Maine s Economic Outlook:

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1 Maine s Economic Outlook: Implications for Real Estate Presentation to: Maine Real Estate & Development Association 010 Annual Real Estate Forecast Conference January 8, 010 Laurie Lachance President Maine Development Foundation Charles Colgan Professor of Public Policy & Management Muskie School of Public Service

2 US Real Gross Domestic Product and Consumer Price Index % 14% Real GDP CPI 1% Percent Gro owth 10% 8% 6% 4% % 0% -% Source: Bureau of Economic Analysis, Bureau of Labor Statistics.

3 Crude Oil Prices U.S. Average Real¹ and Nominal Prices Monthly, January 1980-June Nominal Real 100 Do ollars per Ba arrel p ¹ In chained (009) dollars, calculated by using gross domestic product implicit price deflators. 009 data points are projections. Source: Energy Information Administration.. 3

4 1800 S&P 500 INDEX, Adjusted Closing Index Monthly, January 1980-October Source: MSN Money Central 4

5 9.0% 8.0% 70% 7.0% 6.0% 50% 5.0% 4.0% 30% 3.0%.0% 10% 1.0% 0.0% U.S. Delinquency Rate on Single Family Residential Mortgages All Commercial Banks, Quarterly, 1991Q1 009Q3 009Q3 98% 9.8% 1991Q1 199Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 000Q1 001Q1 00Q1 003Q1 004Q1 005Q1 006Q1 007Q1 008Q1 009Q1 Source: Federal Reserve Bank 5

6 5.0% 4.5% 40% 4.0% 3.5% 3.0%.5%.0% 1.5% 1.0% 0.5% 0.0% U.S. Delinquency Rate on Consumer Loans All Commercial Banks, Quarterly, 1987Q1 009Q3 009Q3 4.8% 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 199Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 000Q1 001Q1 00Q1 003Q1 004Q1 005Q1 006Q1 007Q1 008Q1 009Q1 Source: Federal Reserve Bank 6

7 7.0% 6.0% 5.0% 40% 4.0% 3.0%.0% 1.0% 0.0% U.S. Delinquency Rate on Credit Card Loans All Commercial Banks, Quarterly, 1991Q1 009Q3 009Q3 6.6% 1991Q1 199Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 000Q1 001Q1 00Q1 003Q1 004Q1 005Q1 006Q1 007Q1 008Q1 009Q1 Source: Federal Reserve Bank 7

8 Prime Rate; Average of U.S. Banks Present 1 11 Oct Source: US Federal Reserve Bank 8

9 Maine Wage and Salary Employment* (Monthly) January October Nov Thousands *Seasonally Adjusted Source: Maine Department of Labor 9

10 Unemployment Rates, Maine and U.S.* (Monthly) January November 009 1% MAINE U.S. Nov 09 ME 8% US 10% 10% 8% 6% 4% % 0% *Seasonally Adjusted Source: U.S. Bureau of Labor Statistics & Maine Department of Labor 10

11 008 Unemployment Rate by Maine County 9.0% Coastal Central Rim 8.5% 8.0% 7.0% Maine = % 8.0% 73% 7.3% 7.1% 6.9% 6.% 6.0% 6.0% 5.0% 4.9% 4.6% 5.5% 51% 5% 4.9% 5.1% 5.% 5.6% 4.0% 4.0% 3.0%.0% 1.0% 0.0% Yk Cu Sa Li Kn Wal Ha An Ke Pe Ox Fr So Pi Ar Was Source: Maine Department of Labor, Center f or Workf orce Research and Inf ormation 11

12 50 Maine People on the Supplemental Nutrition Assistance Program Monthly, January December 009 Dec 09 4, Thousands s Source: Maine Department tof fhealth and dhuman Services, Office of fintegrated t daccess and dsupport 1

13 Maine Bankruptcy Filings January November Nov 09 1 Month Moving Total 3,570 7 Thousan nds Cha ange in Bankrup ptcy Law Note: The bankruptcy laws in Maine changed beginning g with interim rules on October 17, 005, with the complete set of interim rules, with amendments, released on October 1, 006. For more information go to Source: U.S. Bankruptcy Court 13

14 10 9 New Privately Owned Housing Units Authorized in Maine January November Month Moving Total Nov 09, Thousand ds Source: U.S. Bureau of the Census 14

15 Central Maine Power Annual Gain in Customers Monthly, January December Commercial/Industrial Residential 8 6 Thousan nds Source: Central Maine Power Company

16 Per Capita Personal Income Growth Maine & US Maine US 16% 14% 1% 10% 8% 6% 4% % 0%

17 0 Maine's National Rank on Per Capita Personal Income National Ran nk

18 Per Capita Personal Income in Maine by County Coastal Central Rim Me. = Thousand ds Yk Cu Sa Li Kn Wal Ha An Ke Pe Ox Fr So Pi Ar Was 18

19 Maine's Housing Affordability Index by Year (weighted owner/renter) U.S. NorthEast Maine

20 0.0 Maine's Housing Affordability Index by County (weighted average) 000 vs Note: below 1 is less affordable Coastal Central Rim 0

21 Maine Auto/Transportation Taxable Sales January September 009 $4.5 1 Month Moving Total 1 Month Growth Rate 0% $4.0 15% $3.5 llions of Dol llars $3.0 $.5 $.0 Moving Total 10% 5% 0% Growth Rat te Bi $1.5-5% $1.0 $0.5 Growth Rate -10% $ % Source: Maine Revenue Services Economic Research Division 1

22 Maine Building Supply Taxable Sales January September 009 $3.0 1 Month Moving Total 1 Month Growth Rate 0% $.5 15% llars $.0 Moving Total 10% 5% Rate llions of Do Bi $1.5 $1.0 0% -5% Growth Growth Rate -10% $0.5-15% $ Source: Maine Revenue Services Economic Research hdivision i i -0%

23 Maine Bank Non-Performing Loans $300 $50 $00 Millions $150 $100 $106,463,000 $50 $ Source: Federal Deposit Insurance Corporation 3

24 % Population Growth Maine and US % 1.8% 1.6% 1.4% 1% 1.% 1.0% 08% 0.8% 0.6% 0.4% 0.% Maine United States 0.0%

25 Average Annual Change in Population % Coastal Central Rim 1.0% 1.0% 08% 0.8% 0.8% Me. = 0.45% 0.6% 0.4% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 04% 0.4% 04% 0.4% 0.4% 0.% 0.% 0.% 0.0% -0.% -0.1% -0.4% -0.6% -0.4% Yk Cu Sa Li Kn Wal Ha An Ke Pe Ox Fr So Pi Ar Was -0.5% 5

26 80% Percent of Maine's Population Living in Regional Service Centers (Compared to Other Municipalities) % 63.% 60% 50% 40% 51.6% 48.4% 51.7% 48.3% 30% 0% 36.8% Service Centers Other Areas 10% 60 65* 70 75* 80 85* 90 95* *Estimated 6

27 Maine's Wage & Salary Employment* by Sector 700 Other Industries Government Leisure Health Care Retail Trade Manufacturing % ployment housands Emp T % 16.9% 17.9% 97% 9.7% 8.9% 10.3% 15.6% % 14.% % % 7

28 10% 8% Percent of Workers Holding Multiple Jobs U.S. and Maine, United States 8.1% 8.3% Maine percent of workers 6% 4% 5% 5.% 5% 5.% Gap % 0%

29 Per Capita Personal Income Gap (% Points Maine Income Lags U.S.) 0% % -4% -6% -8% -10% -1% -14% -16% -18% -0% 9

30 Value Added per Manufacturing Worker U.S. and Maine $140 United States $10 usands of Dollars $100 $80 $ Gap: 1% 008 Gap 3% Maine Tho $40 $0 $

31 The Outlook The Recession in on the turn Recovery will be slow and economic growth will remain weak Monetary policy will remain simulative for the foreseeable future Housing in Maine has not fallen as far as the US, but will not recover quickly 31

32 Employment in Maine and the US Maine History Maine Forecast US History US Forecast :Q4= :04 008:01 008:0 008:03 008:04 009:01 009:0 009:03 009:04 010:01 010:0 010:03 010:04 011:01 011:0 011:03 011:04 01:01 01:0 01:03 01:04 013:01 013:0 013:03 013:04 3

33 GDP Growth 8% Annual Ra ates Growth at 6% 4% % 0% % 5.5% 0.7% 1.% 1.4% 0.5% 4.0%.9%.1% 1.9% 1.0% 05% 06% 0.3% 0.4% 0.5% 0.6% 0.7% 1.0% 0.9%.3% 1.6%.9% Maine US Quarterly 4% 6%.7% 5.5% 5.6% 8% 6.6% 008:01 008:0 008:03 008:04 009:01 009:0 009:03 009:04 010:01 010:0 010:03 010:04 33

34 Population Growth in Maine International Migration, Domestic Migration, Natural Change, International Migration, 88 Natural Change, 789 Domestic Migration, Annual Average

35 Maine Net Migration Series Series :01 981:04 983:03 985:0 987:01 988:04 990:03 99:0 994:01 995:04 997:03 999:0 001:01 00:04 004:03 006:0 008:01 009:04 011:03 013:

36 Where will the jobs come from (010:Q3 013:Q4) Tho ousands Government Leisure & Hospitality Education & Health Professional & Business Services Retail Construction Manufacturing 36

37 Household Buying Stabilizes January 008 = Vehicle sales (L) Home sales (L) Retail sales ex auto (R) Jan-08 Sep-08 May

38 No Quick Exit for the Fed Federal Reserve s balance sheet, $ bil ,000,500,000 1,500 1,000 Other Swap Lines PDCF Term Auction Facility Discount Window Repurchase Agreements Securities Lent to Dealers Securities Held Outright Jan-08 Mar-08 May-08 Jul-08 Oct-08 Dec-08 Feb-09 May-09 Jul-09 38

39 The Peak of Consumer Distress is still two years away and will be greater in Maine Maine US 150 Bankruptcies: 007:Q1= = :01 007:0 007:03 007:04 008:01 008:0 008:03 008:04 009:01 009:0 009:03 009:04 010:01 010:0 010:03 010:04 011:01 011:0 011:03 011:04 01:01 01:0 01:03 01:04 013:01 013:0 013:03 013:04 39

40 Mortgage Delinquencies Maine US 0 40

41 Existing Home Sales ME History ME Forecast US History US Forecast 0 00:Q1= :01 001:01 00:01 003:01 004:01 005:01 006:01 007:01 008:01 009:01 010:01 011:01 01:01 013:01 41

42 Single Family Housing Permits Maine :01 000:04 001:03 00:0 003:01 003:04 004:03 005:0 006:01 006:04 007:03 008:0 009:01 009:04 010:03 011:0 01:01 01:04 013:03 4

43 Multifamily Housing Permits History 400 Forecast :01 001:01 00:01 003:01 004:01 005:01 006:01 007:01 008:01 009:01 010:01 011:01 01:01 013:01 43

44 Two Views of Housing Prices (Peak to Trough Declines) 30.0% 5.6% 0.0% 10.0% 11.7% 7.9% 13.7% 0.0% 10.0% 10.0% 0% 0.0% 30.0% 4.9% 19.4% 40.0% 33.9% Median Price ME Median Price US OFHEO ME OFHEO US Recession Recovery 44

45 Commercial RE Under Severe Pressure Repeat Sales Indices: 000Q4 = Sources: Moody s Investor Service, REAL, Fiserv Commercial RE prices 110 House prices

46 Projected peak-to-trough house price decline < -30% -0 to -30% -10 to -0% 0 to -10% No decline Sources: Fiserv Lending Solutions, Moody's Economy.com, OFHEO 46

1. External Economic Drivers 2. Current Conditions 3. Economic Projections 4. Long term Trends

Maine s Economic Outlook: 2010 and Beyond January 12, 2010 James Breece, Ph.D. University of Maine System Outline 1. External Economic Drivers 2. Current Conditions 3. Economic Projections 4. Long term