Credit Is Key to Recovery

WASHINGTON, DC - Improving the availability of credit and access to capital are essential to recovery in the real estate market. Addressing these challenges was the focus of the "Financing Real Estate for Tomorrow" session, part of the National Association of Realtors®' daylong "Real Estate Summit: Advancing the U.S. Economy."

"As the leading advocate for housing issues and homeownership, NAR knows that real estate is the road to economic recovery," said NAR President-Elect Vicki Cox Golder. "It is vital for the health of both the residential and commercial real estate markets to improve the flow of credit, and we look forward to identifying paths toward a successful resolution of this current credit crisis."

In his keynote address to the attendees, former Federal Reserve Board Chairman Alan Greenspan identified two major problems confronting a housing recovery and ultimately an economic recovery in the near-term - falling home prices and increased inventory. Falling home prices decrease homeowners' equity, and when mortgage debt exceeds equity, defaults increase. To exacerbate the problem, increased inventory of unsold single-family homes continues to depress prices.

Greenspan's remarks were followed by a panel discussion moderated by Jane Bryant Quinn, contributing editor for Newsweek. Members of the panel included Bruce Katz, vice president, Brookings Institution; Conrad Egan, president and CEO, National Housing Conference; Phil Bracken, executive vice president, Wells Fargo Home Mortgage; and Jeff DeBoer, president and CEO, The Real Estate Roundtable.

Panel participants emphasized the need to stabilize and provide liquidity to financing in both the residential and commercial real estate markets. Jerry Howard, president and chief executive officer of the National Association of Home Builders, reported seeing a significant reduction of available credit in land acquisition, development and construction. "There are no new homes being constructed right now," said Howard. "Funding is vital to the health of the American housing market."

"A sound and functioning commercial and multifamily real estate sector is critical to our country's economic growth and development," said NAR Treasurer Jim Helsel. "This sector now faces its worst liquidity challenge since the Great Depression, and we must address it to stem the threat of rising delinquencies and foreclosures."

Michael Calhoun, president, Center for Responsible Lending, observed that restrictive lending isn't the only challenge. "The market is being flooded with foreclosures, which is creating problems on the supply side," said Calhoun. "We must address this excess supply before the real estate market can recover."

Egan emphasized the fundamental importance of strong credit scores and personal savings on an individual level. "We need to get back to basics," he said.