Quotes from the NAR Economic Summit

Highlights from the 2009 Real Estate Summit

Below is a summary of some quotable quotes from the first-ever NAR Real Estate Summit “Advancing the U.S. Economy” held on May 12th in Washington, D.C.

This day-long summit brought together some of the most influential experts in the fields of housing, finance, government, academia and the media to find solutions to today’s economic conditions and move the economy as a whole toward recovery. Access videos from the Summit online.

Dr. Robert Reich, former U.S. Secretary of Labor. “We are starting to see renewed sales and interest beginning to turn around. The rate of joblessness is dropping. The economy, instead of falling off a cliff, is rolling down a grassy hill. We should expect the job unemployment figures to hit bottom later this year. As far as a bank bailout, if you are too big to fail perhaps you are too big period. In the future we need to be looking at antitrust laws to see if banks/companies are too big to fail in the future. There is danger of deflation as consumers hold back, prices could potentially fall further. There remains only one buyer left—the government. We are coming to the bottom and will see a turn around. The major problem has to do with the financial markets. Consumers need more purchasing power. But there is no going back to the economy of 2002-2007—where people used homes as a piggy bank. We cannot have that kind of economy again. Real estate costs have traditionally been one-third of a middle-class family income. Median incomes are not rising. Prices will adjust upward as the economy improves. There is opportunity for innovation and change in this market. There is pressure for change. There will be a great deal of uncertainty in terms of buoyancy and strength in the economy in these next few months. The globe is in a recession. When the world starts recovering, you are going to see a dramatic increase in supply and demand. Prices will go up again.

Dr. Barry Bluestone, Professor of Political Economy, Northeastern University. “Vacancy rates were up 2.85 percent in 2008; from 1956 to 2007 they were at 1.5 percent. As long as vacancy rates are at 1.75 to 2 percent housing prices will stabilize. Seeing some deep losses, most metro areas will see markets soften and decline. There are 18.6 million unoccupied homes that will take years to work off the supply. We need to enact a temporary home price insurance program. In a deflationary cycle, federal government could insure homes of 85 percent of loss if owners held on to the house for three years. If a temporary program like this was implemented, it could have a huge impact.”

Jay Brinkman, Chief Economist, Mortgage Bankers Association
“Occupancy rates are tied to jobs. Still expect unemployment to increase next year. We should continue to see contract of housing and household formation; expect vacancy rates to increase. Vacancy rates are tied to the vintage of the home; those built in this decade are averaging around 10 percent occupancy rates.”

Jim Park, President and CEO of the Asian Real Estate Association of America “Hearing more deals are falling through because of lack of liquidity issues. Now is the time to re-shift to more origination issues; find new lenders to work with. There are 20 million homes underwater; that is going to take time to get those homes refinanced.”

Ron Phipps, Broker, First Vice President, National Association of REALTORS®. “There is a fundamental problem with short sales. You have four or five purchasers trying to buy a home that is taking four or five months to sell when it should take two or three weeks. The capacity has to be addressed immediately. We need to get industry partners to work with us to shorten the short sale process and solve the problem now.”

Robert Sibcy, President Sibcy Cline REALTORS®. “We have the lowest new home construction rate in 40 years with a resale pace of 4.5 million. We need to stop the downward spiral of prices and shore up asset of people. If you want to start moving real estate, increase the tax credit to $16,000 and make it available to every American with no income levels and no price levels. Let every American participate in this recovery.”

John Taylor, President and CEO of National Community Reinvestment Coalition. "We had the envy of the world in our financial system. It collapsed. That free market has to be balanced in terms of law in integrity, accountability and fairness.

Dr. Susan Wachter, Professor of Wharton School of the University of Pennsylvania. “Homeownership peaked in 2004. The worst of predatory loans was 2004, 2005, 2006. We saw easing of regulation when the housing market was bubbling. We cannot have erosions of lending standards on a pro-cyclical basis. We need to bring the private sector back into lending and make sure that FHA and GSE are supported—without them there is no market at all. Interest rates are creeping up.”

Sarah Rosen Wartell, EVP, Center for American Progress. “Contraction of lending standards is coming from lack of liquidity in the markets. In the late 90s we had a period of rising rate of homeownership done right. We knew how to lend to those with constrained incomes and learned how to supplement the downpayment. We had to face competition from an unregulated system driven by demand and with no capacity to repay. We were competing with an irrational market. We learned the wrong lessons: Some people should be homeowners at certain parts of the time and not in others.” We now need to go back to fundamentals of how to lend people money. We have to address incomes. We will still see increasing rates of people losing jobs and declines in income. Now we are going to see further declines in the income collapse of wealth in people. We need to get the economy growing again; invest in long-term stabilized growth and return to a robust housing market. We have to get housing moving again as it is key to recovery. The risk is interest rates may start going up again.

Gerri Willis, CNN Anchor. “The job now is to step up; to educate people about lending and have better disclosures. People need to understand what they are signing or we could be setting ourselves up for the same thing all over again.”

Shaun Donovan, U.S. Secretary of Housing and Urban Development.
“We all want to enable FHA consumers to access the homebuyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly. The President’s Making Home Affordable program is helping 7 to 9 million people on the edge of foreclosure to help them refinance their homes and take advantage of lower interest rates. To date 16 million people have visited the Web site www.MakingHomeAffordable.gov. We should expect to see a substantial increase in loan modifications. We are seeing early signs the market is stabilizing. We are optimistic the housing market will recover by the end of the year. We anticipate the $8,000 tax credit will stimulate an additional 160,000 new home sales across the nation. FHA volume is set to only increase. In 2009, were at volume of $69 billion; 2008, $181 billion and this year expect $290 billion. In 2010 we are requesting a budget of $400 billion. We are offering higher incentives to servicers before 60 days delinquent and will not be raising premiums in 2010.”

Martin Feldstein, Professor of Economics, Harvard University. “The number of underwater homes continues to drive prices down and deters people from buying even if prices are down from where they were a year ago. The President’s plan focuses on people trying to stay in their homes and does not deal with other large problems hanging over the real estate market.”

Alan Greenspan, Former Chairman of Federal Reserve Board. “The stock market is the leading indicator of economic markets worldwide. The bottom is the limit to how far human fear can go…adjust to extraordinary circumstances. Yields have upsides and downsides. The market started to turn in November of last year and flattened out. When fear began to ebb we saw stock prices increase by a substantial amount from March 9 until a few days ago. Equity/debt ratios are rising. High grade of junk bonds are increasing. Price of homes is the key determinant of equity of homes. A very significant number exceeds equity of home. We are at the edge of where the number of conventional financings are beginning to show signs of picking up. Further price declines may dig into where real home equity is. We are seeing some major liquidation of inventories. We have to see stabilizing prices before macro-effect. We are beginning to see seeds of bottoming but not in prices yet. We will see significant regional differences start to balance off before rest of country. May see Fannie/Freddie splitting up into smaller organizations—failure of one does not cause catastrophic circumstances as seen lately. The boom that occurred was directly related to long term rates; they started to fall in early 2000 before the Fed started to ease the rate.

Jim Helsen, Treasurer, NAR: “REALTORS® are talking the $8,000 tax credit is helping but short sales process is horrible. It is a four to five-month process instead of three- to six-week process. With regards to loan limit for GSE, why is there a limit?”

Phil Bracken, EVP, Wells Fargo Home Mortgage. “The short sale process is a chronic issue for the marketplace right now. The authorization and approval process from bids on investors needs to be improved. It is a high priority for the Mortgage Bankers Association. We did $100 billion in single-family home sale loans in the first quarter of the year; the flow of mortgage credit is out there. The modification process is still not good due to stringent guidelines and the administration.”

John Maggs, Economy Correspondent of National Journal. “There is a lot of optimism when real estate hits bottom whether it is going to be in the shape of a “V” or a “L”. You can make observations re: inventory. There is a lot of capital moving through the market that is tied to the government. The recovery is not clear, sustained yet.”

Jerry Howard, President and CEO, National Association of Home Builders. “There are 300,000 new homes on the market and none being built. The only persons building homes are those that are building customized homes.”

Tim Sandos, President, CEO, National Association of Hispanic Real Estate Professionals. “Access to capital to get loans is much more difficult. We have to be able to stem the tide of foreclosures. You have to show that people have access to pay bills through rent payments, utility bills, etc. If you can do that people can buy homes.”

Michael Calhoun, President, Center for Responsible Lending. “The home market is being flooded with foreclosures with an additional 300,000 per month. We are dealing with 8 to 10 million loans in foreclosure. We have to address the flood of foreclosures before the market can be stabilized. The HOPE for Homeowners program created by the Bush Administration did not work; 90 percent of subprime borrowers were already homeowners.”

Bernard Katz, Vice President, Brookings Institute and Founding Director, Brookings Metropolitan Policy Program. “There is a major restructuring of economics taking place in Ohio, Michigan and Indiana. There will be collateral damage on other people’s property values due to the economies. It is systemic. We have a ways to go to prevent foreclosure. We have to invest in skills in innovation and infrastructure and regional economics policy.”

Aquiles Suarez, Vice President- Government Affairs, National Association of Industrial and Office Properties. “We need to fix housing first. Leasing is weak in the commercial sector. These are the dark days. The commercial real estate sector will suffer through end of 2010.”

Jeff DeBoer, President and CEO of The Real Estate Roundtable. “Commercial real estate is valued at $6.5 trillion dollars. There is a silver lining for commercial real estate assuming we can get jobs created.”

Michael Kercheval, President and CEO, International Council of Shopping Centers. “Commercial construction has ground to a halt. There is 70 million square feet of commercial property sitting empty. What is going to help the whole economy is jobs. Jobs will lead to confidence and people will buy homes. The high school class of 2010 is the highest group of high school seniors in the U. S. history—represents an enormous bubble moving. The compositions in diversity is increasing—future yet to build shopping centers for diverse cultures.’

Alex Pollock, Resident Fellow-Financial Policy Issues, American Enterprise Institute. “It looks like we are getting to the bottom. Now is the best time to encourage creation of brand new banks to create new flows of credit. Our regulation system is discouraging the formation of new banks.”

Kathleen Hays, Anchor, Bloomberg Television. “Jobless claims may have peaked. The new orders index took a big jump in the last survey. The financial services lobby is trying hard not to get regulated to prevent this from happening in the future. Let legislators know you want meaningful bank reform.”

Sheila Bair, Chairman, FDIC. “Housing led us into this downturn and needs to lead us out. We are seeing signs the housing market is stabilizing. With a normal housing market we will see stabilized home prices. We need to improve lending practices to prevent another housing bubble. It will mean back to better simplicity in mortgage practices in the future. We are dealing with an economic challenge we have not seen in recent years. People want a quick fix. If you are looking for it—it will take time.”
 

- Compiled by Mary Schaefer, IAR Director of Communications