Maybe because they were being hosted by the National Association of Realtors and maybe because they really believe it, the panelists were in general agreement that the housing market needs to lead the way back out of this slump/recession/bust. But in spite of that consensus, it was also generally acknowledged that in spite of the lip service accorded to housing by the Administration and by congress, housing really isn’t their primary focus. Not that they can focus on the housing element to the exclusion of other factors, but many of the more substantive efforts have been extended to banking, insurance and the auto industry while many of the efforts aimed at housing have been piece-meal or have lacked the depth to be truly effective.
Dr. Barry Bluestone, Northeastern Univ. Professor or Political Economy, stated that some things that make sense economically are unpalatable politically – including broader stimulus for the housing market like extending the $8,000 first time homebuyer credit to include all homebuyers, or increasing that amount to provide increased incentive for homebuyers to get into the market now. Ron Phipps, NAR 1st VP added that it’s only a buyers market if buyers are in the market. While that is occurring in some areas, what we are seeing now is more of an investors market as they are the ones taking advantage of the depressed prices and picking off the low-hanging fruit.
It was also generally conceded that loosening credit regulation during the boom was bad but tightening regulations during the bust is also bad. Many of the panelists indicated a concern that we are even learning the right lessons from this current debacle. A return to fiscally prudent lending practices – getting back to the basics – was widely encouraged. At the same time, it was stated by one panelist that we need a bubble to pull us out of this current slump and another panelist proclaimed that bubbles are both good and necessary and will inevitably be part of our future business. We just need to do a better job anticipating the cycle and moderating it’s impact.
In what may anathema to some, it was acknowledged that not everybody should be a homeowner, or at least not at every point of their lives. Having said that it was also widely stated that we must not continue to lay the blame on the home buying public. The panel, including lender representatives, pointed to lender malfeasance and greed as the root cause of the problem. The publics financial illiteracy was behind it but even with this panel of experts, they concluded that few if any of them understood the intricacies of the mortgage process and fewer still even bothered to read through the stack of documents they signed. Statistically, people spend more time researching the purchase of an HD TV than they do researching their mortgage loan. The lending process must be more transparent and banks must be held accountable if we are to return consumer trust in the system.
On the issue of consumer trust, it was also widely speculated that the media plays an outsize role in that element. While experts agree that today’s situation is nowhere near as critical as the period leading to the Great Depression of the 1930’s, attitudinally both the media and, to a lesser extent, the administration, have continued to advance that flawed comparison to the detriment of consumer confidence.
It was also pointed out that while the failure rate among sub-prime borrowers is higher than among the general population, the failure rate among sub-prime lenders is even higher – around 100%. There was also substantial speculation as to the future roles of Fannie & Freddie as well as FHA as ongoing factors in the housing market. The CRA (Community Reinvestment Act) was also discussed for the role it played in the drama. There was some debate on whether the CRA actually played a role or not and the extent to which they participated in the broader lending malfeasance. It was suggested by some that the CRA may be due for a re-invention and that they should be directed to re-invest in those same communities they helped decimate. As one who agrees that the CRA played a pivotal role in leading the charge to lax lending regulations, I am in complete agreement that their future roles should be re-evaluated and revised.