New Research Shows U.S. Housing Finance System is More Complex than Other Countries but Offers More Opportunities for Consumers
Data can inform housing policy in troubled housing markets such as Central Florida
ORLANDO, Fla., April 17, 2012 /PRNewswire-USNewswire/ -- The Bipartisan Policy Center (BPC) Housing Commission held a public forum in Winter Park, Florida today to discuss the state's response to pressures on Florida's housing market, where foreclosures are nearly double the national average. According to CoreLogic's February foreclosure report, the Orlando and Tampa metros tied for the highest foreclosure rate, with 12.3 percent (1 in 8) of homes with a mortgage in some stage of the foreclosure process. In addition, the Commission released new research from the University of California, Berkeley that highlights the complexities and opportunities of the U.S. housing finance system compared to other countries; how different types of regulatory structures may have contributed to the housing boom and bust; and how this data can inform domestic housing policy moving forward.
The forum, held at Rollins College, featured former U.S. Senator and Department of Housing and Urban Development Secretary (HUD) Mel Martinez, who co-chairs the BPC Housing Commission. It also brought together regional housing experts to discuss Central Florida's housing market, its effect on the local economy, and implications for the future.
"By studying both the real-world effects of this nation's financial crisis on regional housing markets and how other countries handled similar crises, we can examine ways to spur our own economic recovery and learn effective strategies to better handle the temptations of another hot housing market in the future," said Mel Martinez, Vice Chairman of JPMorgan Chase & Co.
According to new data by the Orlando Regional Realtor Association, the overall median price of Orlando homes has increased 13 percent compared to this time last year—a strong sign of continued improvement in the local market.
Speakers at today's forum pointed out that many factors can influence regional housing markets, including demographics, income levels, local economic growth, and job creation. U.S. Bureau of Labor statistics for February show that Florida's 9.4 percent unemployment rate was significantly higher than the 8.2 percent rate for the nation as a whole. Clearly, unemployment has helped fuel foreclosures in Florida, where one in 341 homes received a foreclosure filing in February, compared to one in 634 housing units nationwide, according to foreclosure listing firm RealtyTrac Inc.
"We cannot begin to talk recovery in Central Florida's housing market without first addressing the region's economic development as a whole," said Dr. Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "Housing and the labor market are the Siamese twins of Florida's economy. When unemployment rates rise, so do foreclosures. When people have paychecks, they have money to buy houses. Until the labor market stabilizes, economic recovery in Florida will continue to be slow."
The Housing Commission today also released a study by the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, entitled, "A Comparative Context for U.S. Housing Policy: Housing Markets and the Financial Crisis in Europe, Asia, and Beyond." The study examines how local economic, national-institutional, and global financial forces shape housing markets in the United States and around the world.
The research examines a wide variety of products from other countries' housing finance systems, such as adjustable rate mortgages, and non recourse loans, to see whether it makes sense to consider shifting more U.S. homebuyers to these products in an effort to avoid another housing market collapse in the future.
The study also found that small interventions early on kept some housing markets from reaching crisis levels and avoided more substantial government involvement later, that conservative lending practices and strong regulations dampened both housing booms and busts, and that no country is immune from irrational behavior, although institutional memory can have an effect in deflating economic bubbles.
"The way different countries handled the global financial crisis and the boom-bust in their own housing markets illustrates the tradeoffs between tightly regulating markets, which offers more stability but narrower choices, and more dynamic systems that are riskier for borrowers and lenders. Such tradeoffs even appeared among housing markets in the United States," said Dr. Cynthia Kroll, one of the report's authors.
"Moving forward, policymakers will have to weigh these pros and cons and determine whether it is possible to strike an optimal balance in housing policy that would retain its dynamic features and encourage mobility, while still protecting homeowners and borrowers from foreclosure and significant financial losses, and lenders from heightened risk," said Dr. Ashok Bardhan, another of the report's authors.
Today's event was the second of four regional forums of the BPC's Housing Commission. Launched in October 2011, the Commission aims to reform the nation's housing policy by crafting realistic and actionable policy recommendations that consider the near-term and address the long-term challenges in the housing sector. Throughout 2012, the Commission will visit different regions of the country to hear first-hand from stakeholders and interest groups about the housing challenges affecting citizens.
About the Bipartisan Policy Center
Founded in 2007 by former U.S. Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole, and George Mitchell, Bipartisan Policy Center (BPC) is a non-profit organization that drives principled solutions through rigorous analysis, reasoned negotiation and respectful dialogue. With projects in multiple issue areas, BPC combines politically balanced policymaking with strong, proactive advocacy and outreach. http://www.bipartisanpolicy.org/
SOURCE Bipartisan Policy Center