RISMEDIA, April 30, 2009-Richard Smith, President and CEO of Realogy Corp., took part in a panel discussion titled ‘Jump-Starting the Housing Market’ at the Milken Institute 2009 Global Conference. Smith and panelists Donald Brownstein, CEO and Chief Investment Officer, Structured Portfolio Management; Ross DeVol, Director of Regional Economics and the Center for Health Economics, Milken Institute; Steven Mnuchin, Chairman and Co-CEO, Dune Capital Management LP; Chairman and CEO, OneWest Bank Group LLC discussed solutions on how to fix the housing market.
While everyone agrees that the U.S. housing market is troubled, when it comes to solutions, there’s a raging debate. Smith stated: “The administration has failed so far in addressing the housing crisis. The focus of the administration has been on the foreclosure issue, but the solution to the problem is on the demand side.”
Recounting the challenges facing the housing market, panel members agreed that the causes are numerous. Brownstein said the downturn was the result of easy money for homebuyers in the form of mortgages that were too high for people’s income. Mnuchin agreed: “The industry began making loans based on the value of the property instead of on the home-buyer’s income. The problem is lending gone wild.”
Other panelists noted a complete breakdown in the mortgage system observing that no one, from homebuyer to mortgage lender, understood the risks associated with high housing prices and mortgages based on home value instead of income.
The panel said the troubled housing market is a large contributor to the economic downturn. “What we have now is a depression in the housing market, and it is why we have an overall economic slump,” DeVol said. Housing’s decline has taken approximately two years’ growth from the nation’s gross domestic product.
While the bottom of the market is still ahead, the essential question is when will the economy turn around and how? While forecasts predict an uptick in the housing market in the next few years, there is a lot of room for government and free market solutions.
For more information, visit http://www.milkeninstitute.org or to see the video, click here.