The thesis of U.S. Sen. Bob Corker, R-Tenn.’s Wednesday real estate market discussion made it clear that smart people were involved in a difficult situation, with no clear answer on the table.
Panelists for the event were Tim Bolding, executive director of United Housing Inc.; Sean Dobson, CEO and chairman of the board of Amherst Holdings LLC; Greg Gonzales, commissioner of the Tennessee Department of Financial Institutions; Andrew Howell, executive vice president and COO of Federal Home Loan Bank of Cincinnati; Alex Pollock, resident fellow with American Enterprise Institute; and Jim Vogel, executive vice president at First Tennessee Financial.
And while several audience members and panelists disagreed on various issues, Corker made numerous references that the biggest challenge the real estate market faces is getting Washington to come up with a solution that addresses the politics rather than the problem.
When responding to a frustrated builder, Corker advised to be resilient.
“I used to love to develop and build buildings,” Corker said. “But over time in the Chattanooga market, you could buy and renovate cheaper than you could build them. Housing prices have dropped, and we have ended up in this quandary.”
Dobson responded, “Maybe building more houses at this point in the cycle is not the key. It’s a dangerous thing for the nation to say, ‘let’s put money on a house,’ because I don’t know about your house, but my house doesn’t have much dividends. We need to rethink this concentration as somehow an asset. It’s dangerous to focus on housing as a light in the distance.”
Pollock chimed in, saying appraisals are part of the pessimistic market. We need to go back to the way things were years ago, he said, when a houses’ value was determined based on sustainability over time, and not just in recent years.
“The fact is, it’s collateral, so why is there any government involved?” Corker asked. “Government acts on where it sits, and there’s not an American who would disagree. The housing industry is the most basic industry there is – why is there any government involved?”
And the lender can only do so much, Howell added.
“They can’t hold 15 to 30 years on a balance sheet,” Howell said. “If the investor’s not there, the whole thing comes to a screeching halt.”
Among other issues addressed included the foreclosure crisis. Bolding was concerned about clearing the bank-closed properties out to maintain the quality of neighborhoods.
He also added that a new generation of homebuyers was vital.
And in response to an audience comment about the loan paperwork process, Howell agreed with the power of the rising generation.
“We’re analyzing through faulty data,” Howell said. “Kids with their iPhones could probably do it better than the system that we have today.”
Pollock advocated self-discipline: “The same behavior that generates regular savings is the same behavior that generates loan payments.”
This education must begin at the high school level, Dobson said.
“Buying a home is the biggest purchase one makes in a lifetime,” Dobson said. “I’ve got a 10-year-old that’s getting credit card applications.”
Gonzales pointed out that he gets calls from across the state on a fairly regular basis from people facing financial literacy. But numerous outlets, such as banks and other organizations, are trying to help, and are rarely spoken of.
Corker brought the discussion to a close by saying how much he had learned during the two-hour debate, as compared to a recent Chattanooga forum, where he felt not much was accomplished.
“Getting from here to a far more rational market will be a complex process,” Corker said. “This is as an exceptional a panel as we could ever get in Washington. Try to create political will to deal with it, and hopefully, we’ll get it right.”