Economists’ Panel

Christina Romer vs. Greg Mankiw

Moderated by Lawrence Yun

NAR 2013 Issues Conference Dana Point, CA

February 15, 2013

Pending Home Sales Index

2007 - Jan

2007 - Jun

2007 - Nov

2008 - Apr

2008 - Sep

2009 - Feb

2009 - Jul

2009 - Dec

2010 - May

2010 - Oct

2011 - Mar

2011 - Aug

2012 - Jan

2012 - June

2012 - Nov

707580859095

100105110115

Homebuyer Tax Credit

Was the home buyer tax credit a success in stopping bleeding in housing?

Home Price Index

2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr100

120

140

160

180

200

220

Homebuyer Tax Credit

Home prices essentially stabilized after the tax credit after steep declines.

• Written in 1988

• “ … real housing prices will fall substantially over the next two decades.”

• “ … because the Baby Bust generation is now entering its house-buying years, housing demand will grow more slowly in the 1990s than in any time in the past forty years.”

THE BABY BOOM, THE BABY BUST,AND THE HOUSING MARKET

N. Gregory Mankiw and David N. WeilHarvard University

Will Baby Bust impact will be mitigated from population growth and immigration?

The Greatest Generation! From Poverty to Victory to Prosperity

Baby Boomer parents were the ‘Greatest’ and what role did the government play or not?

Soviet Joke

Pretend the ‘train is moving’ … led to complacency and eventual collapse

The Lost Generation ! (?)

Is America pretending we don’t have problems on entitlement obligations?

Federal Government Tax Revenue and Spending

1970 - Jan 1974 - Jan 1978 - Jan 1982 - Jan 1986 - Jan 1990 - Jan 1994 - Jan 1998 - Jan 2002 - Jan 2006 - Jan 2010 - Jan0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

Revenue Spending

12-month tally in $ million

Should deductions be limited to raise revenue or should spending be cut?

The Role of Government

• Reagan … Wanted Small Government– How? Run up big deficits …. this is the only way

for people to understand the need to restrain spending

• Obama … Wants Big Government– How? Run up big deficits … this is the only way for

people understand the need to pay higher taxes

Renter Households

1980 - Q1 1984 - Q2 1988 - Q3 1992 - Q4 1997 - Q1 2001 - Q2 2005 - Q3 2009 - Q425,000

27,000

29,000

31,000

33,000

35,000

37,000

39,000

41,000In thousands

Are we headed towards a Renter Nation?

Homeowner Households

1980 - Q1 1984 - Q2 1988 - Q3 1992 - Q4 1997 - Q1 2001 - Q2 2005 - Q3 2009 - Q450,000

55,000

60,000

65,000

70,000

75,000

80,000In thousands

Wealth Distribution (Federal Reserve data on median net worth)

Renter Owner$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

199820012004200720102014

2014 Forecast by NAR

Bubble Crash

Is Lawrence Summers right that hedge funds becoming owners while good renters are having great difficulty obtaining mortgages?

Bully or Smartest Person in the World?

Really, he’s a …

Monetary Policy by Federal Reserve (zero rate policy to 2015 ?)

20052006

20072008

20092010

20112012

2013 foreca

st

2014 foreca

st

2015 foreca

st0

1

2

3

4

5

6

Fed Funds %

Will loose monetary policy lead to future inflation?

Federal Reserve Balance Sheet from Quantitative Easing

1-Aug-0

7

7-Nov-0

7

13-Feb-08

21-May

-08

27-Aug-0

8

3-Dec-0

8

11-Mar-

09

17-Jun-09

23-Sep-09

30-Dec-0

9

7-Apr-1

0

14-Jul-1

0

20-Oct-

10

26-Jan-11

4-May

-11

10-Aug-1

1

16-Nov-1

1

22-Feb-12

30-May

-12

5-Sep-12

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

Total Assets

$ million

Will the Fed report losses in the future when interest rates rise?

Rising Renters’ and Homeowners’ Rent Growth (the biggest weight to Consumer Price Index)

2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr-1

0

1

2

3

4

5

Owners' Equivalent Rent Renters' Rent

Nearing 3%

3.8% tax on rental income … higher future rent?

Nation’s Mobility RateFrom 18% to 12%

.1

.12

.14

.16

.18

.2

Fra

ction

of

pop

ula

tion

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Year

(Any Distance)

Fraction of Population Who Moved in the Last 12 Months

Falling mobility naturally implies less movement up the economic ladder.What should and shouldn’t be done to reverse the trend?

Person of the Century?

In regards to impacting the economic well-being, should Deng Xia-Ping be considered as someone who lifted the most people out of poverty (by abandoning Mao policy and implementing wealth creation policies) and hence the person of the century?

Will China overtake the U.S. in GDP?It depends on Singapore

19291934

19391944

19491954

19591964

19691974

19791984

19891994

19992004

20092014

20192024

0

5000

10000

15000

20000

25000

U.S. (growing 3%) China (growing 8%)

Persons of the Millennia?

The Glorious Revolution of William and Mary definitively affirmed the power of the parliament and the rule of law (and not the arbitrary powers of Kings and Queens), which thereby guaranteed that the English-speaking people would rise to the top in economic development.