Thursday, April 19, 2012
Florida's Housing Recovery: Location, Location, Location
ORLANDO, Fla. – April 18, 2012 – The Bipartisan Policy Center (BPC) Housing Commission held a public forum in Winter Park yesterday to discuss Florida’s response to recent problems in its housing market. The group focused on U.S. policies, state policies and local conditions that led to the recent crisis, as well as those that helped or hindered a recovery.
The forum, held at Rollins College, featured former U.S. Senator and Department of Housing and Urban Development Secretary (HUD) Mel Martinez, co-chair of the BPC Housing Commission and vice chairman of JPMorgan Chase & Co.
It also included regional housing experts from Central Florida. According to CoreLogic’s February foreclosure report, the Orlando and Tampa metros tied for the state’s highest foreclosure rate – 12.3 percent (1 in 8) of homes with a mortgage in some stage of the foreclosure process.
The forum’s goal was to look at the way national and state policies impact a single region. Some of the discussion was based on new research from the University of California, Berkeley, comparing the U.S. housing finance system to other countries.
“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.
Speakers pointed out that many factors influence regional housing markets, including demographics, income levels, local economic growth and job creation. According to the U.S. Bureau of Labor statistics, Florida’s 9.4 percent unemployment rate in February, for example, was significantly higher than the 8.2 percent rate for the nation as a whole. Clearly, they said, unemployment helped fuel foreclosures in Florida.
“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 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 and global financial forces shape housing markets in the United States and around the world. It looks at popular mortgage products in other countries, such as adjustable rate mortgages and non-recourse loans, to see whether U.S. homebuyers should consider shifting homebuyer financing in some way to avoid a future market collapse.
According to the worldwide study, some countries had early interventions that helped keep the housing problem from reaching a crisis level – ones that required less government intervention down the road. Successful responses in other countries generally involved more conservative lending practices and stronger regulations.
However, the report found that no country is completely immune from irrational behavior. Still, recent events such as the current housing crisis tend to dampen similar irrational behavior in the near future.
“The way different countries handled the global financial crisis … 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,” 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 … and lenders,” said Dr. Ashok Bardhan, another of the report’s authors.
© 2012 Florida Realtors®