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Residential redlining of U.S. neighborhoods

The FRED graph above shows home values for four classifications of neighborhoods from 1930 to 2010. The lowest values (and highest levels of risk) are shown by the red line, which was an intentional choice: Red is the color used in 1930s city maps to mark the residential neighborhoods where lenders deemed they were most likely to lose money when making mortgage loans. And that color gave rise to the term “redlining.”

After the Great Depression (1929-1933), the federal government tasked the Home Owners’ Loan Corporation (HOLC), among several other agencies, with overseeing the work of residential lenders. The HOLC designed a set of rules to appraise the value of properties, and these appraisals took into consideration local housing market conditions as well as the demographic and economic characteristics of the neighborhoods.

Between 1935 and 1940, the HOLC used those rules to draw maps of 239 cities across the U.S. In each city, neighborhoods were graded and city maps were shaded:

  • Grade A: “Best” (shaded green), where properties were expected to increase or maintain a high appraised value. This grade represented the lowest default risk for mortgage lenders.
  • Grade B: “Still desirable” (shaded blue), where properties were expected to maintain their appraised value. This grade represented an acceptable risk of default for mortgage lenders.
  • Grade C: “Declining” (shaded yellow), where properties were expected to lose their appraised value. This grade represented a high risk of default for mortgage lenders.
  • Grade D: “Hazardous” (shaded red), where properties were old or nearby unattractive or unhealthy industrial areas, therefore having minimal value. This grade represented a dangerous risk of default for mortgage lenders.

To learn more about this topic, see this Page One Economics essay.

FRED has added 20 data series from the working paper “The Effects of the 1930s HOLC ‘Redlining’ Maps” by Daniel Aaronson, Daniel Hartley, and Bhashkar Mazumder. Those economists matched U.S. Census data collected between 1930 and 2010 to the available geocoded HOLC maps of 149 cities.

The data in the graph are the inflation-adjusted median home values in each neighborhood: “Median value” means that, in that neighborhood, half of the houses are priced above that value and half are priced below that value. In other words, median value is the typical home value.

The lasting impact of the HOLC maps on home values is visible in the layering of the data series: Up until 1990, redlined neighborhoods consistently recorded the lowest home values. In the following decades, gentrification closed the value gap with traditionally more attractive neighborhoods.

Stay tuned to the FRED Blog, as we’ll discuss other data series in the Aaronson, Hartley, and Mazumder paper that relate the HOLC mortgage-lending maps to the practice of racial segregation in housing.

How this graph was created: From FRED’s main page, browse data by “Release.” Search for “The Effects of the 1930s HOLC ‘Redlining’ Maps.” Select “Summary Statistics” and under “Panel C. Home Values” check the box to the left of each of the four HOLC neighborhood categories. Next, click on the “Add to Graph” button. Lastly, from the “Edit Graph” panel, select the “Format” tab to match the color of each line to their HOLC designation and to turn off the “Recession shading.”

Suggested by Diego Mendez-Carbajo.

No taper tantrum this time?

Comparing bond market reactions in 2013 and 2021

The FRED graph above shows the daily yield on 10-year U.S. Treasuries since the beginning of 2013. On May 22, 2013, Federal Reserve Chair Ben Bernanke announced that the Fed would start tapering asset purchases at some future date, which sent a negative shock to the market, causing bond investors to start selling their bonds. (See the dotted vertical line in the graph.) As a result, the yield on 10-year U.S. Treasuries rose from around 2% in May 2013 to around 3% in December. This sharp climb in yields is often referred to as the “taper tantrum.”

In late July 2021, Federal Reserve officials signaled that the Fed would start reducing the volume of its bond purchases later in the year. This signal made some investors worry about another taper tantrum; however, it might not be the case this time.

Despite these fears of history repeating, investors remained placid when the Fed hinted at tapering in July 2021. The Treasury yield remained around 1.3%, declining from its recent peak in early April. One explanation for this difference in market responses is that the announcement in 2021 was in line with market expectations and the announcement in 2013 came earlier than expected.

How this graph was created: Search for and select “10-Year Treasury Constant Maturity Rate.” To add the vertical line, refer to these instructions. The “Data start/end” of the vertical line is 2013-05-22.

Suggested by Praew Grittayaphong and Paulina Restrepo-Echavarria.

Discrepancies in dating recessions

Illuminating the shaded areas on the graph

There’s no hard and fast rule for determining when the U.S. economy has entered a recession, and there’s no one indicator that determines a recession.

The National Bureau of Economic Research (NBER) Business Cycle Dating Committee defines a recession as a significant decline in economic activity spread across the economy and makes that determination by considering numerous indicators of economic activity. They date a recession from the peak of a business cycle through its trough. Most recently, the committee identified February 2020 as the last business cycle peak and April 2020 as the business cycle trough, making this the shortest recession on record—just 2 to 3 months.

While the beginning and ending months of a recession tend to get a lot of attention, the committee also releases the corresponding quarters of the peak and trough. These turning points are primarily based on quarterly averages of the monthly indicators along with prominent quarterly series such as real GDP. In most instances, the turning point quarters match the turning point months. In fact, the months and quarters had all been in alignment since March (Q1) 1954.1 But for this past recession, the months and quarters of the business cycle turning points do not align.

Again, as far as the monthly turning points go, the most recent business cycle peak was in February 2020 and the trough was in April 2020, implying the only month the economy was clearly in a recessionary state was March 2020. Some time in February, the economy moved from expansion to recession; and some time in April, the economy moved from recession back to expansion.2

For the quarterly turning points, the committee determined that the business cycle peak occurred in the fourth quarter of 2019. This is consistent with the –5.1% decline in real GDP in the first quarter of 2020, but not in alignment with the monthly peak in February 2020. Moreover, the steep decline in employment in March 2020 more than offset the gains in January and February, generating a quarterly decline in employment of over 900,000 jobs (see the FRED Graph above).3

Shaded areas indicate U.S. recessions

Frequent FRED users are familiar with the phrase “Shaded areas indicate U.S. recessions” in the bottom left-hand corner of their FRED graph. You can see this shading below in the FRED graph of the unemployment rate, which also appears on the committee’s web page, with a nod to the St. Louis Fed. The recession shading is a useful visual tool for interpreting economic data. In this case, we can see that the unemployment rate rises during a recession and tends to reach a peak a few months after the recession ends.

The FRED team applies recession shading starting with the month of the peak and ending with the month prior to the trough. This method has most accurately aligned with the turning points in economic data because of the consistency between NBER turning point months and quarters: As noted above, NBER turning point months and quarters have aligned for over a half-century!

Of course, this shading technique is not perfect and things change. The recent discrepancy between the monthly and quarterly turning points may generate some confusion when examining recent data. Rest assured, all the data behind these shaded areas do exist in FRED; and for those users who want to fine-tune their graphs, the series are here.

1 The committee, which dates back to 1894, has identified 68 business cycle turning points; 13 of the turning months and quarters do not align.
2 Currently, daily or weekly economic indicators aren’t robust enough to make this determination. Stock indices, for example, are forward looking; so, turning points in equity prices don’t always correspond with business cycle turning points.
3 This NBER press release discusses the discrepancy in household employment depicted above and nonfarm payroll employment (PAYEMS).

How these graphs were created: For the first graph, search FRED for “Employment Level” and select the series “CE16OV.” The default graph will be a monthly graph of the employment level in thousands of persons. To change units, go to the “Edit Graph” panel: Under “Units,” select “Change, Thousands of Persons.” Next, to add the quarterly employment level, use the “Add Line” tab to search for “Employment Level” and select the series “CE16OV.” Next, under the “Edit Lines” tab, click the “Edit Line 2” button to change the units and frequency. Under “Units,” select “Change, Thousands of Persons.” Then, under “Modify frequency,” select “Quarterly.” Next, under the “Format” tab, select “Off” next to “Recession Shading.” To add marks to the lines, select “Circle” under “Mark type” next to each line. Return to the main graph. Use the date range boxes to set the beginning date to “2018-09-01.”
For the second graph, search FRED for “Unemployment Rate” and select the series “UNRATE.” The default graph will be a monthly graph of the unemployment rate as a percent.

Suggested by Chuck Gascon.

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