Summary:
U.S. home prices are back to 2003 levels. Moderator Lewis Feldman of Goodwin Procter posed the burning question on everyone′s mind: Does that mean that the housing market has hit bottom?
The answer is that it's actually a tale of two housing markets.
At the affordable end of the scale, panelists agreed, there is a healthy uptick in demand, spurred on by state and federal tax credits for first-time home buyers. But a 41-month supply of inventory is still bogging down the high end, noted Laurie Goodman of Amherst Securities. Those buyers have been more cautious about where values are headed, explained Todd Dal Porto of Bank of America Home Loans, adding that it is still difficult to obtain a jumbo mortgage.
Jason Reese of Imperial Capital called for a greater focus on job growth, noting that it doesn't matter how low your mortgage rate is if you've lost your job. Emile Haddad of Five Point Communities agreed, stating that without jobs, there is no long-term stability.
Haddad called for an extension of the $8,000 tax credit for first-time home buyers. Steven Mnuchin of OneWest Bank Group went even further, proposing that the tax credit be expanded to all buyers.
As for the secondary mortgage market, Goodman observed that Fannie Mae and Freddie Mac have become extremely conservative, but she sounded a note of caution about the FHA, warning that a lot more FHA delinquencies are likely in the coming year.
Liquidity is still an issue, noted Reese, adding that the market for construction financing doesn′t exist. Mnuchin recounted that OneWest had inherited lots of construction loans in its takeover of IndyMac, and these are the most problematic part of OneWest′s portfolio. In fact, he sees defaults on commercial mortgage-backed securities as the biggest looming problem for the banking industry.
Dal Porto said he takes heart in the fact that federal loan modification programs are gaining traction. Goodman cautioned that there is a huge shadow inventory and a wave of additional foreclosures still ahead. But all panelists agreed that the housing market is showing signs of life—signs that will solidify as the economy improves.
To keep the market moving, they called for a combination of tax credits, loan modification programs and job creation plans to aggressively attack the housing problem on all fronts.
