The afternoon session kicked into gear immediately following Alan Greenspans remarks. Moderated by Newsweek Contributing Editor Jane Bryant Quinn, the panel consisted of 16 experts from field as diverse as the Washington Post, Bloomberg News, Wells Fargo, NAR, the National Association of Home Builders and the National Association of Hispanic Real Estate Professionals.
Following up on comments made by Dr. Greenspan on entities ‘too big to fail’ – one panelist (and I wish I had noted who) made the following observation. “Capitalism without the possibility of failure is like religion without the threat of sin.” I love that. The difference is that most people will do the right thing and act in their own best interest and self-preservation naturally while businesses surprisingly do not. They will build Ponzi’s, they will accept short term gains to the detriment of long term viability, they will formulate business plans that guarantee a short life span and as long as the government is willing to step forward and rescue them from their own folly, there is no incentive to improve. Even in the aftermath of the current situation, we are seeing lenders doing this. Greenspan had noted some of these same points as being responsible for much of the current situation.
Jim Helsel, NAR Finance Dir. stated that lenders continue to be their own worst enemy. “Bankers aren’t doing their job. The short sale situation is simply unacceptable and having a very deleterious effect on the market. Lenders don’t seem to grasp that by aggressively working with their clients and with Realtors, they will increase their return and avoid bringing more properties to foreclosure. Indeed while prices are down substantially in most markets, accessing capitol continue to be unnecessarily challenging, delaying market recovery.”
While states like California and Florida continue to wrestle with a glut of foreclosed homes, sales in those states have rebounded in some cases to double or triple what they were a year ago. Those states that experience the earliest and greatest declines are showing some signs of bottoming (green shoots). To a great extent they are suffering now from the hangover effect and will rebound strongly when the correction has run it’s course. Other states like Ohio, Michigan and Indiana are suffering from more systemic structural problems and will need to re-invent themselves. People are always drawn to coastal areas either as primary or secondary residences by geography and lifestyle. The Midwest doesn’t have that luxury and with the demise of the primary industrial base (steel, autos and related industries), they will need to address more fundamental issues. If, as some have forecast, we have an additional 8 – 10 million foreclosures over the next 4 years, it will be very difficult to sustain a recovery.