xiaozhen chen hai tran ng man 1. 2 what is a recession? a recession is a period of general...

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SPP1 topic 2

XiaoZhen ChenHai TranNg Man

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Recession

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What is a recession? A Recession is a period of general economic

decline; typically defined as a decline in GDP for two or more consecutive quarters.

A Recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market.

Recession

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Recession is a significant decline in activity across the economy, lasting longer than a few months.

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession.

Recession definition con’t

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A Recession is generally considered less severe than a depression, and if a recession continues long enough it is often then classified as a depression.

There is no one obvious cause of a recession, although overall blame generally falls on the federal leadership, often either the president himself, the head of the Federal Reserve, or the entire administration.

Recession definition con’t

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When did the recent recession begin? According to CNN.com. The National Bureau

of Economic Research declares that the recession begin Dec,2007.

Recession--Begin

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When did the recent recession end? The recession officially ended in June 2009,

according to the Business Cycle Dating Committee of the National Bureau of Economic Research, the official arbiter of such dataes.

Recession-End

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GDP declines House market collapse: Falling housing

prices and sales Industrial output and sales declines Drop-off in business investment Slowdown in retail sales Banks collapse Many company out of business cause high

unemployment

Recession—Why recession in 2007

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Job lost, unemployment increase. Oil shock. Job losses and employer cutbacks in hours

worked, was sufficient to cause the level of payroll employment to erode enough so that the start date of recession was pushed up to November-December 2007, some four to five months sooner than it might have done otherwise as the outcome of the oil shock.

Recession—Reason why there is a recession in 2007 con’t

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Reason that show the end of Recession. According to the committee, such indicator as

gross domestic product and industrial production appear to have bottomed out in June 2009

The committee determined that a trough in business activity occurred in the U.S. economy in June 2009

The committee said that the trough marks the end of the recession that began in December 2007 and the beginning of an expansion.

Recession—Reason to end

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The committee determine that a trough occurred in June 2009, and determined only that the recession ended and a recovery began in that month.

The trough marks the end of the declining phase and the start of the rising phase of the business cycle.

Recession—Reason to end Con’t

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The NBER committee made its determination after considering numerous economic data and concluding that several key measures of economic activity — including total output and industrial production — pointed to June 2009 as the trough of that business cycle.

Recession-Reason to end con’t

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The economy started growing again in the July-to-September quarter of 2009, after a record four straight quarters of declines. Thus, the April-to-June quarter of 2009, marked the last quarter when the economy was shrinking. At that time, it contracted just 0.7 percent, after suffering through much deeper declines. That factored into the NBER's decision to pinpoint the end of the recession in June.

Recession-Reason to end Con’t

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According to the above graphs, we could see that GDP, Personal income, Industrial production index, Retail sales and food services and employees are slightly change to positive in Mid 2009.


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Recent Recession

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The demand for new homes during recession.

Recent Recession—Demand New Homes

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Recent Recession—Demand for new homes

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Recession—Demand for new homes

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According to the graph, the demand for the new homes is decreasing during the recent recession(2007-2009)

Recent Recession—demand for new homes

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Demand for existing homes

Recession—Demand for existing homes

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According to the graph, we could see that the sale of existing home is decreasing during recession, although it has a slightly change to increase during 2008 but it falls again quickly in 2008 to decrease on sale of the existing homes during recession. (2007-2009)


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Supply of new homes

Supply of new homes

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Supply of new homes Con‘t

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According to the above data, the supply of new homes seems to increase during recent recession. (2007-2009)

Supply of new homes con’t

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Supply of existing homes


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According to the above data, the supply of the existing homes seem to increasing during recent recession. (2007-2009)


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Are the market for new homes and the market for existing homes related? How? Explain.

From my point of view, they are related. For example, If there was 1000 buyers in the market looking for a house to buy and they are only buying one for living. One more of those buyer buy an existing home that means one less person will buy a new home. Therefore, If 500 of them buy a new home, that means only 500 of them will buy an existing home. If there is no existing home available, Those 500 buyer who buy an existing home might look for a new home to buy, then the demand for new home will increase.

Market for new and existing homes related?

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Furthermore, If there was so many existing homes in the market that was unable to sold out. Those facts will effect the market for new homes because buyer will compare the price of the two and will buy the cheaper one. That means the existing home market will effect the new home market.

Market for new and existing homes related? Con’t

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Moreover, If the company who build the house knows that there was so many home in the market that unable to sold out, they might build less of the new homes. They build less of the new homes because they will affect that their new home might unable to sold out as well.


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Finally, the price of the two will effect. If there was so many existing homes in the market, the new home price will effect because if the new home price is so high, people will decide to buy the existing homes. Conversely, if the price of the new homes are high, the existing home price could increase as well. And If there is less new home build, the existing home price could increase.


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On the other hand, they might not related. For example, if people who is looking for only the new home to buy and won’t consider the price or other factor of the existing homes; then there was not related between the market for new and existing homes. But overall, I believed they are related.


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years Quantity of new homes sales

2000 877

2001 908

2002 973

2003 1086

2004 1203

2005 1283

2006 1051

2007 776

2008 485

2009 374

Quantity of new homes

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1998 2000 2002 2004 2006 2008 20100

200

400

600

800

1000

1200

1400Quantity of new home sales

Series1

years

Quanti

ty o

f new

hom

es

Quantity of new homes graph

Recession

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Year Quantity of existing home sales

2000 5174

2001 5335

2002 5632

2003 6175

2004 6778

2005 7076

2006 6478

2007 5652

2008 4913

2009 5156

Quantity of existing home sales

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1998 2000 2002 2004 2006 2008 20100

1000

2000

3000

4000

5000

6000

7000

8000

Quantity for existing home sales

Series1

years

Quanti

ty o

f exis

ting h

om

e s

ale

s

Recession

Quantity of existing home sales graph

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1998 2000 2002 2004 2006 2008 20100

1000

2000

3000

4000

5000

6000

7000

8000

Quantity of new and existing home sales

new homesexisting homes

year

Quanti

ty

Compare Quantity of new home and existing home sales graph

Recession

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According to the above data, The quantity of new and existing homes sale seem to increase the quantity from 2000-2005, then decrease the quantity of homes sale from 2006-2009.

The quantity of existing homes sale is six times more than the quantity of new homes sale.

Explanation

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year price

2000 169000

2001 175200

2002 187600

2003 195000

2004 221000

2005 240900

2006 246500

2007 247900

2008 232100

2009 216700

Price of new homes

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1998 2000 2002 2004 2006 2008 20100

50000

100000

150000

200000

250000

300000

Price for new homes

Series1

years

Pri

ce f

or

new

hom

es

Price of new homes graph

Recession

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year

price of existing homes

2000 143600

2001 153100

2002 165000

2003 178800

2004 195400

2005 219600

2006 221900

2007 219000

2008 198100

2009 172500

Price of existing homes

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1998 2000 2002 2004 2006 2008 20100

50000

100000

150000

200000

250000

Price for existing homes

Series1

years

pri

ces f

or

exis

itng h

om

es

Recession

Price of existing homes graph

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1998 2000 2002 2004 2006 2008 20100

50000

100000

150000

200000

250000

300000

Price for new and existing homes

new homesexisting homes

years

Pri

ce

Compare price of new and existing homes

Recession

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The price of new and existing home is increasing from 2000-2007 and start to decrease from 2007-2009.

The new home price is higher than the existing home price at all time by a few thousands.

Explanation

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year Dollars in Billions

2000 9951.5

2001 10286.2

2002 10642.3

2003 11142.1

2004 11867.8

2005 12638.4

2006 13398.9

2007 14061.8

2008 14369.1

2009 14119

GDP

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1998 2000 2002 2004 2006 2008 20100

2000

4000

6000

8000

10000

12000

14000

16000

GDP

Series1

year

Dollars

in B

illions

GDP graph

Recession

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year

Dollars in Billions

2000 449

2001 472.4

2002 509.5

2003 577.6

2004 680.6

2005 775

2006 761.9

2007 628.6

2008 472.5

2009 352.1

Residential Fixed investment

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1998 2000 2002 2004 2006 2008 20100

100

200

300

400

500

600

700

800

900

Residential Fixed investment

Series1

Year

Dollar

in B

illions

Residential Fixed investment Graph

Recession

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1998 2000 2002 2004 2006 2008 20100

2000

4000

6000

8000

10000

12000

14000

16000GDP and Residential fixed investment

GDPResidential fixed investment

Year

Dolla

r in

Billi

ons

Compare GPD and Residential Fixed investment Graph

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GDP is increasing from 2000-2008 and decrease during 2008-2009.

Residential Fixed investment is increasing from 2000-2005. and decreasing from 2005-2009.

GDP is higher at all time than Residential Fixed investment.

Explanation

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Demand and supply of new homes from 2000 to 2009

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200 400 600 800 1000 1200 14000

50000

100000

150000

200000

250000

300000

S_2009

S_2000 D_2009

D_2005

D_2005


P ($)

Q (units)

E_2000

E_2009

E_2005


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From 2000 to 2005:◦ Demand of new house increases, shift the

demand curve to right.◦ Supply of new house did not change.◦ The equilibrium price increases and equilibrium

quantity of new house increases.


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From 2005 to 2009◦ Demand of new house decreases, shift the

demand curve to left.◦ Supply of new house decrease, shift the supply

curve to left .◦ The equilibrium price decreases and equilibrium

quantity of new house decreases.


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Demand and supply of existing homes from 2000 to 2009

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5000 5500 6000 6500 7000 75000

50000

100000

150000

200000

250000


E_2009

E_2000

E_2005

D_2000

D_2009

D_2005

S_2009

S_2000

P ($)

Q (units)


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From 2000 to 2005:◦ Demand of existing house increases, shift the

demand curve to right.◦ Supply of existing house did not change.◦ The equilibrium price increases and equilibrium

quantity of existing house increases.


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From 2005 to 2009◦ Demand of existing house decreases, shift the

demand curve to left.◦ Supply of existing house decrease, shift the

supply curve to left .◦ The equilibrium price decreases and equilibrium

quantity of existing house decreases.


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New homes market from 2006 to 2009

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Year Quantity (units) Price ($)

2006 1051 246500

2007 776 247900

2008 485 232100

2009 374 216700



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300 400 500 600 700 800 900 1000 1100200000

210000

220000

230000

240000

250000

260000


E_2009

E_2006E_2007

E_2008

S_2009

S_2006

S_2007

D_2009

D_2008

D_2007

D_2006

P ($)

Q (units)


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From 2006 to 2007◦ Quantity of new house decrease.◦ Price of new house increase.◦ Supply decreases, shift the curve to left.◦ Demand decreases, shift the curve to left.◦ Supply dominates demand in the market of new

house.


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From 2007 to 2008◦ Quantity of new house decrease.◦ Price of new house decrease.◦ Demand decreases, shift the demand curve to

left.◦ Supply increases, shift the demand curve to right.◦ Demand dominates supply in the market of new

house.


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From 2008 to 2009◦ Quantity of new house decrease.◦ Price of new house decrease.◦ Supply increases, shift the curve to right.◦ Demand decreases, shift the curve to left.◦ Demand dominates supply in the market of new

house.


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Existing homes market from 2006 to 2009

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Year Quantity (units) Price ($)

2006 6478 221900

2007 5652 219000

2008 4913 198100

2009 5156 172500



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4800 5000 5200 5400 5600 5800 6000 6200 6400 66000

50000

100000

150000

200000

250000


P ($)

Q (units)

E_2006

E_2007

E_2008

E_2009

S_2006

S_2008

D_2006

D_2007

D_2008


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From 2006 to 2007:◦ Quantity of existing house decrease.◦ Price of existing house decrease.◦ Supply increases, shift the curve to right.◦ Demand decreases, shift the curve to left.◦ Demand dominates supply in the market of

existing house.


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From 2007 to 2008:◦ Quantity of existing house decrease.◦ Price of existing house decrease.◦ Supply did not change.◦ Demand decreases, shift the curve to left.◦ Demand dominates supply in the market of

existing house.


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From 2008 to 2009:◦ Quantity of existing house increase.◦ Price of existing house decrease.◦ Supply decreases, shift the curve to left.◦ Demand did not change.◦ Supply dominates demand in the market of

existing house.


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http://www.investorwords.com/4086/recession.html

http://www.investopedia.com/terms/r/recession.asp

http://money.cnn.com/2008/12/01/news/economy/recession/index.htm

http://economix.blogs.nytimes.com/2010/09/20/the-recession-has-officially-ended/?scp=8&sq=current%20recession%20end?&st=Search

Work cited











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http://news.yahoo.com/s/atlantic/20100920/cm_atlantic/recessionofficiallyendedjune2009whatitmeans5092

http://www.creditwritedowns.com/2010/09/the-recession-ended-in-june-2009.html

http://articles.latimes.com/2010/sep/21/business/la-fi-recession-over-20100921

http://www.cbsnews.com/stories/2010/09/20/business/main6884342.shtml

Work cited con’t










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http://www.creditwritedowns.com/2010/10/demand-for-new-homes-in-u-s-is-far-below-prior-records.html

http://www.businessinsider.com/awesome-existing-home-sales-charts-from-calculated-risk-2010-4

http://wallstreetpit.com/41827-existing-home-sales-worst-on-record

Work Cited Con’t







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http://www.recharts.com/NewHomeSales.html

http://www.taintedalpha.com/tag/existing-home-sales-months-supply/

http://www.ritholtz.com/blog/2010/09/its-official-recession-ended-june-2009/

http://calculatedriskimages.blogspot.com/2010/08/existing-home-months-of-supply-july.html

Work Cited Con’t







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http://www.calculatedriskblog.com/2010/09/lawler-again-on-existing-home-months.html

http://seekingalpha.com/article/74332-new-home-sales-inventory-chart-you-re-going-the-wrong-way

http://www.eclectecon.net/2009/01/the-causes-of-the-200809-recession.html

http://www.marketwatch.com/story/us-recession-began-in-december-2007-nber-says

http://useconomy.about.com/od/grossdomesticproduct/a/cause_recession.htm

Work Cited Con’t










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Thank you

xiaozhen chen hai tran ng man 1. 2 what is a recession? a recession is a period of general...

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