Recounting the challenges facing the housing market, panel members agreed that the causes are numerous. Donald 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. Steven 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 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," Ross DeVol said. Housing's decline has taken approximately two years' growth from the nation's gross domestic product.
The bottom is still ahead, Brownstein said, and 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.
Richard Smith said, "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." But Mnuchin said stabilizing housing prices is part of the solution.
The panel addressed some misconceptions about the housing market, especially the idea that there is a national housing market with challenges that can be addressed on a one-size-fits-all basis. Devol said that misconception leads policymakers to miss the fact that 50 percent of foreclosures are in California, Las Vegas, Phoenix and southern Florida. "The plan from the federal government addresses the housing problem as on a national problem but doesn′t tackle it locally," he said.