Why Portland Home Prices and Building Permits Rise While the Suburbs Recover Slowly

The full answer to the question in the title is in the Census Bureau statistics and details, however you can see what is happening in this simple statement I received via email correspondence with a Portland area economist.

“But many suburbs look like they aren’t returning to normal any time soon. Excess inventory – still unsold – must be scaring off developers in certain communities. For those cities, this is a very nervous making. Will they ever fully recover?

Meanwhile, developers seem optimistic that they can continue selling apartments and condos to the huge numbers of younger adults with college degrees that keep moving to the City of Portland and avoiding the suburbs.“

That is it in a nut shell.

Bankruptcy Index

In the spirit of the highly successful University of Oregon Index of Economic Indicators, I decided to start work on an Oregon Bankruptcy Index.

The goal of this index would be to provide a summary of the vast available economic data as it pertains to bankruptcy filing and bankruptcy risk in Oregon.

The method behind this index might gauge unemployment levels, interest rates, business loans, and other economic criteria.  The data I review and include will depend highly on how my econometric analysis from earlier posts turns out.  Data with a large correlation would be prime for more research and possible addition into the index.  A solid index of numbers might then allow for prediction of future bankruptcy filings.

The obvious benefit of this index could be for real estate companies, banks and investors.  The index might help gauge economic and legal/litigation risk levels.  After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, bankruptcies went down significantly only to rise up slowly towards the current economic downturn.  Bankruptcy lawyers have learned the law and are now better at getting their clients though the new regulations with five years of experience against the 2005 legal changes.  The index might be able to include and factor in such changes in the regulatory environment.

Bankruptcy Charts

Below are early graphs of my Bankruptcy data project.

The data seems pretty straight forward at first.  Bankruptcies slowly climb upward from early 2008.  Divorces stayed fairly steady and the Federal funds rate and employment statistics are too small to contribute significantly to this chart.   However the next chart examines the same numbers with the log value of each one.

Notice the complete collapse of the Fed rate.  This is in connection with the economic recession and intended  lowering of interest rates.  The log version shows the Bankruptcy and Divorce data almost converging.    It will be interesting to see how the regression analysis runs with this data.

The data is from the following sources:

http://www.bankruptcy-statistics.com/ (Bankruptcy numbers)

http://www.dhs.state.or.us/dhs/ph/chs/data/div.shtml (Divorce numbers)

http://www.bls.gov/ (Unemployment Numbers)

http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm (Federal Funds Rate)

Bankruptcy Surge

http://www.huffingtonpost.com/2010/01/04/bankruptcies-surge-32-per_n_410824.html

I copied relevant portions of the text from the article above below.  There is some really good analysis of the 2005 Bankruptcy law.  John Pottow, the bankruptcy professor from the University of Michigan is correct in his points that the law just made more paperwork while not changing the dynamics of people in serious debt.

Its also really fascinating that Alaska and Nebraska, the states with the lowest bankruptcy increases saw bankruptcies grown by 12%.  Thats still a big jump in bankruptcies.

“For three years, filings have been steadily rising back toward levels reached early in the decade before Congress overhauled the nation’s bankruptcy laws. The 2005 alterations made bankruptcy filings more cumbersome, a move that followed fears from lenders that some consumers were abusing the system to wipe away debts.

Bankruptcies surged to slightly more than 2 million in 2005 as consumers rushed to file before the new law took effect but then plummeted to 600,000 in 2006. They’ve been climbing ever since and in 2009 became the seventh-highest year on record, behind only the years 1998 and 2001-2005.

The 2005 spike had been preceded by a steady climb from 1.5 million in 2001 to 1.6 million in 2005.

John Pottow, a bankruptcy professor at the University of Michigan, said the return to the highs of earlier this decade illustrates the failures of the 2005 overhaul bill. He said the measure largely made filings more costly and time-consuming by forcing consumers to undergo a paperwork-heavy test to determine eligibility for Chapter 7 bankruptcy and adding liability for attorneys who provide help.

“It never made sense in the first place that you could change the laws and make all these bankruptcies go away,” said Pottow, who would like to see the 2005 law changes repealed. “If people are encountering financial distress, you can only scare them away for so long before they come back again.”

While every state saw a rise in bankruptcies, Alaska (up 12 percent), Nebraska (12 percent) and North Dakota (14 percent) performed best.”

I have an Equation

For my bankruptcy project I intend to study the relationship of Oregon and/or nationwide bankruptcy filings against a series of factors.  I became curious of this subject in my bankruptcy work.

This is a continuation of an earlier post on an economic project I am working on.

The main variable being The number of Bankruptcy filings in a region every month for a series of years. The realtion of this value will be tested relatively to the following variables (each according to monthly numbers).

• The Federal Funds rate, the interest rates that which banks offer each other loans.
• Regional unemployment statistics.
• Home prices (ie median value, assessed value or market prices).

Those three are the primary values I expect to have significant relationships to bankruptcy filings.  There is however an additional “wild card” variable:  Divorce data.  I will include divorce filings by state to include them in the equation.

Hopefully when the data is compiled we can see if there is a meaningful correlation between bankruptcy and divorce filings.  Expect more to come on this subject.  There is quite a bit of data to mine.

More Bankruptcy Data

I started compiling data from the usual government sources.  The BLS and the Census.   These variables should be useful in comparing bankruptcy data with individual and statewide  unemployment levels.  Empirically one would assume that states or time periods with increased unemployment levels would have more bankruptcy filings.

My initial equation would then be B/K (Chapter 7 and Chapter 13) = C + X + Y +Z + Unemployment (growth or real levels).  C being a constant value determined by the Regression program, X, Y, and Z are to be determined variables.

http://www.census.gov/govs/statetax/

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

My knowledge of creditor-debtor matters should be shared, so below is  a tip on privacy.

Creditor-Debtor Tip #1:

Go to http://www.whitepages.com/ and search for yourself.  Did you find your home address?  If you don’t like any address you see (ie for privacy concerns), then click the green tab next to the name titled “edit details”.  You can also replace them with more appropriate info like a business address, social media profile, email or twitter account.  Remember that your creditors, vampires, creepers and the less nefarious direct mailers will look at free online directories first when they want to track you down.  Bear in mind that if a creditor cant serve you and they have your email, then they may try to get the Court to allow service of summons by email.

Bankruptcy Research Project

I am currently working on a bankruptcy economics project. Hopefully I will be able to combine my academic background with my current work specialization. I already complied an amazing amount of nationwide bankruptcy data. Now I just have to find some other fun variables to run against the bankruptcy information.

The links to my initial sources are below. The open source application gretl will be great for my regression and analysis of the date. To the non-economic viewers, a regression analysis is using data to create a function that shows correlation between variables. Please note that last sentence is an extremely simplified explanation, for more data please see http://elsa.berkeley.edu/sst/regression.html. Essentially a dependent variable is tested using a computer program (that preforms the OLS regression) against several sets of data. The end benefit of this project would be possible forecasting for future bankruptcy numbers.

http://www.bankruptcy-statistics.com/

http://bdp.law.harvard.edu/index.cfm

http://lopucki.law.ucla.edu/index.htm

http://www.learneconometrics.com/gretl.html

Any ideas for resources, data or interesting testing variables is appreciated.