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28 HOUSING MARKET CONTINUES GRADUAL MOVE TOWARD RECOVERY Housing and economic activity has returned to or exceeded normal levels in 68 of about 360 metropolitan areas in the country (about 19 percent) as of the end of Q1 2015, according to the National Association of Home Builders (NAHB)/First American Leading Markets Index (LMI). e new total represents a year-over-year increase of seven markets, according to NAHB. "e increase is heavily driven by the increase in metro areas employment index," NAHB Chief Economist David Crowe said. "e number of markets back to or above normal in employment levels increased from 30 to 56 over the year. e number of markets returning to house price levels last seen in the early aughts has remained high at 95 percent of all metros measured. e slowest indicator to return to normal has been single-family permits as only 7 percent of the listed metros are issuing as many or more permits compared to the early aughts." e score for the nationwide index increased to 0.91, meaning housing and economic activity is running at 91 percent on the average nationwide based on the most current data for the three leading indicators: single-family housing permits, home prices, and employment. A score of one indicates a return to "normal" levels, or a return to the level of normality. e LMI averages the scores of the three indicators for a composite score for each metro area and nationwide. e markets with the strongest recovery are those with the strongest employment growth, according to the LMI. Among major metros, the area with the highest rating on the LMI was Baton Rouge, Louisiana, at 1.43, meaning the area exceeded its last normal level by 43 percent. Other major metros near the top of the list for highest value on the LMI were Austin, Texas; Honolulu; Houston; Oklahoma City; San Jose and Los Angeles, California; Salt Lake City; Charleston, South Carolina; and Nashville, Tennessee. About 68 percent of the nation's approximately 360 markets improved year- over-year in Q1. e number of markets with a value exceeding 90 percent in Q1 was 157 (nearly 44 percent of markets), according to Kurt Pfotenhauer, vice chairman of First American. "e markets are continuing to make gains," said NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri. "A strengthening economy and low interest rates should spur the release of pent-up demand and keep housing moving forward this year." Among the smaller metros, Midland and Odessa, Texas, posted LMI scores of 2 or higher, meaning those markets are twice as strong as they were at their normal pre- recession levels. Other smaller metros with high LMI values for Q1 were Manhattan, Kansas; Grand Forks, North Dakota; and Casper, Wyoming. "Strong employment growth leads to the need for more homes and the markets showing the greatest improvement are in strong employment markets, primarily in energy production and refining," Crowe said. "Half of the 68 metros with an index value of one or above are in the oil/energy belt in the middle of the country." STUDY ESTIMATES DODD-FRANK WILL COST EVERY WORKER $334 PER YEAR OVER NEXT DECADE A recent research paper on the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 estimates the burden of compliance costs on the banking sector will result in a reduction of nearly $900 billion in gross domestic product (GDP) and a cost of about $334.60 per year for a working-age person over the next decade. Washington, D.C.-based nonprofit think tank American Action Forum President Douglas Holtz-Eakin, former director of the Congres- sional Budget Office, said in his research paper, "e Growth and Consequences of Dodd- Frank," released last month that there are so many uncertainties around the act that its effect may be the opposite of what was originally intended. "It is widely perceived that this massive regulatory initiative has generated uncertainty that has harmed lending," Holtz-Eakin said. "It is even more likely that the banking sector's response to these requirements and the burden of regulatory compliance have been an effective tax on the banking sector that has harmed lend- ing, investment and growth. To date, however, there has been little quantitative evidence on the magnitude of these impacts." Where the effective tax rate on the banking sector is concerned, the increase of 2 percentage points in the leverage ratio of the banking sec- tor, from 7.5 percent to 9.5 percent in the post- crisis years of 2008 to 2014, can be transformed into an increase in the effective tax rate for the banking sector, according to Holtz-Eakin. "e banking sector responded to Dodd- Frank by holding more equity capital, thus require it to have greater earnings to meet the market rate of return—the same impact as raising taxes," he said. "In this case, the higher leverage ratio translates into a further increase in the effective tax rate to 40.3 percent, for a total rise of 9.2 percent." Dodd-Frank mandated the creation of new bureaus and agencies (such as the Financial Stability Oversight Council and the Consumer Financial Protection Bureau), revamping of securitization rules, and the changes in corporate governance, capital requirements, and oversight of derivatives, which have resulted in 398 separate rulemakings that are still being finalized even five years later, Holtz-Eakin said. e impact of these changes on economic growth is a drop of 0.059 percentage points annually in the per capi- tal growth rate during the years of 2016 to 2025— an estimated $895 billion reduction in GDP over a 10-year period from 2016 to 2025, which computes to $3,346 per working-age person (16 and older) during that decade ($334.60 per year). The total number of jobs added in April 2015, more than two and a half times March's downwardly revised nonfarm payroll employment increase of 85,000. Source: The U.S. Bureau of Labor Statistics STAT INSIGHT 223,000

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