Housing, the Economy, and COVID-19 - SaleCore

Copyright 2020

Paul H. Brewbaker, Ph.D., CBE

Housing, the Economy, and COVID-19Presentation prepared for the

Honolulu Board of REALTORS®

Mahalo: Leeward RegionLivestream via ZOOM

by Paul H. Brewbaker, Ph.D., CBE

TZ Economics, Kailua, Hawaii

March 18, 2020

1

Slide copyright 2019

[This page intentionally left blank]

COVID-19 in the United States

2


COVID-19 cases in the United States by date of illness onset,

January 12, 2020, to March 16, 2020, at 16:00 ET (n = 1,295)

0

20

40

60

80

100

January February March

COVID-19 cases by date of illness onset

*Does not include U.S.-identified cases where the date of illness onset has not yet been reported; excludes cases among

persons repatriated to the United States from Wuhan, China (3) and Japan aboard the Diamond Princes cruise ship (46).

*

Sources: U.S. Centers for Disease Control (https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html#epi-curve)

https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html#epi-curve

3


Cumulative COVID-19 cases in U.S. by date of illness onset, 1/12 – 3/18,

(known date n = 1,295; total known U.S. cases 7,038) vs. WHO U.S. total

*Does not include U.S.-identified cases where the date of illness onset has not yet been reported; excludes cases among

persons repatriated to the United States from Wuhan, China (3) and Japan aboard the Diamond Princes cruise ship (46).

*

Sources: U.S. Centers for Disease Control (https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html#epi-curve); World Health Organization (https://www.who.int/emergencies/diseases/novel-coronavirus-

2019/situation-reports)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Cumulative COVID-19 cases by date of illness onset


CDC

WHO3,536


https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports

World Health Organization

Situation Report March 18,

2020

Epidemic curve of confirmed

COVID-19, by date of report

and WHO region

15,000

10,000

5,000

0

ChinaEurope

Americas

Source: WHO (https://www.who.int/docs/default-

source/coronaviruse/situation-reports/20200318-sitrep-58-

covid-19.pdf?sfvrsn=20876712_2)

https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200318-sitrep-58-covid-19.pdf?sfvrsn=20876712_2

5


Number of specimens tested for SARS CoV-2 through March 11, 2020

by CDC labs (n = 4,255), U.S. public health laboratories (n = 27,623)†

†Non-respiratory specimens were excluded. For state public health labs, the date represents the date of sample collection, if available, or the date

tested. For CDC labs, the date represents the date specimen was received at CDC. Results reported as of 4:00 pm ET on March 16 were included.

All data are preliminary and may change as more reports are received.

*

Sources: U.S. Centers for Disease Control (https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html#epi-curve)

0

1,000

2,000

3,000

4,000


CDC

Public health laboratories


https://www.vox.com/policy-and-politics/2020/3/13/21178289/confirmed-coronavirus-cases-us-countries-italy-iran-singapore-hong-kong

Source: Covid Tracking Project, Business Insider, The Atlantic, Taiwan CDC (ttps://www.vox.com/policy-and-politics/2020/3/13/21178289/confirmed-coronavirus-cases-us-countries-

italy-iran-singapore-hong-kong)

A snapshot of early

Covid-19 testing

per capita

8



Murphy’s Law, meet COVID-19

9


+2𝜎

−2𝜎

3,200

2,800

2,400

2,000

2016 2017 2018 2019 2020

Index, 1941-43 = 10 (log scale)

Daily S&P 500 Index closing values through March 17, 2020:

displaced by Trump’s Trade War, now by a novel coronavirus

Sources: S&P Dow Jones Indices LLC, S&P 500 [SP500], from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/SP500), daily closing values through March 17, 2020; trend regression on natural

logarithm of daily closing values, April 1, 2016 – November 25, 2017, and two standard-error bandwidth by TZ Economics, projected forward through 2020 as if bad trade policy never happened after the tax cut.

Tax

Cut

Bubble

The China

SyndromeBurst

Trump

Jump

95%

Powell

Put

Tariff

Man 2

Tariff

Man 1

Tariff

Man 3

Hilary

Fade

Post-

Shanghai

Bubble

COVID-19

https://fred.stlouisfed.org/series/SP500

10


Conditional annualized daily volatility of the S&P 500 Index

through March 17, 2020

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.0 = “100 percent”

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

1987

Crash

Lehman

Brothers

Tea

Party

COVID-19

Dot.com

OPEC

Sources: S&P Dow Jones Indices LLC, S&P 500 [SP500], from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/SP500), daily closing values through March 17, 2020; conditional annualized standard

deviations of log changes of daily closing values of the S&P 500 Index estimated in a Threshold Autoregressive Conditional Heteroskedasticity (TARCH) model by TZ Economics.

Desert

Storm

https://fred.stlouisfed.org/series/SP500

11


Economists’ expectations for next recession better only one month

ago; Q: “When will the U.S. economy enter the next recession?”

13%

37% 37%

13%

0

10

20

30

40

2020 2021 2022 2023

February 2019 August 2019 February 2020Percent of respondents

Source: National Association for Business Economics (February 24, 2020) (https://files.constantcontact.com/668faa28001/4343463d-1a6b-4fa7-8c4a-8a80fd8d4123.pdf)

https://files.constantcontact.com/668faa28001/4343463d-1a6b-4fa7-8c4a-8a80fd8d4123.pdf

12


Your mileage may vary: because Hawaii had hit a couple idiosyncratic

headwinds, its real GDP growth lagged the U.S. average twice in 2010s

-4

-2

0

2

4

Quarterly annual percent changes (y-o-y)

2006 2008 2010 2012 2014 2016 2018 2020

Yen depreciation

Kilauea

East Rift

eruption

Tohoku

Seismic

Event

H1N1-A

The Great Recession

Aloha/ATA

shutdowns

Sources: Bureau of Economic Analysis, U.S. Department of Commerce (https://www.bea.gov/data/gdp/gross-domestic-product, https://www.bea.gov/data/gdp/gdp-state); U.S. quarterly data through 2019Q4, Hawaii

quarterly data through 2019Q3 including revisions, year-over-year growth rate calculations by TZE

U.S.

Hawaii

https://www.bea.gov/data/gdp/gross-domestic-product

https://www.bea.gov/data/gdp/gdp-state

13


Oahu visitor arrivals were engaged in the first breakout in 25 years

following years exposed to Japan’s persistent economic stagnation

Monthly, thousands, s.a. (log scale)

550

500

450

400

350

300

2501990 1995 2000 2005 2010 2015 2020

Sources: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/): monthly data estimated through March 2020; seasonal adjustment by TZ

Economics

Desert

Storm

Y2K

9/11

SARS

Aloha

AlohaTohoku

seismic

event

U.S.

recessions

shaded

https://www.hawaiitourismauthority.org/research/

http://dbedt.hawaii.gov/economic/mei/

14


.0

.1

.2

.3

.4

.5

0.2 = “20 percent p.a.”

1990 1995 2000 2005 2010 2015 2020

VR

ClampdownH1N1-A

Early

Easter

SARS

9/11

Y2K

Desert

Storm

Conditional monthly annualized volatility of domestic Oahu arrivals:

Oh snap, you picked this moment for a vacation rental clampdown?

Sources: Monthly data through December 2019 from Hawaii Tourism Authority, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei), Threshold Autoregressive Conditional Heteroskedasticity (TARCH) estimates of

annualized standard deviation of log changes of seasonally-adjusted monthly visitor arrivals by TZE

http://dbedt.hawaii.gov/economic/mei

15


Oahu visitor arrivals, at the tail end of a long run, were gifted entry by

Southwest Airlines, and a lump of coal from Honolulu’s City Council


560

540

520

500

480

460

440

420

4002015 2016 2017 2018 2019 2020

Vacation

rental

clampdown

COVID-19

Southwest

Airlines

Sources: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/): monthly data estimated through March 2020; seasonal adjustment and

regression by TZ Economics



16



80

70

60

50

40

30

202015 2016 2017 2018 2019 2020

Source: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/monthly-visitor-statistics/); monthly data through December 2019, seasonal adjustment using, nonlinear trend regression through July 2019

by TZE [ ln(VREVOVR3_D11) = −34.2837734267 + 0.0508333271106*t − 1.20633926677e-14*t5 ]; trend growth rate through July 2019 was 20.2 percent p.a. (2.2 percent p.a. for hotel-condo-timeshare visitors)

Through January 2020: monthly Oahu visitor arrivals (staying in a

rental house, private room, or shared room in a private house)

16k

+2𝜎

−2𝜎

28k

Vacation

Rental

Clampdown

August-December 2019 estimates:

Foregone vacation rental visitors −57,731

evaluated at 10 days LOS, $180 pppd: $103.97 million

August 2019 – July 2020 estimates:

Foregone vacation rental visitors −196,118

evaluated at 10 days LOS, $180 pppd: $353.01 million

https://www.hawaiitourismauthority.org/research/monthly-visitor-statistics/

17


0

10

20

30

40

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Apt/Hotel, B&B, Condo Hotel,

Hostels, Hotel, Timeshare, Other

≈4X capacity increase / 20 years

Thousand lodging units

Source: Hawaii DBEDT annual Visitor Plant Inventory reports (http://dbedt.hawaii.gov/visitor/visitor-plant/), disaggregation by TZ Economics

Ha

wa

ii Vis

itors

Bu

rea

u d

id n

ot s

urv

ey

Oahu traditional lodging capacity growth ended 34 years ago; capacity

growth since was in vacation rentals subverting exclusionary zoning

Vacation Rental39.010

39.240

35.4193.821

http://dbedt.hawaii.gov/visitor/visitor-plant/

18


41.314

36.238

31.580

0

10

20

30

40

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Haw

aii V

isito

rs B

ure

au

did

no

t su

rve

y

≈13X capacity increase / 27 years

Neighbor Isle traditional lodging capacity growth ended 28 years ago;

one-quarter now vacation rentals contesting global brands’ oligopoly

Vacation Rental 9.734

Thousand lodging units

Apt/Hotel, B&B, Condo Hotel,

Hostels, Hotel, Timeshare, Other

Source: Hawaii DBEDT annual Visitor Plant Inventory reports (http://dbedt.hawaii.gov/visitor/visitor-plant/), disaggregation by TZ Economics

http://dbedt.hawaii.gov/visitor/visitor-plant/

19



Tourism as a channel of transmission of economic impacts

20



240

200

160

120

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

International passengers

(excl. Canada)

International visitor arrivals

H1N1-A

Tohoku

NE Japan

seismic

event

COVID-19

Japan recessions shaded

Hawaii international passenger counts (excluding Canada) help predict

visitor arrivals, monthly estimates based on daily data through March 9

Sources: Monthly arrivals through January 2020, daily passengers through March 9, 2020 (at monthly rates) from Hawaii Tourism Authority and Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei,

http://dbedt.hawaii.gov/visitor/daily-passenger-counts/), Federal Reserve Bank of St. Louis, OECD-based Recession Indicators for Japan from the Peak through the Period preceding the Trough [JPNRECP]

(https://fred.stlouisfed.org/series/JPNRECP); seasonal adjustment by TZE


http://dbedt.hawaii.gov/visitor/daily-passenger-counts/

https://fred.stlouisfed.org/series/JPNRECP

21


Statewide international visitor arrivals estimates from daily passenger

arrivals data through March 16, 2020: a 35-40 percent drop, so far


260

240

220

200

180

1602015 2016 2017 2018 2019 2020

Sources: Hawaii Tourism Authority (https://www.hawaiitourismauthority.org/research/), Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/): monthly data estimated through March 2020 based on dailiy passenger counts

through March 16, 2020; seasonal adjustment by TZ Economics



22


International visitor arrivals’ history for the last thirty years provide

several precedents from which to calibrate the current Sudden Stop


240

200

160

120

801990 1995 2000 2005 2010 2015 2020



Desert

Storm

Y2K

9/11

SARS H1N1-A

Tohoku

seismic

event

Japan recessions

shaded

COVID-19

Kobe

earthquake



23


Domestic visitor arrivals have more muted reactions to Black Swan

events (less information asymmetry); COVID-19 could be the winner


600

500

400

300

2001985 1990 1995 2000 2005 2010 2015 2020

Desert

Storm

Y2K

9/11

COVID-19

UAL

pilots’

strike

Southwest



U.S. recessions shaded

Aloha

Aloha



24


Domestic visitor arrivals, elevated by Southwest Airlines’ entry, set up

like a bowling pin by HNL vacation rental crackdown for COVID-19


640

600

560

520

480

4402014 2015 2016 2017 2018 2019 2020

COVID-19

Southwest

Airlines

Vacation

rental

crackdown

25



Oahu housing market reactions

26


Looks like a pile-up in the condominium resale market: Oahu months of

inventory remaining at current absorption broke link after Clampdown

Source: Honolulu Board of Realtors, monthly data through January 2020 (https://members.hicentral.com/images/Documents/msr/MSR_Jan2020.pdf), seasonal adjustment by TZ Economics

0

1

2

3

4

Months remaining, seasonally-adjusted

2013 2014 2015 2016 2017 2018 2019 2020

Vacation

Rental

Clampdown

Condominium

Single-family

Correlation January 2013 – July 2019: 0.891118

https://members.hicentral.com/images/Documents/msr/MSR_Jan2020.pdf

27


Remember: existing home prices on Oahu were already stagnating

before last summer’s vacation rental clampdown; no obvious impacts

Thousand dollars, s.a. (log scale)

800

600

400

2002009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Single-family

Condominium

Vacation

Rental

Clampdown

5% p.a.

4% p.a.

Source: Honolulu Board of Realtors, monthly data through January 2020 (https://members.hicentral.com/images/Documents/msr/MSR_Jan2020.pdf), seasonal adjustment by TZ Economics

https://members.hicentral.com/images/Documents/msr/MSR_Jan2020.pdf

28


Oahu median existing home sales prices: last two valuation cycles

(bubbles?) in 2010s returned to longer-term, stable appreciation

Source: Honolulu Board of Realtors; monthly median prices, seasonal adjustment by TZE

Thousand dollars, s.a. (log scale)

700

600

500

400

300

200

1001990 1995 2000 2005 2010 2015 2020


29


FHFA all-transactions index of Oahu housing valuations, adjusted for

inflation, converged to trend during 2010s but slipped after mid-2018

+3𝜎

−3𝜎

2.4%

Index (constant dollars): 2019 = 100 (log scale)

120

100

80

60

40

201980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: Federal Housing Finance Agency (https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/HPI_AT_metro.csv), Bureau of Labor Statistics (https://data.bls.gov/cgi-bin/surveymost?r9); quarterly data through

2019Q3, seasonal adjustment, deflation, and trend regression on the stationary component (change in the natural logarithm) of constant-dollar valuations by TZE.


100.999.4

75.9

53.9

53.0

42.0

37.5

75.7

48.0

https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/HPI_AT_metro.csv

https://data.bls.gov/cgi-bin/surveymost?r9

30


Index (constant dollars): 2019 = 100 (log scale)

110

100

90

80

70

602009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

FHFA all-transactions index of Oahu housing valuations, adjusted for

inflation, converged to trend during 2010s but slipped after mid-2018

Break

100.5 100.9

+3𝜎

2.4%

−3𝜎Trend 1977-2019

Real valuation index

U.S. recession shaded


2019Q3, seasonal adjustment, deflation, and trend regression on the stationary component (change in the natural logarithm) of constant-dollar valuations by TZE.



31


De-trended real Oahu housing valuations give you the best feel for the

nature of the housing cycle over four decades, absence in late-2010s

-20

-10

0

10

20

Percent of real trend value

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025


Inflation

hedging

Japan

Bubble

Sub-prime

Bubble

Smooth

Sailing?


2019Q3, seasonal adjustment, deflation, and deviations from projections based on trend regression on the stationary component (change in the natural logarithm) of constant-dollar valuations estimated by TZE.



32



Interest rates and monetary policy

33


0

1

2

3

4

5

2008 2010 2012 2014 2016 2018 2020 2022

Percent

U.S. Treasury yields, FOMC fed funds rate projections reversed paths

from September 2018-2019, long-run “neutral” fed funds rate slipped

Taper

Tantrum

Source: Federal Reserve Board, monthly average constant-maturity yields through August 2019 (https://www.federalreserve.gov/releases/h15/) and FOMC Summary of Economic Projections (September 2019)

(https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20190918.htm) (median long-run rate is 2.5 percent), along with earlier S.E.P. postings in September 2018, December 2018, March 2019, and June 2019).

Trump Tax

Jump Cut30y

10y


Lehman

Brothers

September 2019 S.E.P.

FOMC fed funds rate

projections (means)

2.8

%2.6%

Sep 2018Dec 2018

March 2019

2y

June 2019

https://www.federalreserve.gov/releases/h15/

https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20190918.htm

34


Fed’s actions over the weekend, this week: take fed funds rate to zero,

restore CP funding facility (CPFF), primary dealer credit facility (PDCF)

0

1

2

3

4

5

Percent

2008 2010 2012 2014 2016 2018 2020 2022

10y

30y

O/N

Source: Federal Reserve Board (https://www.federalreserve.gov/releases/h15/; https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15)

3y

2y


Lehman

Brothers

https://www.federalreserve.gov/releases/h15/

https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

35


-3

-2

-1

0

1

2

Percentage points

1980 1985 1990 1995 2000 2005 2010 2015 2020

Spreads between yields on 10-year and 2-year U.S. Treasury Notes

narrowed to near zero; past reliable precursor of incipient recession

Source: Federal Reserve Board, monthly averages through March 2020 (https://www.federalreserve.gov/releases/h15)


(10yr minus 2yr)

https://www.federalreserve.gov/releases/h15

36


U.S. average 30-year fixed rate mortgage rates (+0.7 fees/points)

actually up slightly from record low 3.29% (week ending March 5)

Sources: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States (http://www.freddiemac.com/pmms/) and FRED, Federal Reserve Bank of St. Louis; (https://fred.stlouisfed.org/series/MORTGAGE30US).

0

4

8

12

16

Percent

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

18.63%

3.36%

http://www.freddiemac.com/pmms/

https://fred.stlouisfed.org/series/MORTGAGE30US

37


10

20

30

40

50

60

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Oahu conventional mortgage debt service-to-income ratio, a measure

of housing affordability, currently among the most affordable ever

Sources: Bank of Hawaii, Honolulu Board of Realtors, U.S. Department of Housing and Urban Development, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/MORTGAGE30US; annual average of

weekly rates); TZE calculations on annual data for single-family homes, 1976-2018 (full-year calculation) and estimate for first half 2019, under conventional mortgage lending assumptions

*Fannie Mae (May 30, 2017) Selling Guide (https://www.fanniemae.com/content/guide/selling/b3/6/02.html)†FHFA (https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Limiting-Fannie-Mae-and-Freddie-MacLoan-Purchases-to-Qualified-Mortgages.aspx)

Not Affordable Debt-to-income

thresholds

45%*

43%†

[3.5]−1

28.57%

Mortgage debt-service to median 4-person family income ratio (percent), Oahu single-family homes

Relatively

Affordable28.5%29.4% 29.96%

https://fred.stlouisfed.org/series/MORTGAGE30US

https://www.fanniemae.com/content/guide/selling/b3/6/02.html

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Limiting-Fannie-Mae-and-Freddie-MacLoan-Purchases-to-Qualified-Mortgages.aspx

38



Same as it ever was? Life after the 1918-19 Spanish Flu pandemic, etc.

39


Monthly, thousands (staying 2 days or longer), s.a. (log scale)

2.0

1.6

1.21.0

0.8

0.6

0.4

0.21922 1924 1926 1928 1930 1932 1934 1936 1938

Monthly Hawaii visitor arrivals in the 1920-30s—excluding passengers

on ships in transit—exhibited business cycle and jumps just as now

U.S. recessions shaded The Great Depression

Stock

Market

Crash

Maritime

Strikes

Oct. 1936 to

Feb. 1937

Sources: George T. Armitage, Hawaii Tourist Bureau, “Hawaii’s Tourist Business,” Hawaii Territorial Planning Board An Historic Inventory of the Physical, Social and Economic and Industrial Resources of the Territory of

Hawaii (February 8, 1939), p. 317; U.S. Bureau of Labor Statistics "The Maritime Strikes of 1936-37." Monthly Labor Review 44, no. 4 (1937): 813-27. Accessed January 29, 2020 (www.jstor.org/stable/41815101)

Pan-Am Hawaii Clipper

The Roaring Twenties

West Coast

Waterfront

Strike

http://www.jstor.org/stable/41815101

40


Domestic arrivals 6-months before and 6-months after the 9/11 event

(“month 7”), and after that: “is it L-shaped, U-shaped, or V-shaped?”

Thousands, s.a. (log scale)

300

290

280

270

260

250

240

230

220

210

200

190

180

170

160

150

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Oahu domesticNeighbor Isle domestic

Sources: Hawaii Tourism Authority, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/), seasonal adjustment using Census X-13 ARIMA filter; seasonally-adjusted data may be downloadable from UHERO and the

DBEDT Data Warehouse. Simply translating month six values to a base period (divide all other months by its values) will index proportionate impacts to that starting point.

Oahu (right scale)

Neighbor Isles

(left scale)

Months


41


Thousands, s.a. (log scale)

180

160

140

120

100

80

100

90

80

70

60

50

40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Oahu internationalNeighbor Isle international

International arrivals 6-months before and 6-months after the 9/11 event

(“month 7”), and after that: “is it L-shaped, U-shaped, or V-shaped?”

Sources: Hawaii Tourism Authority, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei/), seasonal adjustment using Census X-13 ARIMA filter; seasonally-adjusted data may be downloadable from UHERO and the

DBEDT Data Warehouse. Simply translating month six values to a base period (divide all other months by its values) will index proportionate impacts to that starting point.

Oahu (right scale)

Neighbor Isles

(left scale)

Months


The SARS math (the bottom line):

Foregone visitor days, March-July 2003: 1.0411 mil.

Avg. daily intl. visitor expenditure (2003): $228.22

Foregone intl. tourism receipts (2003$): $237.60 mil.

Ratio of Urban Hawaii CPI-U 2019/2003:

(281.585/184.5) = 1.526 (inflation factor)

Foregone intl. tourism receipts (2019$): $362.58 mil.

Assumption: zero Iraqnaphobia impacts, international

impacts only to Japan, Asia, and Canada (half-weight)

Hawaii international visitor days (millions, s.a., log scale)

-.12

-.08

-.04

.00

.04

.08

.12

1.4

1.3

1.2

1.1

1.0

0.9

0.8

2002 2003 2004 2005

Residual

Actual

Fitted

Dependent Variable: Hawaii international visitor days (millions, s.a.)Method: Least SquaresDate: 02/05/20 Time: 15:02Sample: 2002M06 2005M12Included observations: 43

Variable Coefficient Std. Error t-Statistic Prob.

C 71.04634 30.08115 2.361823 0.0233@TREND -0.092303 0.039725 -2.323561 0.0255

@TREND^4 2.25E-11 9.64E-12 2.330655 0.0250DUMMYSARS -0.208211 0.026497 -7.857914 0.0000

R-squared 0.678778 Mean dependent var 1.201553Adjusted R-squared 0.654069 S.D. dependent var 0.089668S.E. of regression 0.052739 Akaike info criterion -2.958507Sum squared resid 0.108475 Schwarz criterion -2.794675Log likelihood 67.60791 Hannan-Quinn criter. -2.898091F-statistic 27.47049 Durbin-Watson stat 2.236366Prob(F-statistic) 0.000000

1.4

1.3

1.2

1.1

1.0

0.9

0.8

2002 2003 2004 2005

Int. visitor days, s.a. (model)± 2 standard errors

Forecast (model): Intl. visitor days

Actual: International visitor days

Forecast sample: 2002M06 2005M12

Included observations: 43

Root Mean Squared Error 0.050226

Mean Absolute Error 0.039894

Mean Abs. Percent Error 3.389676

Theil Inequality Coefficient 0.020853

Bias Proportion 0.000000

Variance Proportion 0.096563

Covariance Proportion 0.903437

Theil U2 Coefficient 0.569519

Symmetric MAPE 3.376099

Sources: Hawaii DBEDT Monthly Economic Indicators (http://dbedt.hawaii.gov/economic/mei/) and State of Hawaii Data Book

(2004) (http://dbedt.hawaii.gov/economic/databook/db2004/), U.S. BLS (https://data.bls.gov/cgi-bin/surveymost?r9) Slide copyright 2020

Post-9/11 recovery

SARS

SARS episode, March

through July 2003


http://dbedt.hawaii.gov/economic/databook/db2004/


43


International visitor days before and after two famous Black Swans;

SARS associated with $360 million foregone tourism receipts (2019$)

Sources: Monthly data from Hawaii Tourism Authority and Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei), Federal Reserve Bank of St. Louis, OECD-based Recession Indicators for Japan from the Peak through the

Period preceding the Trough [JPNRECP] (https://fred.stlouisfed.org/series/JPNRECP); seasonal adjustment by and polynomial regression estimates by TZE

Monthly, million days, s.a. (log scale)

1.6

1.4

1.2

1.0

0.81997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

SARS

9/11

Japan recessions shaded


https://fred.stlouisfed.org/series/JPNRECP

44


Hawaii real General Fund tax revenues now are headed for Sudden Stop

of a magnitude at least as large as experienced several times before

Quarterly, million constant 2019$, s.a. (logs)

2,000

1,600

1,200

800

4001970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Reagan

Reagan

Waihee

WaiheeCayetano

Lingle


Sources: Quarterly data from Hawaii Department of Taxation and Hawaii DBEDT (http://dbedt.hawaii.gov/economic/mei), U.S. Bureau of Labor Statistics (https://data.bls.gov/cgi-bin/surveymost?r9); seasonal adjustment,

deflation, and regression estimate on the stationary component of real General Fund revenues by TZE

Lehman

Brothers



45


Hawaii real General Fund tax revenues and post-Great Recession

trajectory through calendar 2019: set up like a bowling pin?



Quarterly, million constant 2019$, s.a. (log scale)

2,000

1,600

1,200

8002006 2008 2010 2012 2014 2016 2018 2020

Lingle

trick (2)

The Great

Recession

(U.S.)

Lingle

trick (1)

Abercrombie fade“In Hawaii, every

year is a record year”

H1N1-A

COVID-19

(TBD)



46


Hawaii real General Fund revenues, seasonally adjusted, indexed to

“Quarter 2 = 100 (in parentheses)” and six episodes of “compression”



80

85

90

95

100

105

110

1 2 3 4 5 6 7 8 9 10

Abercrombie (2012Q3)

80

85

90

95

100

105

110

1 2 3 4 5 6 7 8 9 10

Dot.com recession (2001Q1)

80

85

90

95

100

105

110

1 2 3 4 5 6 7 8 9 10

Double-Dip recession (first; 1980Q1)

80

85

90

95

100

105

110

1 2 3 4 5 6 7 8 9 10

Gulf War (1991Q1)

80

85

90

95

100

105

110

1 2 3 4 5 6 7 8 9 10

SARS + Iraqnaphobia (2002Q4)

80

85

90

95

100

105

110

1 2 3 4 5 6 8 9 10

Great Recession (2008Q1)

Desert

Storm

9/11

SARS Lehman

Brothers

Reagan

tax cut

Lingle

trick

Ige Primary

80.1

H1N1-A

95.993.4

89.3 89.091.9



47



Pau

Housing, the Economy, and COVID-19 - SaleCore

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