The U.S. Residential Housing Market: What’s Next (panel discussion)
David Blitzer, the Chairman of Standard & Poor’s Index Committee started with the question “Is owning your own home still a part of the American dream?” and the panel was off. Owning a home these days, many panelists concurred, is akin to “catching a falling knife,” and the future for home prices, according to the panel, looks bleak. “The generation coming out of college right now, is seeing the concerns in the economy and the problems their parents are having, and they want to rent. And people in the business [of housing] think that it will go on until people forget,” said CNBC Real Estate reporter Diana Olick.
The discussion moved to local and national factors when the panel turned to the market trend. Christopher Mayer, the Senior Vice Dean at Columbia Business School claimed it was a localized phenomenon, citing the differences in coastal markets and Midwestern and Southern markets, where people are more likely to build their own homes. Olick disagreed, saying that “Housing is definitely local, but consumer confidence is national.”
Chuck Robida, Chief Scientist at Experian took a more balanced stance. He directed the audience towards data concerning the top 50 metropolitan statistical areas (MSAs). “You can see that the 15 [MSAs] at the bottom were lower than their precrash levels…the bad news is that they top 10 have four times the [precrash level] rate.”
On the other hand, it was with a united front that the panelists took a rather pessimistic position toward the future of home prices. Standard & Poor’s managing director Diane Westerback stated “I’m not on the optimistic side. One in 10 homeowners is behind his or her mortgage by 18 months. We are seeing the tip of the iceberg.” Olick responded with the question of mobility. Effective negative equity— all the funds that would be needed when selling one home and buying another, including brokerage commissions, fees, closing costs and more –rose up to 50%. People are unable to move, and home prices are lower than they should be. Panelists agreed that national data was not entirely representative of the different neighborhoods in the U.S., and that this was causing people to panic. “It’s hard not to believe that home prices are going to continue to fall,” Mayer stated.
The panel’s overall view of the housing market remained negative through the audience’s questions. There was, however, a unanimous call for leadership from the government – ignoring housing is not the answer. Westerback raised the issue of accountability and the question of directing responsibility for the loan to the person getting the loan. She also added that “a big issue is that 10% of property aren’t paying taxes, aren’t being lived in—are essentially in limbo. And these properties are adding to the uncertainty that anybody thinking of committing to these neighborhoods, is feeling.” Mayer also spoke about the need to find other options to find people single-family homes, although he and the other panelists were adamantly against government involvement in the form of another home buyer tax credit. Nevertheless, no universal solution presented itself through the panel, and there was a note of apprehension when the panelists ended the conversation with their negative views of the future.