mortgage-financing system would not have been available.
The underwater mortgage myth

Over the past few years there has been rapidly-growing attention to the concept of an alleged underwater mortgage problem. That term describes a situation that arose from the substantial drops in existing-home prices since 2007. As a result, many homeowners found that the current value of their property was lower than the amount of the principal balance remaining to be paid on their mortgage. That situation left the homeowner with too little equity to qualify for a refinancing loan from his bank, and the inability to sell his property without losing a substantial portion of that equity. However, the underlying flaw in the underwater mortgage theory is that it is a static concept that relies on a still snapshot in time. It just assumes that all other factors will remain constant!
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The most significant assumption is that the employment level will never increase. The 2.8 million surge in total nonfarm employment over the past two years and the 2.0 million year-over-year average increases during the first five months of 2012 should soon dispel that notion! As this study has stated several times, as employment increases all boats rise with it. The most significant of those are the declining mortgage foreclosures, which for a while during the recession ran out of control. Like foreclosures, the so-called underwater mortgages will also soon disappear.
The lending standards factor in declining mortgage delinquencies

Fortunately, thanks to a natural trend factor, the numbers of mortgage delinquencies in most states had already begun to decline gradually by early 2010. Since late 2008 lenders have sharply tightened their mortgage underwriting standards. As a result, the quality of loans now being purchased or guaranteed by Fannie Mae and Freddie Macthe federal governments two secondary mortgage market giant agenciesis as high as the loans they acquired during the pre-housing boom years of the early 2000s. What it boils down to is that the risky loans from the bubble years have been replaced on the books by much-less-risky underwritten loans. However, the risk factor for the older existing loans has been greatly reduced by the enormous employment gains in the U.S. economy over the past two years. The safest way of assuring that homeowners will continue to make their monthly payments is to provide full employment incomes on a regular basis.
Winding down the foreclosure inventory

A real estate-owned residential property sale (REO) is one that occurs while the home is actively owned by a bank. A foreclosure-related sale is one that occurs while the property is actively in one of the three foreclosure stages. A pre-foreclosure sale is one that takes place at one of the first two stagesnotification or foreclosure auction. A short sale is a special type of pre-foreclosure sale. It means that the bank holding the loan has given permission for the owner to sell his home at a price that will not cover the unpaid mortgage principal balance. Over the past year a positive shift has been taking place away from bank-owned sales to pre-foreclosure or short sales. This is a preferred trend for both the homeowner or mortgage borrower, and the bank for several reasons. Given the heavy cost burden associated with foreclosures, most banks have come to recognize that short sales are a better option for many of their non-performing loans. Between the third quarter, 2008 peak and the third quarter, 2011 low for the past four years the inventory of bank-owned foreclosure mortgages dropped by a healthy -190 thousand to 460 thousand, or -29 percent. That decrease represents a substantial
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improvement in the so-called shadow inventory that some analysts fear may hit the market, causing housing prices to fall again.
THE EFFECT OF THE DECLINE IN PURCHASE MORTGAGE ORIGINATIONS ON KEY MORTGAGE MARKET INDICATORS IN THE UNITED STATES, 2005 TO 2011
A mortgage origination is the entire process involved in the making of a new mortgage. All of the mortgage originations discussed in this study are only for the purchase of a home, and exclude loans that are for the purpose of refinancing an existing loan. Between the end of calendar-year 2005 and the end of 2011 the number of purchase originations plummeted by -5.1 million. Given the dramatic change in economic conditions over the six-year period ending in December, 2011, that result was expected. With the owner-occupied share of the rise in total occupied units falling precipitously and the number of owner-occupied homes with a mortgage plunging twice as fast, the primary explanation for this trend is the dramatic cutback in the number of purchase mortgage originations. In 2005 the purchase-mortgage share of total new and existing home sales was an overwhelming 97 percent. By 2011 that share had plunged by one-third to just 63 percent. Most of that decrease is explained by the heavy intrusion into the housing market of investors, who were able to scoop up the lions share of the bank-foreclosed properties for sale by making all-cash offers for them at low prices. Since the banks almost always prefer cash for those sales, it has been extremely difficult for ordinary households to compete when a mortgage is required. The second reason that ordinary households have not been able to compete for the available home sales is that they have been unable to qualify for mortgage loans because the banks have sharply boosted their credit standards since 2009. The investors game plan for their newly-acquired properties is to pay for their purchases by renting out the homes for a few years, and then selling them later on for high prices when pentup demand permits a more profitable sale. Unfortunately, until the Spring of 2012 this situation had been hurting the market by keeping home prices low. As a result, existing homeowners have not been able to recover enough equity from the sales of their properties in order to be able to afford to move up the tradeup chain to better-quality, higher-priced homes. This situation has caused the number of purchase mortgage originations to plunge from what would be considered to be normal levels for the current combined total numbers of existing and new-home sales. The enormous -2.9 million drop between 2007 and 2011 could not have taken place without the presence of well-financed private investors who have not needed the assistance of a mortgage to make their purchases.
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In time the high one-third investor share of existing-home purchases in January, 2012 will drop back to normal, as pent-up demand for housing picks up and the current foreclosure inventory is cleared off. As a result, the numbers of purchase mortgage originations will return to the early 2000s levels, when they accounted for a full four-fifths of the total number of originations, which includes refinancings.
The impact of declining mortgage originations on mortgage delinquency statistics: absolute number changes versus percentage rates
Between the end of 2009 and the end of 2011, the number of purchase mortgage originations plunged by -927 thousand over a two-year period. That was far greater than the tiny decreases in new and existing home sales. The reason for this development has been the extremely large share accounted for by investor all-cash purchases of existing homes. However, this is a temporary historical quirk, which will soon disappear as the market picks up. To put it bluntly, the various delinquency rates have not fallen as fast as the absolute numbers because of a historical accident that has temporarily caused the total mortgage inventory to shrink at a much more rapid pace than would be expected based on the number of existing-home sales. The accident was the rush of large numbers of private investors into the market with all-cash purchases of bank-foreclosed properties. As a result, the improvement in the mortgage market since the beginning of 2010 has been grossly understated by focusing on percentage rates rather than the much larger increases in the absolute numbers.
PART TWO: EPILOGUE REACHING THE EMPLOYMENT INCREASE TIPPING POINT: THE DRAMATIC IMPROVEMENT IN THE KEY MORTGAGE MARKET INDICATORS DURING THE FIRST QUARTER OF 2012
After total nonfarm employment in the U.S. had plunged by -8.5 million jobs between January, 2008 and January, 2010, the total number of jobs surged by a whopping 2.8 million positions between December, 2009 and December, 2011. However, between November, 2011 and May, 2012 total nonfarm jobs soared by an additional 595 thousand. As a result, the total increase from the January, 2010 decade-low to this May was a whopping 6.6 million. Because of that sharp 6.6 million increase in employment, as well as the permanent return of 630 thousand Mexican former jobholders to their home country, the real recovery share of the net -7.9 million jobs that had been lost during the recession comes to a whopping 83 percentwell over four-fifths.
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Fortunately, the enormous increase in the numbers of full-year incomes associated with the dramatic 6.6 million improvement in the employment numbers has been instrumental in restoring the home mortgage markets to health in most key states.
The recovery in the nationwide mortgage market, first quarter, 2012

Between the first quarter of 2010when the employment and incomes numbers began to surgeand the first quarter of 2012, the absolute numbers for each key delinquency category of the 48.7 million total first-lien mortgages in the United States improved dramatically. The 2012 numbers directly reflect the sharp 2.8 million jump in total nonfarm jobs over the previous two years, and the 600 thousand rise to May of 2012. The most startling development is the sudden ending of large numbers of new mortgages coming into the foreclosure processing system at the bottom end. Altogether, during the full two-year period between the first quarters of 2010 and 2012 the 30-day and 60-day delinquency categories fell by a combined -434 thousand loans. The fourth-quarter, 2011 to first-quarter, 2012 plunge of -446 thousand accounted for 103 percent of that two-year drop! Obviously, the best way to cure the nations home foreclosure problem is to stop new problem loans from entering the system. The dramatic improvements shown at the bottom end of the process are convincing evidence that the entry gate to the system is now being closed off. That welcome trend clearly indicates that households are generally enjoying a substantial increase in financial health and, in turn, their credit ratings needed to get a mortgage application approved by their banks. It also shows that both prospective homebuyers and the banks are gaining much more confidence in the soundness of the economic recovery and the applicants ability to afford a home purchase.
Shutting down the mortgage foreclosure process: eliminating the 90-day plus mortgage pool
For those homeowners whose mortgages have already passed by the end of the 60-day delinquency period, there is strong encouragement for owners whose mortgages have reached the 90-day plus delinquency category. Between the first quarter of 2010 and the same period in 2012 the number of loans in that category plunged by a whopping -1.1 million. The discussion of the extreme significance of the 90-day plus delinquency category earlier in this report explains that this group of loans constitutes the pool from which delinquent loans finally enter the foreclosure process. Obviously, the best way to stop already-delinquent loans from reaching that point is to reduce the number that are currently available in that pool. Seventy percent of the plunge in the 90-day plus delinquency category can be explained by the sharp rise in the numbers of pre-foreclosure sales discussed in the previous section of this summary.
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THE STATE-BY-STATE PROGRESS REPORT

The first section of this study provides a detailed state-by-state analysis of the key mortgage market indicators for the 20 leading job-creating states up to the end of 2011. This section will provide a brief update for the first quarter of 2012. The analysis of the absolute number changes between the fourth quarter of 2011 and the first quarter of 2012 shows that almost all states have joined in the nationwide trend toward dramatic improvements in all of the key mortgage market indicators. Forty-six out of the 50 states92 percentsaw a decrease in their average 90-day plus delinquency rates. Just four had increases. Forty-one states had decreases in foreclosure startsover four-fifthswhile just 9 states (18 percent) experienced increases. It is clear that for the key mortgage market indicators, which are the signals as to how many loans will actually make it up the pipeline to the foreclosure process, the news is very good. With 82 to 92 percent majorities of states on the positive side, the so-called lions share is heading in the right direction. It is also clear that the few problems that are left are becoming increasingly concentrated in just a few states. The 5 states with the highest shares of total U.S. loans in foreclosure still account for 52 percent of all loans in that category in the nation. However, it must be noted that 4 out of the top-five are judicial process states. The tardiness of the court system, especially in Florida, which suffered from a massive number of bank robo-signing foreclosure-fraud cases, accounts for most of their problem. Overall, progress has been good. Twenty-two states had decreases in their percentages of loans in foreclosure. By and large, the vast majority of states have been working quickly through their backlogs of bad loans. The decreases in the absolute numbers prove that case. There was an enormous drop in the number of first-lien mortgage loans in the 90-day plus delinquent category between the first quarters of 2010 and 2012. That is the singlemost-important indicator of mortgage health because it can be a rough predictor of the size of the pool waiting to enter into the foreclosure process. Readers who wish to see the individual state data should send for the full standalone study, the second in this series. All of these trends indicate that the whopping 6.6 million gain in total U.S. employment between January, 2010 and May, 2012 has had an enormous positive impact on the key mortgage market indicators in the leading job-creating states.
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The increased incomes associated with those additional jobs have had a major impact on the health of the household finances, and on consumer confidence in making a big-ticket purchase of a home.
WHAT EVER HAPPENED TO SUBPRIME MORTGAGES?

Thanks to the enormous financial collapse in the United States during the late 2000s, subprime mortgages became one of the most frequently used terms.Subprime mortgages are those that charged substantially higher interest rates to cover assumed risk factors, such as the borrowers low income-to-debt ratio. The abuses associated with the over-issuance of that type of home loan between early 2005 and late 2007 not only shut down the nations existing and new-home markets between early 2007 and late 2009, but they also came close to destroying the broader financial system. Unfortunately, the fraudulent over-origination of subprime mortgages to Hispanic households removed what had been the key stimulus to the early 2002-mid-2006 housing boom because it was their purchases of single-family starter homes that permitted current existing homeowners to move up the tradeup chain. This last section of the report ends on a very positive news note that, by the first quarter of 2012, the subprime mortgage situation has improved substantially.
The effect of subprime mortgage foreclosures on Hispanic homeowners in the United States, January 1, 2007 to January 1, 2010
Mortgage foreclosures that were completed between January 1, 2007 and January 1, 2010 had a serious negative effect on Hispanic homeowners. Those mortgages had been originated between January 1, 2005 and January 1, 2008. During the first three and one-half years of the housing boom period beginning in early 2002 subprime mortgages had been originated with cautious safeguards. However, as the home construction and sales booms began to overheat during the second half of 2005, the subprime mortgages originated through late 2007 were characterized by rapidly deteriorating underwriting standards and fraudulent practises. As a result, the 2005 to late 2007 subprime loans were of extremely poor quality compared to those that had been issued prior to mid-2005. The passing off of those fraudulent loans to unsuspecting investors in the secondary mortgage market brought about the severe financial collapse which came close to putting the entire U.S. economy into an out-of-control tailspin. Unfortunately, Hispanic and African-American black families were by far the hardest-hit by the defective 2005-2007 subprime loans. Their shares of the completed foreclosures carried out between January 1, 2007 and January 1, 2010 were grossly disproportionate to those demographic groups shares of the originations of those same mortgages. Completed
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foreclosures are those that have resulted in the sale of a foreclosed residential property, either through a bank-owned sale or a private pre-foreclosure sale. The 16.2 percent Hispanic share of total completed foreclosures in the U.S. exceeded the groups 11.2 percent share of total mortgage originations by 5.0 percent (basis points). Although the three major American minority groups only accounted for a 23 percent combined share of total U.S. originations between early 2005 and late 2007, their share of completed foreclosures during the early 2007 to late 2009 period was close to one-third8.2 percent greater. On the other hand, while non-Hispanic whites accounted for two-thirds of the total U.S. originations during the first three-year period, their share of the losses was 10 percent less (basis points) at 56 percent. An enormous 7.7 percent of the Hispanic mortgage borrowers during the early 2005 to late 2007 period lost their homes to foreclosure71 percent greater than the modest 4.5 percent rate for non-Hispanic whites.
The banks subprime mortgage fraud

It is clear that the combined 7.8 percent average foreclosure rate for the black and Latino minority groups was 73 percent greater than for their white counterparts. The main reason for this discrepancy is that low-income minority groups had a much higher share of high-interest rate subprime mortgage originations than nonHispanic whites. Unfortunately, very large numbers of subprime mortgages were fraudulently forced onto borrowers who could have qualified for a low-interest prime rate mortgage. This was done so that the banks could earn a much higher return than they would have from a prime rate loan. But when house prices began to plunge early in 2007 those subprime borrowers were unable to carry the financial burden of a high-interest loan. As a result, 16.5 percent of the subprime loans originated between early 2005 and late 2007 wound up in completed foreclosures. The subprime foreclosure completion rate exceeded the low 2.3 percent rate for largely prime-rate conventional mortgages by 14.2 percent (basis points). The 64 percent subprime share of all completed foreclosures between January 1, 2007 and January 1, 2010 grossly outweighs that types 22 percent share of total mortgage originations between early 2005 and late 2007 by 42 percent (basis points). To put it another way, the two-thirds foreclosure completion share is a whopping three times the 22 percent origination portion! There is a close relationship between the over-origination of subprime mortgages for African-American black and Latino families and those groups foreclosure rates. Between early 2007 and late 2009 it is estimated that black families had already lost 240 thousand homes, and Hispanic families were forced to give up
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336 thousand residences in just a three-year period. The combined loss was 576 thousandwell over half a million. Those numbers continued to increase during 2010 and 2011. Those patterns of discriminatory mortgage lending have been the subject of major civil and criminal investigations by the federal government and the attorneys-general of most of the states that were seriously affected by the subprime mortgage crisis. This multi-state group has been demanding a $26 billion payment from the large banks in order to settle those lawsuitsan enormous sum. It is intended that the proceeds will be used to help families that had been victimized by the fraudulent subprime mortgage practices of those banks to recover enough of their financial solvency to be able to purchase another home. The gross total amount that will be made available for consumer assistance will be enormous! The revival of the black and Latino first-time homebuyer sector will be vital to the recovery of both the existing-home sales and new-home construction markets. During the housing boom of the early 2000s the Hispanic group in particular provided the enormous demand for starter homes that permitted all existing-home owners to move up the tradeup chain. During the 2012-2015 period they will perform that same vital function.
THE IMPACT OF THE RECOVERY OF THE SUBPRIME MORTGAGE MARKET ON THE OVERALL MORTGAGE MARKET INDICATORS, FIRST QUARTER, 2010 TO FIRST QUARTER, 2012
Because the number of completed foreclosures of subprime mortgages was very high during the three-year period between early 2007 and late 2009, during the first quarter of 2010 their indicators were at their worst state since the Great Depression in the 1930s. Fortunately, over the next two years the subprime mortgage situation has improved substantially.
The recovery of the subprime mortgage market, first quarter, 2010 to first quarter, 2012
Fortunately, the subprime mortgage market did experience a strong recovery from the first quarter of 2010 to the end of 2011, and especially from that point to the end of the first quarter of 2012. The total number of non-current subprime loans plummeted by -579 thousand over the past two yearsclose to two-fifths of which happened in the first quarter of 2012 alone!
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What does all of this mean? Simply this. It is clear that the decreases in the numbers from the fourth quarter of 2011 to the first quarter of 2012 greatly exceeded the quarter-to-quarter reductions for the previous seven periods, especially when the quarterly averages are considered. That is why the first quarter 2012 shares of the total two-year decreases for each indicator are so high for just one quarter.
The subprime mortgage driver of the improving overall mortgage market, first quarter, 2010 to first quarter, 2012
The improvements in the subprime mortgage market over the past two years were the primary driver of the better news in the overall market for all types of mortgage loans. Altogether, the steep -432 thousand combined reduction for all three types of subprime delinquencies over the full two-year period contributed a strong 29 percent of the -1.5 million plunge in the number for all types of mortgage loans nationwide. As for loans in the foreclosure process, the -146 thousand drop in the subprime number accounted for well over half of the nationwide drop for all mortgage types. This means that the bulk of the bad mortgage paper that had been fraudulently dumped into the secondary mortgage market is now being cleaned up at a rapid pace.
THE POSITIVE IMPACT OF THE IMPROVING MORTGAGE MARKET ON U.S. HOUSE PRICES AND HOME SALES
The recent strong improvements in the U.S. mortgage market were all made possible by the dramatic 6.6 million surge in total nonfarm employment between January, 2010 and May, 2012. As a result, home prices in many states that had been hard-hit by the 2007-2011 housing crisis are beginning to rise again. The reason is that, with the removal of the bad mortgage paper from the financial market, investors and regular household home buyers now have much more confidence that the housing market will not be flooded with a large number of foreclosed properties at depressed prices. For both groups that would be a serious negative prospect. Fortunately, house prices nationwide have been rising rapidly over the past year, and especially during the first quarter of 2012. The Federal Housing Finance Agency (FHFA) publishes the only reliable purchase-only house price index for single-family homes that both this author and the Federal Reserve trust. That regulatory agency collects the data from Fannie Mae and Freddie Mac, by far the largest secondary mortgage market companies in the country.
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Between December, 2011 and March of 2012one full quarterthe total U.S. price index jumped by 1.7 percent. The 1.8 percent surge between February and March, 2012 alone accounted for 106 percent of the quarterly rise. This means that the pace of house price increases has been accelerating rapidly over the past few months. As a result of the steep rise in the first quarter and March, 2012 single-family house prices, the increases from March, 2011 to March of this year were also healthy. For the entire country the increase was a strong 2.7 percent. However, it is important to emphasize that the pace of price increases has accelerated dramatically during the last two months of that twelve-month period. As a result, there is now a realization in the non-judicial system states that, finally, the market is stabilizing. It is very clear that our April, 2011 forecast correctly predicted that the rapid pace of employment growth would provide the additional household incomes required to let all boats rise with the jobs increases. These so-called rising boats include declining delinquencies and rising house prices. Those price increases will permit home sales to restart, as current owners will once again be able to recover enough equity to be able to afford to move up the tradeup chain to a larger, more expensive residence. Between March and April, 2012 alone, existing single-family home sales surged by 120 thousand, an enormous 3.0 percent, to 4.1 million at a seasonally adjusted annual rate. Over the full year between April, 2011 and April, 2012 existing singles sales jumped by a whopping 370 thousandup by a strong 10 percent. Moreover, during the past year the nationwide inventory of unsold single-family homes plunged by -520 thousand, from 2.8 million to 2.2 million in April of 2012. As a result, the months supply of inventory dropped from 8.9 to 6.6 months last Aprila -26 percent plunge. A large part of the reason for the improvement in sales prices is that distressed home sales have now fallen from 37 percent in April, 2011 to 28 percent in April, 2012an enormous decrease of -9.0 percent (basis points). Three-fifths of the April, 2012 share was accounted for by a decrease in foreclosure sales. That drop confirms the discussion earlier in this report that rising pre-foreclosure sales and a rapidly-dwindling 90-day plus delinquency inventory have been shutting off the new mortgage entrants into the foreclosure process. All of this means that there is now a return to normal home buying for occupancy by households whose purchases have long been put off. As a result, the investor share of all purchases fell by -1 percent (basis points) from March, 2012, to 20 percent in April. This trend is confirmed by the 1 percent rise in the first-time home buyer share to 38 percent in April, up substantially from one-third in January, 2012.
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As expected, the general downtrend in both the listed and the so-called shadow inventory of homes in the foreclosure inventory has caused the general housing market to shift dramatically from a buyers to a sellers market. As a result, home sales prices have been climbing steadily over the past year, and especially during the first quarter of 2012. The prices of existing single-family homes jumped by 10.4 percent between April, 2011 and April, 2012, and surged by 21 percent on a non-seasonally adjusted basis between March and April of this year. As a result, the once-popular underwater mortgage myth will soon be forgotten.
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PART THREE
THE EFFECT OF THE SURGE IN THE UNAUTHORIZED HISPANIC IMMIGRANT POPULATION OF THE UNITED STATES ON THE SINGLE-FAMILY HOUSING BOOM, 20022006, AND THE POSITIVE IMPLICATIONS FOR 2012-2015
Introduction
In just four years single-family detached housing starts in the United States plunged from a record-high of 1.72 million in 2005 to a first all-time low of 445 thousand in 2009an enormous drop of -1.3 million. In 2006 and 2007 the number had already begun to slip gradually, as would normally have been expected in such a highly cyclical industry, following 3 consecutive years of super record-high numbers. However, the precipitous drop to just 622 thousand single-family starts in 2008 was largely caused by the severe recession which began in January of that year. As a result, between January, 2008 and the January, 2010 low for the decade, the nations jobs total plummeted by -8.5 million, before beginning to recover in February, 2010. Although the downturn in single-family house construction was caused by a complicated interaction of several forces, household job losses were far more responsible than any other single factor. The evidence clearly shows that the serious income losses which resulted from severed employment were the direct cause of rising mortgage delinquencies, bank foreclosure actions and evictions of owners from their homes, and a vicious cycle of plunging house prices from closeby neighborhoods to cities and regions. Fortunately, between the January, 2010 low and May, 2012 total permanent nonfarm employment in the U.S. surged by 6.6 million jobs on a non-seasonallyadjusted basis. Of the three facets of U.S. demographics that determine single-family housing startsincreases in population, household formations and employmentthe number of jobs that people hold is by far the most important. As the employment tide rises, all the other boats rise with it. Mortgage foreclosures disappear, household formations increase, and consumers begin to spend freely. This is exactly what is happening in the U.S. economy now. It is really very simple. In order for a household head to purchase a home or hang onto the one he already has, he must have a paycheck. Over the past two and one-half years the numbers of paychecks have been increasing dramatically.
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THE IMPACT OF THE MASSIVE INFLOW OF MEXICAN AND HISPANIC IMMIGRANTS ON THE U.S. LABOR MARKET
What do we mean by employment?
Unfortunately, the general public is often very confused about the definition of employment. Many think that it means the unemployment rate. It does not. The unemployment rate is the ratio of the number of individuals who do not currently have a job to the total labor force. To be in the labor force a person must either be employed, or be actively seeking a job. In December, 2011 the 13.1 million individuals who were counted as unemployed were divided by the 153.9 million people in the labor force to produce an unemployment rate of 8.5 percent. Unfortunately, like all economic rate equations, the unemployment rate can often produce erroneous results. Because the answer is the product of not one but two factorsa numerator and a divisorthe calculated rate often tells us more about the factor that we are not concerned about than the one that we are. Namely, the number of unemployed. If, for some reason, the percentage decline in the number of unemployed in the numerator is less than that for the labor force in the denominator, then the unemployment rate will remain higher than it should, and vice versa.
The effect of unauthorized immigration on the labor force and the unemployment rate
Sometimes the decreases in the labor force and the unemployment rate are caused by individuals becoming discouraged about their prospects of being able to find a job. As a result, they quit looking for work. On the other hand, prolonged surges of new entrants into the labor force from massive immigration inflows can temporarily push up the number of unemployed and the unemployment rate, simply because there are not yet enough new jobs to provide employment for everyone. However, there is a very high probability that the recent steep downward trend in immigration demographics in the U.S. since 2007 will dramatically slow the growth rate in the labor force and the number of unemployed, at least for several years. Between early 2000 and late 2005 the dual surges in the U.S. labor force and the demand for single-family houses can largely be credited to the enormous jump in the inflows of unauthorized immigrants. Over four-fifths were Hispanic, and three-fourths of those were from Mexico. During the boom housing construction years one-fifth of all foreign-born Latinos were employed in the construction industry, while millions of others found low-skilled jobs in industries such as leisure and hospitalitywhich includes hotels and restaurants.
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As a result of that sharp increase in low-skilled job opportunities, between 2000 and 2005 the total number of unauthorized immigrants residing in the U.S. soared by 2.7 million, or one-third, to 11.1 million, from 8.4 million 5 years earlier. During that period the average annual inflow of unauthorized immigrants from all source regions was a whopping 850 thousand a year. Between 2005 and 2007 that rate slowed to 550 thousand a year. As a result, in 2007 the total number of resident unauthorized immigrants peaked at 12.0 million3.3 million greater than the 2000 level. However, a drastic reduction in arrivals between 2007 and 2009 to just 300 thousand annually caused the 2009 total to shrink by close to a million to the 2005 level of 11.1 million. Several well-documented studies have shown that this drop was as much due to the steep 1.4 million reduction in the size of the inflows of unauthorized immigrants from early 2006 through late 2010, and was not solely the result of the 1.4 million increase in the number of Mexican-born migrants who returned home from the U.S. during those years. It is obvious that the key factor in slowing down the inflows was the severe U.S. recession during 2008 and 2009. In turn, that economic downturn drastically reduced the demand for low-skilled Mexican labor in the economy. As a result, over the next 2 or 3 years the upward pressure on the nations unemployment rate will be much less severe than it was in 2010 and 2011. The most important reason for the continuing decline in that rate is that during 2012 the number of new jobs created by the broader economy will continue at the rapid pace set in 2010 and 2011. Between December, 2009 and December, 2011 the reported total number of nonfarm jobs soared by 2.8 million. The addition of a 100 thousand upward revision to the 2011 total in January, 2013 will bring the second-year rise to 1.9 million, and the total two-year jump to 2.9 million. During the first 5 months of 2012 the year-over-year increases averaged a whopping 2.0 million over the same 2011 month. That jump exceeded the average year-toyear increases for the last four months of 2011 by a strong 258 thousand, or 15 percent! Even more importantly, during the first five months of 2012 the two-year same-month increases over the 2010 levels surged by an average of 3.3 million jobs.
UNLOCKING THE STARTER-HOME BOTTLENECK IN 2012 2015: THE ROLE OF UNAUTHORIZED HISPANIC FIRST-TIME HOME BUYERS IN 2002 - 2006
Probably one of the least-known facts about the U.S. single-family home construction boom between early 2002 and mid-2006 is that it was only made possible by the first-time purchases carried out by unauthorized Hispanic immigrants who had entered the country en masse during the late 1990s. It was those purchases of the so-called starter homes that permitted existing-home
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owners to recover their equity from their current residences in order to move up the tradeup chain. Most owners near the bottom of the tradeup ladder moved up to a larger, more expensive existing house. But eventually those near the top traded up to a newly-constructed single-family home. As a result, singles construction starts zoomed up to ever-higher record levelsfrom 1.5 million in 2003 to 1.72 million in 2005. In 2006 they were still high at 1.5 million! The average for the four-year period from 2003 to 2006 was close to 1.6 million! If it had not been for the Hispanic first-time home buyers, none of those record levels of singles starts would have been possible. After all, it is the first-time home buyers who generate the net additions to the housing stock. The discussion which follows explains the close link between first-time home purchases and the arrival of large numbers of foreign-born Hispanic families. As a result of the massive inflows of 3.6 million Hispanic immigrants between 1995 and 2000, employment of Latinos soared by a total of 3.8 million during the 2002-2006 period. And between 2000 and 2007, a 4.5 million surge in the number of Hispanic jobholders accounted for a whopping 52 percent of the 8.5 million jump in total U.S. employment. All of those additional incomes helped to finance the singlefamily housing boom from early 2002 through late 2006, when a total of 7.7 million singles were constructed.
THE CONTRIBUTION OF MEXICAN IMMIGRANTS TO THE POPULATION EXPLOSION IN THE UNITED STATES, 1991-2011
During the past two decades from 1991 through 2011 Mexican immigrants have made a major contribution to the rapid population growth in the United States. Today, there are 40 million foreign-born persons residing in the U.S.13 percent of the total population. Of that 40 million, Mexicans account for 11.1 million, or 30 percent of all immigrants. Mexico is also by far the largest source of unauthorized entrants into the U.S., partly because of its close geographic proximity. It is clear that, between 2000 and 2007, Mexican immigrants played by far the dominant role in the massive influx of new entrants that helped to buoy the U.S. economy to new heights. The most notable indicator of that buoyancy was the surge in single-family housing starts to an incredible 1.6 million average during the three-year period from early 2003 to late 2005.
Gross annual arrivals of Mexican and Hispanic immigrants into the United States, 1991 - 2011
During the second half of the 1990sfrom early 1995 through late 1999Mexicans began to enter the U.S. in much larger numbers. A total of 2.8 million arrived during that five-year period, almost double the 1.6 million who came during the first four years of the 1990s decade.
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During the entire 9-year period between early 1991 and late 1999 a total of 4.4 million Mexicans arrived in the U.S. That number is extremely important, because it was largely that group that provided the enormous boost to record-high sales of existing homes, and to super-record-high single-family house construction starts between early 2002 and mid-2006. The six-year period between early 2000 and late 2005 set an all-time record for Mexican immigration. However, between the 2000 peak of 770 thousand arrivals and the 2011 low of 130 thousand, the number of new Mexican immigrants had plunged by an enormous -640 thousand!
The effect of emigration back to Mexico on the net immigration of Mexicans into the United States, 1995 - 2010
Net immigration is the number of Mexican immigrants who remained in the United States after some members of the gross inflow had returned to Mexico to live permanently. The first massive influx of unauthorized arrivals into the U.S. from Mexico took place during the 1995-2000 period. A total of 2.9 million entered at that time. The loss due to emigration back to Mexico over the 5 years was just -670 thousand. As a result, the net number of new Mexican immigrants who remained permanently in the U.S. was a whopping 2.3 million. However, due to the failing U.S. economy and the rapid drying up of jobs in the construction industry during the 2005-2010 period, the net immigration number fell to zerothe first time since the early 1980s that this has happened. It is clear that, as job opportunities in the low-skilled industries such as construction disappeared after 2006, the rate of departures for Mexico accelerated dramatically.
THE EFFECT OF HISPANIC IMMIGRANTS ON EMPLOYMENT AND INCOMES IN THE UNITED STATES, 2000-2011
The massive inflows of Mexican and Hispanic immigrants between 2000 and 2006 had a very positive effect on total nonfarm employment in the United States. Between 2000 and the 2007 peak the number of Latinos with jobs surged by 4.5 million or 636 thousand a yearan enormous increase in just seven years! And although the rise between 2007 and 2011 was restricted to just 197 thousand, or a tiny 49 thousand annually, the grand total for the 2000-2011 period was a whopping 4.7 milliona still impressive 422 thousand a year! The 4.7 million jump in Hispanic jobholders between 2000 and 2011 accounted for 164 percent of the net total U.S. rise of 2.8 million. This means that other races and ethnic groups suffered a net loss of -1.8 million. If it had not been for the large Latino increase,
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the entire U.S. would have had an enormous -6.9 million reduction in total employment over the full twelve-year period! However, the severe falloff in immigration, beginning in 2007, dramatically reduced the average number of jobs created to just a tiny 49 thousand per year over the next four years ending in 2011.
THE FIRST-TIME HOME BUYER SURGE IN THE UNITED STATES, 1995-2006

The effect of the demographic profile of Mexican immigrants during 2011 on the future market for starter homes, 2012 - 2015
One-third of all 11.9 million Mexican-American immigrants residing in the U.S. in 2011 arrived after calendar year 2000. That large share confirms the massive inflows that took place between 2000 and 2006. Ninety-two percent of the gross number who entered during the 2000-2011 period arrived during the first 7 years. Fifty-four percent are young males in their late teens or early twenties. But three-fifths are already married, well above the average for native-born nonHispanic whites. However, three-fifths of the young immigrants have less than a high school education. As a result, in the past they have tended to concentrate their employment in low-skill industries such as construction. In turn the median annual household income of these predominantly 2000s arrivals is just $35,000well below the $52,000 figure for other immigrants, and the total U.S. number. Finally, the share of total Mexican households who are homeowners is just 46 percent well below the total U.S. average in the high 60 percent range during the 2000s. All of these numbers add up to a strong potential market for single-family starter homes over the next few years. Mexican immigrants tend to marry at much younger ages than non-Hispanics, and have larger numbers of children much earlier in the marriage. When the construction and other low-skill industries are healthy, Mexican-Americans still generally work hard to achieve the American dream of homeownership. Between 1995 and 2001, Hispanic starter-home buyers were instrumental in driving up the first-time home buyer share of total house purchases to 42 percentwell over two fifths. Following that seven-year surge the first-time share slipped slightly to 40 percent through the next five years, from 2002 through 2005. Finally, in 2006 the groups share fell by -4 percent (basis points) to 36 percent in just one year.
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After 2006 the first-time buyer share only recovered to the mid-40 percent range temporarily in 2009 and early 2010 because of the artificial stimulation provided by the federal tax incentive legislation. However, those increases were short-lived when the tax laws expired. During late 2011 and early 2012 the first-time share of all existing-home sales was running at approximately one-thirdroughly 7 to 10 percent below the 40 percent average of the boom years from 2002 through 2006. However, by April, 2012 that share had bounced back up to a healthy 38 percent. Absent the passage of additional tax incentive legislation, which is unlikely, the recovery of the first-time home buyer sector of the market will depend directly on the revival of the financial health of the unauthorized Hispanics and other immigrant groups who flooded into the U.S. between 2000 and 2006.
The Hispanic first-time home buyer contribution to the single-family house construction boom, 2003-2006
The Hispanic population made a strong contribution to the first-time home buyer group during the hottest non-calendar-year twelve-month period for single-family starts in U.S. history. The second-half of 2005 and the first-half of 2006 were the highest consecutive half-year periods on record. That performance was made possible by the rush of Latinos to purchase their first homes during this last of the 2000s boom years. During 2006 Hispanics accounted for close to 10 percent of all first-time home purchases. That was an impressive accomplishment, given the fact that Latinos had been a small minority prior to the large influx of unauthorized Mexican immigrants that began during the 1980s, and greatly accelerated as the 1990s passed by. It was the 1990s group of Hispanics who provided the enormous demand for starter homes during the first half of the 2000s decade.
The young Hispanic age factor

When the 1990s male entrants arrived in the U.S. they were very young adults. It took them time to find a secure job and a wife to marry, and then begin to have children, and finally, to purchase their first home. When they did so during the early 2000s, that fuelled the enormous boom in existing-home sales and singlefamily housing starts. Almost everyone was able to recover the equity from their current homes and move up the tradeup chain. Because of their young average age, Latinos were predominantly first-time buyers. As might be expected, over half of all first time buyers in 2006 were between 25 and 34 years of age, and an overwhelming 63 percent were under age 34. Since foreign-born Hispanics marry and have more children at a much younger age than the other demographic groupsespecially whitestheir presence in that under-34 age cohort was very strong. Those numbers confirm that the enormous potential for pent-up demand for firsttime home purchases clearly lies with the predominantly young Hispanic population.
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THE IMPACT OF THE ARRIVALS OF HISPANIC IMMIGRANTS ON SINGLE-FAMILY HOUSING STARTS AND THE PURCHASE OF STARTER HOMES IN THE UNITED STATES, 2000-2006
Finally, it is now time to link the massive arrivals of Hispanic immigrants between 1995 and the peak year of 2000 with the boom in single-family housing starts between 2002 and 2006an amazing five-year period. It must be emphasized that there is a considerable time-lag between the year when a Hispanic immigrant arrives and the year when he purchases his first starter home. The lions share of those unauthorized entrants were very young malesin their late teens and early twenties. It took them years to find a job, gain a minimal amount of economic security, find a mate and marry, and finally to purchase their first starter homes in order to provide living space for large numbers of children. But foreign-born Hispanics generally marry at a much younger age than native-born whites. And they also tend to start having children much earlier in the marriage. Between early 1995 and late 2000, a whopping 3.6 million Hispanics entered the U.S., including 770 thousand at the peak in 2000. That enormous influx of arrivals clearly had a strong delayed impact on single-family housing starts. They surged from 1.4 million in 2002 up to new record-high levels in every succeeding year through 2005, when an absolutely unprecedented 1.72 million singles were constructed. Even in 2006, when year-over-year starts began to fall in May, fullyear starts still reached the 2003 level of 1.5 million. Altogether, an incredible 7.7 million single-family unit starts were reported during the 2002-2006 period, or a whopping 1.5 million per year, on average! The first-time homebuyer shares of total home purchases averaged 40 percent from 2003 through the last super-boom year for singles housing starts in 2005, and 39 percent over the 20032006 period. The first-time homebuyer percentage share of total home purchases is equivalent to the number of starter homes that were sold, including both existing homes and newly-constructed houses. During 2005, there were roughly 7.5 million total sales of single-family and condominium dwellings. It is estimated that 3.0 million of that total, or 40 percent, were purchased by first-time buyers of starter homes. It is clear that, during the 2002-2006 boom period for single-family housing starts, the purchase of starter homes by Mexican and other Hispanic immigrants was absolutely crucial to the success of the entire marketboth existing and newly-constructed home sales. Without that contribution the construction boom could not have taken place.
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THE EFFECT OF THE PLUNGE IN UNAUTHORIZED IMMIGRANTS FROM MEXICO ON THE IMMIGRANT POPULATION IN THE UNITED STATES, 2007-2011
In a normal year unauthorized Mexican immigrants accounted for close to three-fifths of all inflows of undocumented immigrant arrivals, and all Hispanics contributed four-fifths of the total. In turn, unauthorized Latino entrants accounted for the lions share of all Hispanic new entrantsup to four-fifths. As a result, during 2011 Mexico was by far the biggest source of foreign-born residents: 11.9 million, or one-third of the total. Calendar year 2011 marks the end of a five consecutive year period of rapidly-declining gross arrivals of undocumented immigrants, from early 2007 through late 2011. As a result of those sharp decreases, as well as a substantial rise in emigration back to Mexico, the total U.S. population of undocumented Mexicans plunged by -900 thousand, or -13 percent of that groups total population in 2007, when the total number of unauthorized Mexican residents reached an all-time high. As a result, the total number of Mexicans living in the U.S. dropped from 12.6 million in 2007 to 11.9 million in 2011. The full 55-page study spells out the reasons for this steep fall.
THE IMPACT OF IMPROVING EMPLOYMENT PROSPECTS FOR HISPANIC FAMILIES ON THE STARTER-HOME MARKET FOR SINGLE-FAMILY HOUSES IN THE UNITED STATES
Unfortunately, during the Great Recession between early 2008 and early 2010 Hispanic families suffered two economic blows which severely hampered their ability to continue purchasing single-family starter homes at the high rates of the early 2000s. The first was their large disproportionate share of the defective subprime mortgages that were originated between late 2005 and late 2007. The second blow was the Latinos high rate of job losses after 2006. It was in May of that year that the residential construction industry began to deteriorate rapidly, after setting wild records for single-family home building between early 2003 and April, 2006. Since the mostly young Hispanic males were poorly educated, they tended to turn in large numbers to industries where low-skilled jobs were plentiful. The primary examples are construction and the leisure and hospitality industrieshotels, restaurants, etc. Unfortunately, those industries were hit hard by the recession, and construction employment still has not returned to normal levels. As a result, during the 2007-2009 period the total number of Latinos who were employed showed poor growth, following the 1.5 million surge between 2005 and 2007. Threefourths of that jump took place between 2005 and 2006the last two boom years for the residential construction industry. A -943 thousand plunge in the number of
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jobs between December, 2007 and December, 2009 cut the net rise between the last months of 2007 and 2011 to just 197 thousand. As a result, the total increase in Hispanic jobs for the full six-year period between 2005 and 2011 was only 1.65 million. That still was, nevertheless, a significant increase in the number of employed Latinos over the past 6 years. Unfortunately, that 1.65 million rise accounted for just 55 percent of the 3.0 million surge in the Latino labor forcea bit over half. The key question then is, why was there such a massive 1.9 million increase in the number of unemployed Latinos between 2006 and 2010? There are two reasons. First, the mostly low-skilled Latinos had gravitated to the industries that had become hardest-hit by the recession, especially construction. Second, the history of immigration flows into the country explains why there was such a concentrated buildup of unemployed Hispanics who were actively looking for work. In 2005 the then-record-high 19.1 million employed Latinos were largely the unauthorized immigrants who had flooded into the country during the late 1990s and the first half of the 2000s to take advantage of the plentiful jobs that were available in a booming U.S. economy. However, those large inflows continued to take place through the end of 2007, long after those low-skilled job opportunities had begun to dry up. As a result, by late 2007 there was a massive concentration of recent Hispanic immigrants who could not get jobs. In a sense it was bad timing, because at best the early-2000s entrants showed up just a few years before the economic crash. That is why almost half of the new entrants into the labor force wound up going straight into the unemployed column, instead of becoming part of the employed group. However, in 2010 the number of jobs for Latinos began to turn around with a 366 thousand increase over the 2009 low level. That was followed by a much bigger 774 thousand rise in 2011twice the increase between 2009 and 2010.
Improving employment prospects for Hispanic workers, 2010-2013

It is now time to put the recent improvement in the Hispanic job numbers into perspective. The number of employed Latinos rose from 19.6 million in December, 2009 to 20.7 million in December, 2011a rise of 1.1 million. However, of the 1.5 million surge in the total U.S. jobs number between the last months of 2010 and 2011, the 774 thousand jump contributed by the Hispanic group accounted for a whopping 51 percentjust over half! That is an impressive improvement, given that Latinos comprised just 16.4 percent of the total U.S. population in 2010. And that percentage is exaggerated for adult workers over 16 years of age because foreign-born Hispanic families have much larger numbers of children than other race and ethnic groups. As a result, the correct comparison is probably more like a 51 percent Hispanic share of the total U.S. jobs increase coming from approximately 15 percent of the adult population.
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Long-term trends
Over the long-term period between December, 2005 and December, 2011 Hispanic employment rose by 1.65 million jobs. But total U.S. employment plunged by -2.24 million. This means that other groups suffered a massive combined loss of -3.9 million. Relatively speaking the Latino share of the employment pie rose substantially, from 13.4 percent in 2005 to 14.7 percent in 2011a 1.3 percent risebased on an overwhelming 1.65 million positive share of the total U.S. change in employment, which plunged by -2.2 million.
THE IMPACT OF PENT-UP DEMOGRAPHIC DEMAND ON SINGLE-FAMILY HOUSING CONSTRUCTION IN THE UNITED STATES, 2003-2012
The 2002-2006 single-family housing boom
During the three-year period from 2003 through 2005 the United States enjoyed a super record-high boom period in single-family detached housing construction. In 2003 singlefamily starts zoomed upward by 140 thousand units from the very respectable 2002 level of 1.36 million to a then record-high of 1.5 million. In 2004 the number climbed again to 1.61 million, and then soared to an unbelievable 1.72 million in 2005. Finally, in 2006 the number of singles started began to show signs of cyclical deterioration by slowing to 1.47 million. But that was still very close to the initial record-setting 2003 level of 1.5 million, and was astronomically higher than the 1.14 million average for the 1990s. In early 2005 this author published a 1,200-page study on the future of the U.S. housing industry. In that report it was predicted that, over the 10 years between 2003 and 2012, U.S. single-family starts would average 1.414 million per year. Compared to the forecasts of other analysts, that was a very high number. However, at the end of the 2003-2006 period single-family starts had surged by a total of 6.3 million units in just 4 yearsa whopping 644 thousand greater than the 5.7 million that would have materialized if our predicted 1.414 million annual average number had been maintained as a perfect score during that period. That amounted to an average overachievement of 161 thousand units a yeara whopping 11 percent difference. In spite of that accelerating upward trend, in October, 2004 this author went on record in a presentation to the senior marketing officials of a large international lumber manufacturing company that in 2005 the number of single-family starts should drop by at least -20 thousand units from the expected 1.6 million level for calendar year 2004. Unfortunately, in 2005 the number started zoomed by an additional 105 thousand to an alltime super-high of 1.72 million. It was not until 2007 that the long overdue cyclical decline began, with a drop to 1.1 million singles starts. Even then, over the full five-year period
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from 2003 through 2007 the actual average annual number amounted to 1.48 million66 thousand a year, or 5 percent, greater than our ten-year average forecast of 1.414 million annually between 2003 and 2012. Given the long overdue cyclical correction from the super-record-high levels from 2003 through 2006, and the severe 2008 recession, the plunge to 622 thousand singles starts in that year was not out of line. That left the six-year average for 2003-2008 at 1.34 million a yearstill a very respectable number compared to the 1.36 million reported in 2002. Until 2003, the 2002 total had been the third-highest on record, behind two previous highs for much smaller units in the late 1970s. Of greater concern, however, was the large plunge to just 445 thousand single-family starts in 2009, and to only 471 thousand in 2010, and finally to a record-low of 431 thousand in 2011.
The real demographic demand factor for single-family housing to mid-2005

The boom in single-family housing construction from early 2002 through late 2004 was solidly based on real demographic demand. During the second half of the 1990s the inflows of unauthorized Hispanic immigrants into the U.S. had soared to an unprecedented 3.6 million. As a result, by calendar year 2000 the net total number from all source regions still living in the country as a result of all previous arrivals reached a whopping 8.4 million. Over four-fifths were Hispanic. And three-fifths of the 8.4 million total were undocumented Mexican immigrants. The 7.7 million five-year total for single-family starts between 2002 and 2006 resulted largely from the 3.6 million total Hispanic arrivals from early 1995 through late 2000. That delayed impact reflects the time that normally elapses between the moment that a young Hispanic undocumented entrant enters the country, finds a job and economic security, gets married and the couple begins having children at a young age. By-and-large, the surge in single-family housing starts during the first half of the 2000s decade did not come from the purchases of starter homes by the current surge of new arrivals between 2000 and 2006, but from their predecessors who entered the country between 1995 and 2000the peak year.
The effect of financial market fraud on the collapse of the single-family housing market, 2008-2011
However, the continued high inflows of unauthorized immigrants between 2000 and 2007 should have added to the demographic pressure on the housing market between 2006 and 2011. During the 2000-2007 period the average annual number of undocumented entrants was a whopping 775 thousand a year. The 5.4 million additional unauthorized U.S. residents who entered the country during the first seven years of the decade did provide a sharp boost to the enormous future demand for housing that was already being released by the large numbers who had preceded them during the late 1990s. Given the normal time lags between
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the moment when young undocumented Hispanic immigrants enter the country and when they marry and move into their first single-family home, the 5.4 million jump between 2000 and 2007 should have permitted single-family housing starts to continue at an average rate of 1.4 million a year from 2006 through 2012. Unfortunately, the incredible surge to 1.72 million single-family housing starts between 2004 and 2005 pushed the economy beyond its normal financial ability to soundly finance such an enormous increase in new-home purchases, as well as 6.2 million single-family existing-home sales. That high level of demographic demand was exacerbated by the development of a greatly overheated speculators market by mid-2005. In order to bridge that gap between speculative demand and the availability of sound funding, widespread financial fraud in the mortgage industry and throughout the economy was required. During the second half of 2005 and most of 2006 hundreds of thousands of defective subprime mortgages were issued, which the borrowers had no hope of paying off when the housing market cooled. Those mid-decade subprime instruments were of much lower quality than those that had been originated in earlier years. Finally, the enormous fraud that permeated the private-label secondary mortgage market after those defective subprime mortgages had been sold to unsuspecting investors was instrumental in bringing the mortgage financing industry to a near-collapse by late 2008. As a result of those negative developments in the financial sector, between 2004 and 2005 single-family housing starts soared by an additional 105 thousand units to a super record-high 1.72 million. In reality, they should have fallen by at least -50 thousand to roughly 1.5 million. Altogether, between 2002 and the end of 2005 the construction of singles had soared by a whopping 360 thousand. That number was far in excess of what the economy could support, even in good times. As the financial system began to unravel late in 2008, employers drastically slashed payrolls in order to cut costs and stay ahead of the curve. The evidence clearly shows that the serious income losses which resulted from severed employment in 2008 and 2009 were the direct cause of rising mortgage delinquencies, bank foreclosure actions and evictions of owners from their homes, and a vicious cycle of plunging house prices from closeby neighborhoods to cities and regions. As a result, in 2008, 2009, 2010 and 2011 single-family housing starts averaged 503 thousand a yearjust one-third of the 2003 and 2006 levels.
THE STRONG HISPANIC CONTRIBUTION TO THE GROWTH IN TOTAL U.S. EMPLOYMENT AND INCOMES, 2000 - 2011
Between calendar years 2000 and 2011, the total number of employed Hispanics surged by 4.7 million, more than one and a half times the net rise in total U.S.
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nonfarm employment of 2.8 million. This means that other races and ethnic groups had a combined loss during that eleven-year period of -1.8 million! If the Latino number had not increased by 4.7 million, the total U.S. jobs number in December, 2011 would have plunged by -6.9 million -4.0 million greater than the actual net increase of 2.8 million! It is clear that the sharp 1.7 million increase in the number of Hispanic jobs between late 2005 and late 2011 and the 4.7 million surge between December, 2000 and December, 2011 added a substantial number of additional incomes to the consumer spending stream during the 2000s decade. Those additional incomes definitely assisted the recovery of the broader economy. The fourth quarter 2011 gross domestic product data show that consumer expenditures accounted for over half of the 3.0 percent jump in GDP.
Improving Hispanic employment prospects in early 2012

The data for early 2012 confirm that the improving trend in the Hispanic employment numbers accelerated at a rapid rate during the first 3 months of this year. Between December, 2011 and March, 2012 the number of Latinos with jobs surged by 779 thousand in just 3 months. That jump slightly exceeded the strong 12-month increase between December, 2010 and December, 2011! As a result, between December, 2009 and March, 2012 the total number of employed Latinos soared by a whopping 1.9 million in just over a two-year period. It is obvious that the Hispanic workforce is on its way to a strong comeback during the rest of 2012.
The effect of declining future immigration inflows on total U.S. employment, 2012 - 2015
Given the current economic and legal trends in the U.S. and Mexico, it is extremely doubtful that the net inflows of Mexican and total Hispanic immigrants will ever come close to the record-high levels of the second half of the 1990s and the 20002006 period. Although the economic environment will continue to serve as the main deterrent to stepped-up inflows, the much stronger enforcement of existing federal laws has also been noticeably more effective in restricting unauthorized arrivals and boosting outflows back to Mexico. As a result, the dramatic increases in the U.S. employment rolls and the total labor force seen during the late 1990s and the first six years of the 2000s will also be extremely difficult to achieve. It must be remembered that during the 2000-2006 period the U.S. experienced unsustainable booms in housing construction and job increases that were based on a fraudulent financial system. Given the federal banking regulatory reforms that have been implemented since 2008, the chances of a repeat of those conditions over the next 3 years are very low. Since one-fifth of all foreign-born Hispanics worked in construction during the economic boom, the cooling of that industrys Doug Smyth and Associates
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growth will provide a much smaller incentive for unauthorized Mexican immigrants to cross the border. It is simply unrealistic to expect that the U.S. will experience the same high level of new entrants that it did between 2000 and 2006. As a result, there can be no doubt that the year-to-year surges in payroll employment between 2003 and 2006 will never be replicated. The average annual December-to-December increase for that three-year period was 2.24 million, before dropping to a 1.1 million rise in 2007, as the size of the immigration inflows began to decline. By December, 2011 the year-over-year increase had bounced back to 1.8 million jobsclose to the 2.0 million rises in 2004 and 2006. The 2011 jump was solidly based on the economic recovery that began in July, 2009. At this rate of increase total payroll employment in December, 2012 should easily come close to the December, 2005 level of 135.6 million. The 2005 number resulted from a record-high increase of 2.5 million jobs from the 2004 level. The 2.1 million year-to-year rise in December, 2006 and the 1.1 million increase in December, 2007 both were the products of a grossly overheated economy, which was based on fraudulent financial practices. The surge in the number of jobs available attracted large numbers of immigrants that the economy could not support during more moderate growth periods.
Finding jobs for unemployed Hispanics already in the country, 2012-2015

As of May, 2012, a whopping 6.6 million of the -7.9 million total net nonfarm jobs that had been lost since the beginning of the recession had been recovered83 percent. This means that 1.3 million additional jobs must be created in order to recover the entire 7.9 million total payroll jobs that had been lost between January, 2008 and the decade-low in January, 2010. Moreover, additional jobs must be created in order to satisfy the needs of new entrants into the labor force that have resulted from the aging of young people into the 16-and-over population group. The Hispanic resident population are the group of greatest potential concern. Since the mostly young Hispanic males were poorly educated, they tended to turn in large numbers to industries where low-skilled jobs were plentiful. The primary examples are construction and the leisure and hospitality industrieshotels, restaurants, etc. Unfortunately, those industries were hit hard by the recession, and construction employment still has not returned to normal levels. During the boom period from 2000-2006 one-fifth of foreign-born Latinos worked in construction. As a result, the slow recovery of the residential homebuilding sector has caused large numbers of Hispanic immigrants to remain unemployed. The final boost to total nonfarm employment will come from the recovery of the construction industry. Between December, 2010 and December, 2011 the industry experienced its first year-over-year rise since 2005a modest 72 thousand. However,
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during the first 5 months of 2012 the year-to-year increases averaged 63 thousand double the average year-to-year rise between September and December, 2011. In the leisure and hospitality industries the news is much better. During the last 4 months of 2011 hotels, restaurants and other establishments hired 276 thousand more employees than they had employed in the same period of 2010 on average. However, during the first 5 months of 2012 the average year-over-year increase jumped to 321 thousand16 percent higher. And the two-year jumps between the same months of 2010 and 2012 showed an average increase of 521 thousand7 percent higher than the December, 2009 to December, 2011 surge of 485 thousand. Since a large portion of the Hispanic workforce is employed in the leisure and hospitality industry, those dramatic improvements in new hiring bode well for the continuation of strong increases in Hispanic employment over the next few years. That, in turn, will generate increased incomes that will be available for the purchase of single-family starter homes.
TOTAL NONFARM EMPLOYMENT, 2012 - 2015

During 2012 the number of new jobs created by the broader economy will continue at the rapid pace set in 2010 and 2011. Between December, 2009 and December, 2011 the reported total number of nonfarm jobs soared by 2.8 million. The addition of an expected 100 thousand upward revision to the 2011 total in January, 2013 will bring the second year rise to 1.9 million, and the total 2009-2011 two-year jump to 2.9 million. During the first 5 months of 2012 the year-over-year increases averaged a whopping 2.0 million over the same 2011 month. That jump exceeded the average year-to-year increases for the last four months of 2011 by a strong 258 thousand, or 15 percent! Even more importantly, during the first five months of 2012 the two-year samemonth increases over the 2010 levels surged by an average of 3.3 million jobs.
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SUMMARIZING THE HISPANIC DEMOGRAPHIC POTENTIAL FOR PURCHASING SINGLE-FAMILY STARTER HOMES, 2012-2015
It is now extremely important to summarize the trends in key labor market indicators for Hispanics in order to gauge the positive impact on future purchases of starter homes in the United States. The recent upsurge in total nonfarm employment for the nation as a whole bodes well for a gradual improvement in Hispanic industries such as construction, and in the key durable goods manufacturing industries that are dependent on material supplies such as lumber and other wood products, as well as gypsum, and concrete. At the outset, the current situation for the key labor market indicators can best be described as the best of all worlds. There appear to be two contradictory trends. First, between December, 2009 and December, 2011 both the Latino employment numbers and the total labor force statistics have been rebounding at a rapid pace. On the other hand, those improvements have not come with the assistance of new entrants into the country. Since 2007 the rate of net inflows of unauthorized arrivals from Mexico has plunged to near zero. This means that the massive numbers of undocumented Mexican old immigrants who arrived during the early 2000s had an opportunity to become absorbed into the workforce without having to compete with large numbers of new entrants who are willing to work at lower wage rates. As a result, both the total numbers of unemployed Latinos and their unemployment rate have fallen substantially from their close peaks in December, 2009 and December, 2010. The massive influx of unauthorized Mexican immigrants who arrived in the U.S. between early 2000 and late 2006 amounted to a large oversupply of foreign-born labor. Instead of the increased demand for labor inputs being a response to real demographic demand from current U.S. residents, the driver was an overheated single-family home construction industry that was being fanned by the fires of a fraudulent mortgage financing system. As a result, too many people came to the party during the 2000-2006 period. The stepped-up emigration of 1.4 million Mexicans back to their home country confirms that conclusion. That was more than twice the number who returned during the 1995-2000 period. In a sense, that large outflow acted as a giant safety-valve for the U.S. labor force. In 2005 the U.S. economy simply did not have the wherewithal to finance a record-high combination of 8 million sales of existing and newly-constructed single-family homes! In the end, during the second half of 2005 investors began to outbid legitimate prospective family buyers for those singles sales. As a result, in 2006 the first-
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time buyer share of those purchases plunged to 36 percent from 40 percent the year beforean enormous drop of -4 percent (basis points) in just one year. The speculators had really killed the goose that had laid the starter-home golden egg, which in turn had driven the single-family housing market to boom levels from early 2002 to mid-2006. Of course, the entire period was dominated by fraudulent mortgage underwriting standards. However, over the past two years the Hispanic employment numbers have shown a marked improvement. It is those increased jobs that have generated the additional income required to make additional consumer purchases. That is why consumer expenditures accounted for one-half of the 3.0 percent boost in economic growth during the fourth quarter of 2011. In a short time, as Latinos who are currently unemployed also find jobs, there will be significant increases in existing and new home sales. In the meantime, the steep reductions in the inflows of undocumented Mexicans and the sharp increase in outflows back to their home country have dramatically slashed the numbers of unemployed Latinos and the Hispanic unemployment rate.
THE CONFIDENCE FACTOR

In terms of the overall job market in the U.S., the economy is now close to the tipping point, where increased employment positions will generate significant increases in all types of home sales. Given the high level of pent-up demographic demand from new Hispanic households for single-family starter homes, a reduction in single-family housing starts to the 450 thousand average annual range of the last four years is almost inconceivable. Even the temporary two-year drop in the total nonfarm employment numbers alone was not sufficient to justify such a large plunge in singles construction. Then why has the comeback taken so long? In a single word: confidence, or rather the lack of it. Following the absolutely terrifying financial meltdown between late 2007 and early 2010 lack of confidence has been severely hindering the economic recovery since it began in July, 2009. There are several examples, but due to time and space limitations in this summary, just one is discussed here.
The banks unrealistically high mortgage underwriting standards

The third example concerns the banks origination of mortgages. Since the financial collapse the big banks have been setting unrealistically high underwriting standards for all mortgage applicants. Those institutions have gone from pushing clearly seriously defective and often fraudulent subprime mortgages onto unsuspecting minority homebuyers between the second half of 2005 to the end of 2007, to requiring very high credit scores since 2009. There are several reasons for this dramatic turnaround. The big banks have become the targets of numerous costly lawsuits from the federal government and many state attorneys-
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general for fraudulent practises that were committed in both the origination and the foreclosure processes. Moreover, the threat of costly lawsuits from large investor groups has enormous ramifications. Unfortunately, during the housing boom period banks rationalized dumping defective mortgages into the secondary market by falling back on the assumption that the risk would be spread over large numbers of investors. Unfortunately, the amount of bad paper became so large that it caused a catastrophic collapse of the mortgage and broader financial markets. As a result of all of these legal threats to the health of bank balance sheets, the big banks have boosted their underwriting standards to the point that the quality of loans being accepted for purchase or guarantee by Fannie Mae and Freddie Mac has risen to the level that prevailed in the early 2000s before the housing boom period. Again, those excessive underwriting standards reflect a lack of confidence in the quality of mortgage loan applicants on the part of the big banks.
The rising employment solution to the mortgage banking confidence problem

Following the scary collapse of the financial system between late 2007 and early 2010, most of the key players in the mortgage banking industry have been grossly overreacting due to a serious lack of confidence. However, the recent surges in total nonfarm employment will soon help to substantially ease those confidence problems. As more and more mortgage applicants show up with secure jobs and sound incomes, that will dramatically reduce the risk of additional delinquencies. During the first quarter of 2012 the number of defaults fell steeply from the fourth quarter, 2011 result. As the delinquency rate keeps falling, banker confidence in originating new loans will definitely improve.
THE EFFECT OF HOMEBUILDER CONFIDENCE ON SINGLEFAMILY HOUSING STARTS, 2012

One of the most crucial factors which determines future single-family housing starts is the confidence of the individual home builders in the future of the market. The reason is that in a normal year companies that construct built-for-sale homes account for two-thirds to fourfifths of total singles starts. Those sales require the builder to secure an acquisition, development and construction (AD&C) loan before breaking ground, and carrying the costs until the home is sold. When it comes to built-for-sale units, many factors affect the builders confidence level, including present sales and customer traffic through homes that are close to completion, and his ability to access AD&C financing. For 25 years the National Association of Home Builders has conducted a monthly confidence index survey of its members. Between September, 2011 and May, 2012, builder confidence in future sales over the next 6 months doubled to 34 pointsthe
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highest of all 3 components in the index. That upsurge in builder confidence s based largely on growing consumer confidence in purchasing a home, due to stabilizing house prices and excellent affordability conditions. By far the most important driver of greater homebuyer confidence has been the dramatic 6.6 million surge in total nonfarm jobs nationwide between February, 2010 and May, 2012. A strong 15 percent of that increase is accounted for by the 1.0 million jump in durable goods manufacturing employment, including permanent and temporary help-service positions.
The durable goods manufacturing industry driver of the U.S. economy

With an impressive 15 percent share of the 6.6 million surge in total nonfarm employment between February, 2010 and May, 2012 the durable goods manufacturing industry is leading the U.S. economic recovery. Durable goods include those products that are intended to last three years or longer. That ratio is literally two and one-half times the sectors 6 percent share of the absolute total number of jobs in the country. It is also clear that the Midwest manufacturing industry is on the leading edge, with a contribution of over one-fifth of the 2.8 million jump in total nonfarm jobs nationwide between December, 2009 and December, 2011, or 585 thousand. Those impressive job gains are being driven by enormous pent-up demand for durable goods such as motor vehicles and appliances, etc. Between the fourth quarters of 2010 and 2011 real inflation-adjusted personal consumption expenditures on durables soared by 18 percent. As a result, total durable goods manufacturing production of physical units also surged by over 8 percent. In turn, total employment, including permanent and temporary positions, jumped by 374 thousand between December, 2010 and December, 2011, or a healthy 5 percent. During the fourth quarter of 2011 alone personal expenditures on durable goods soared by 16.2 percent in just one quarter. And between the fourth quarter of 2011 and the first period of 2012 that component of the GDP accounts surged by an additional 14.3 percent three fourths of the 1.9 percent rise in GDP. As a result, total employment in durable goods manufacturing continued to soar. During the first five months of 2012 the average year-over-year increase for the same months was a solid 372 thousand. That amounted to a full one-fifth of the 2.0 million average year-to-year surge in total nonfarm employment during the same period. And the two-year comparisons between 2010 and 2012 show that the 795 thousand average jump in the total number of durable goods manufacturing jobs during the first 5 months accounted for a whopping one-fourth of the 3.3 million surge in total nationwide jobs from January through May of 2012. That 3.3 million average two-year jump exceeded the 2.8 million nationwide increase between December, 2009 and December, 2011 by a whopping 551 thousand, or 20 percent.
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One year ago this author correctly predicted in a detailed stand-alone study of the U.S. motor vehicle manufacturing industry that it would not only make a dramatic recovery from its near-bankruptcy state in mid-2009, but it would also become a large driving force of the durable goods manufacturing industry and the broader economy. Both of those forecasts have now become a reality. It is extremely clear that the jobs situation in the U.S. economy has now improved dramatically over the past two and one-half years. That has two important ramifications for the housing market. First, it is a given that people do not purchase houses when they do not have a paycheck with which to pay a mortgage. Second, having the feeling that ones job is secure in a rising economy provides the confidence required to spend the lions share of ones future income and assets on the largest item that a family will purchase during their lifetime. From the point of view of the economics alone, the time is ripe for a strong revival in single-family existing-home sales, as well as newly-constructed singles. When that factor is coupled with the strong demographic component, the prospects for greatly-improved single-family housing starts over the next few years are very good.
THE IMPACT OF THE DECLINE IN UNAUTHORIZED IMMIGRATION INFLOWS ON THE PENT-UP DEMAND FOR SINGLE-FAMILY HOUSING, 2012-2015
Although the average annual rate of entry of unauthorized immigrants into the U.S. since 2007 has fallen to just 15 percent of the whopping 850 thousand a year pace set during the first half of the past decade, that trend in no way threatens future demand for single-family detached housing. It is important to understand that there are always significant time lags between the moment when an undocumented new resident enters the country and when he or she marries and begins to occupy a single-family home. The main reason is that the lions share of new entrants are youngin their late teens or early twentiesand they are predominantly single. Because the federal governments substantial tightening of enforcement measures against illegal border crossings has made it more difficult to survive the arduous trip through inhospitable terrain, the demographic weight of the newentrant group has been heavily tilted toward younger individuals for several years. Second, a significant time period is required for the new immigrant to find a job and become financially secure before he or she can marry and begin to raise a family. As a result, it is not normally until several years after entry that young immigrants begin to release their latent demand for single-family housing. The heated quest for single-family homes between early 2002 and mid-2006 was based largely on the enormous influx of young Hispanics who had entered the country during the
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late 1990s. In spite of the 4.2 million surge in undocumented immigration from Mexico between 2000 and 2006, those later entrants contributed only a minor share of the demand for single-family housing during the first half of the decade. During the second half of the decade that pattern of delayed purchases would have repeated itself if it had not been for the unfortunate gradual collapse of the mortgage financing system between 2005 and 2008. As a result, the 2000-2006 unauthorized entrants were unable to make their purchases of single-family homes at their expected normal time between 2008 and 2011. In turn, the undocumented Hispanics failure to purchase the starter homes prevented existing homeowners from recovering their equity in order to move up the tradeup chain to better-quality existing and newly-constructed houses. That problem prevented existing homeowners who, under normal circumstances could have afforded to move up, from selling their properties in the same way that the Latino buyers had facilitated during the first half of the 2000s. As a result, the severe downturn in single-family home construction between 2008 and 2011 has left the country with an enormous amount of unsatisfied pent-up demographic demand for that type of housing. The vast majority of foreign-born Hispanic households still require suitable housing for their families. Between 2000 and 2006 gross arrivals from Mexico totaled 4.2 million. Even when an estimated 720 thousand males who emigrated back to Mexico between 2005 and 2011 are subtracted from that seven-year total, an estimated 3.4 million men, women and children from that group still reside on U.S. soil, including 1.4 million young males. Because foreign-born Hispanics generally marry young and start their families early in their marriages, there is a pressing immediate need for additional living space. As a result, since 2006 large numbers of Latino families have been trapped temporarily in multifamily rental housing units that provide totally inadequate space for such large young families. That is why for the past year apartment vacancy rates have been plunging, rents have been rising rapidly, and multifamily-unit construction has been increasing at a faster pace than for single-family units. Eventually, as the cost of rental units begins to exceed that for single-family homes, more Latino and other young households will make the decision to purchase their own starter home.
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THE RETURN OF SINGLE-FAMILY HOUSING CONSTRUCTION TO REAL DEMOGRAPHIC DEMAND LEVELS, 2012-2015
It is clear that, because of the fraudulent abuses in the mortgage financing system during the 2005-2007 period, between 2008 and 2011 single-family housing starts in the U.S. fell well below their demographic potential. During the 5 years between 2003 and 2007 the average annual rate of singles starts still exceeded our optimistic 10year forecast for the 2003-2012 period of 1.414 million a year, by 55 thousand units annually. Even the 6-year average came to 1.34 million per yearjust -70 thousand, or 5 percent, less than the optimistic long-term predictionin spite of the drop in 2008 to only 622 thousand. A five percent error for such a high-risk optimistic forecast over 60 percent of the time period is well within an acceptable range of error. However, the plunge in 2009 to 445 thousand, the uptick to 471 thousand in 2010, and the record-low of 431 thousand in 2011 brought the 9-year average down to only 1.0 million. That number was lower than the 1.14 million average for the decade of the 1990swell before the positive effects of the surge in unauthorized immigrants during those 10 years were felt during the 2002-mid-2006 period. As a result, it is obvious that the amount of pent-up demographic demand for single-family housing in 2012 is enormous. That demand will gradually be released as widening year-over-year and two-year employment increases during the coming months continue to reduce mortgage delinquency rates and foreclosures disappear. The second standalone study on the state mortgage markets documents the enormous improvements in the absolute numbers for key mortgage market indicators between the first quarter of 2010 and the fourth quarter of 2011. And the first quarter, 2012 data show an acceleration of that trend. At the same time, consumers will continue to spend even more freely than they did in late 2010 and 2011. As a result, long overdue household formations will increase, and existing and newly-constructed home sales will finally begin to improve as 2012 unfolds. Given the combination of the improving economics and the enormous buildup of pent-up demographic demand for single-family housing after at least four years of extremely poor starts, it is not a question of whether the recovery will come, or by how much, but when. The last two pages of the second standalone study on the state of the mortgage market provide a detailed description of how this process is now already underway. Single-family home prices in most key states and regions are now rising rapidly, as are single-family existing home sales. There are still other hurdles that must be cleared before a full housing recovery is underway. But the dramatic improvement in the jobs picture and the existence of
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enormous pent-up demand point to a substantial improvement in single-family housing starts over the next few years.
PART THREE EPILOGUE: THE EFFECT OF A REVIVAL OF SINGLE-FAMILY HOUSING STARTS ON THE SOFTWOOD LUMBER AND OTHER WOODPRODUCTS INDUSTRIES
A revival of single-family housing starts in the United States even up to the 1.3 million level from the record-low average of 449 thousand a year over the past three years would have a dramatic positive effect on the North American softwood lumber industries. That would increase the demand for softwood lumber to roughly three times the average annual level between early 2009 and late 2011.
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Reaching The U.S. Employment Increase 'Tipping Point'

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Reaching The U.S. Employment Increase 'Tipping Point'

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REACHING THE U.S.

EMPLOYMENT INCREASE TIPPING POINT

Doug Smyth and Associates

EXECUTIVE SUMMARY TABLE OF CONTENTS

Part One: Appendix A

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

February to November, 2011

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

FUTURE EMPLOYMENT IN 2012-2015: PRODUCTIVITY LOSSES VERSUS ONSHORING INCREASES

Doug Smyth and Associates

The sustainability of improvements in durable goods manufacturing employment

Doug Smyth and Associates

PART ONE: APPENDIX A

Doug Smyth and Associates

The demise and recovery of the housing-related industry sectors

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

Key mortgage market indicators

Doug Smyth and Associates

Employment shares of the top 20 states

Positive effect on the mortgage market

Key mortgage indicators: 90-day plus delinquent loans

Doug Smyth and Associates

The role of employment income factors in repairing the mortgage-financing system

The underwater mortgage myth

Doug Smyth and Associates

The lending standards factor in declining mortgage delinquencies

Winding down the foreclosure inventory

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

The recovery in the nationwide mortgage market, first quarter, 2012

Doug Smyth and Associates

THE STATE-BY-STATE PROGRESS REPORT

Doug Smyth and Associates

WHAT EVER HAPPENED TO SUBPRIME MORTGAGES?

Doug Smyth and Associates

The banks subprime mortgage fraud

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Doug Smyth and Associates

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Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

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THE FIRST-TIME HOME BUYER SURGE IN THE UNITED STATES, 1995-2006

Doug Smyth and Associates

The young Hispanic age factor

Doug Smyth and Associates

Doug Smyth and Associates

Doug Smyth and Associates

Improving employment prospects for Hispanic workers, 2010-2013

Doug Smyth and Associates