Paul Ballew, D&B's Chief Economist, assesses the housing industry based on Dun & Bradstreet's proprietary data on delinquencies and failures.

1. D&B U.S. Business Insights
Monthly Report
Published March 2012
by Paul Ballew, D&B Chief Economist
D&B Housing Report Construction Delinquent Dollars: All States
The current economic cycle has been
the most unique in recent history
due to the severe imbalances that
preceded the downturn and drove
the severity of the contraction. His-
tory has shown that the process of
correcting for extreme imbalances
usually takes time and is not a linear
journey.
Among the imbalances during the current economic cycle,
none was more disruptive than the run-up in housing and
the subsequent burst of the bubble. Home prices in some por-
tions of the U.S. surged in excess of 150 percent between 2000 *
and 2006. The resulting correction has resulted in historic levels
of foreclosures, declines in home values and a severe reduction
in household net worth. The correction in housing has been
a significant drag on the economic recovery and a primary fac-
tor for its hesitant behavior, since to some degree the housing Real Estate Delinquent Dollars: All States
industry correlates with the U.S. economic recovery.
Dun & Bradstreet has recently assessed the housing industry
using our proprietary data on delinquencies and failures. This
month’s report provides a perspective on the industry’s journey
back to health. The insights on the housing sector are broad-
based, but two significant conclusions arose from the re-
search on the sector: 1) the healing process is progressing, but
the sector is still going through the adjustment process and
likely will not return to full health until the middle stages of
the decade at the earliest and 2) the challenges in housing are
increasingly becoming geographically concentrated with the
worst-hit regions demonstrating few signs of improvement
while other regions are shifting into a mild recovery.
*Department of Planning and Development
www.dnb.com ©2012 Dun & Bradstreet

2. D&B U.S. Business Insights Monthly Report
Housing Delinquent Dollars: The Troubled States
*
Delinquencies and Failure Data cies have been more prevalent in the Real Estate sub-sec-
tor, which also shows slightly higher declines since 2010,
are Insightful signifying a faster recovery compared to the Construc-
Consistent with the belief that the worst is behind us, tion sub-sector.
the percentage of dollars 91 days past due in the Con-
A closer look at the states shows a fairly consistent pat-
struction and Real estate sectors in the D&B database
tern wherein Nevada and Arizona feature consistently
shows a sharp downturn starting mid-2011. Delin-
in the list of states (see tables in the appendix) projecting
quency levels are considerably lower than the beginning
the highest percent of delinquent dollars (91 days past
of 2010, suggesting the worst of the storm has clearly
due) and the highest percent of businesses 91 days de-
abated. Importantly, excluding four states (Arizona,
linquent. In addition, the review of quarterly delinquent
California, Florida and Nevada) that have been identified
dollars and businesses between 2008 and 2011 identify
as hotbeds of the housing bubble and still struggling
a few more problem states such as Utah and Illinois. The
pockets of the country, delinquency levels are consistent-
better states include Alaska, Maine, North Dakota,
ly lower than the peak in 2008 and 2009 and the trends
West Virginia and Vermont. North Dakota and Kentucky
are positive.
feature the fastest recovery rates in terms of, respective-
One of the most startling elements of this pattern is ly, declining delinquent dollars and delinquent business-
the gap in delinquencies between the upper and lower es. These states are also leading the economic recovery
tiered sectors – the most severely impacted states have due in part to their dependency on the natural resources
delinquency rates almost six times higher than the best sector.
performing states, confirming that the healing process
Overall, from D&B’s perspective, the housing sector is
in the most severely impacted states will take time. The
showing signs of restoration compared to its recession
same picture is also presented when the sub-sectors are
days, with most of the recovery having taken place in
studied individually including the Real Estate sub-sector.
the past year. Nevertheless, the recovery will be incom-
An investigation on failures and bankruptcies in the two plete until the troubled states are able to pull out of
Housing sub-sectors of Construction and Real-Estate their quandary, and this journey is still in its early stages.
also shows signs of the upturn (see tables in appendix). So, some bright spots? Yes. However, in betting on a
Although failures and bankruptcies are still considerably housing recovery it is important to focus on the old
above 2006 pre-recession levels, the significant decrease adage, “location, location, location.”
since 2010 is once again notable. Failures and bankrupt-
*Department of Planning and Development
www.dnb.com ©2012 Dun & Bradstreet

3. D&B U.S. Business Insights Monthly Report
APPENDIX
Failures and Bankruptcy in Construction & Real Estate
States with Lowest Delinquent Dollars
*
States with Lowest Delinquent Businesses
States with Highest Delinquent Dollars
*Department of Planning and Development
www.dnb.com ©2012 Dun & Bradstreet

4. D&B U.S. Business Insights Monthly Report
States with Highest Delinquent Businesses
Quarterly Delinquent Businesses: 2008-2011 Quarterly Dollars 91 Days Past Due: 2008-2011
*
*Department of Planning and Development
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