Cox and Inside Business Executive Discussion: Housing and the Economy

Photo by David Brandt, Rubin Communications

Comment from Wade Powell, President of Dale Carnegie Training of Eastern Virginia: "I thought the Cox/Inside Business Breakfast and Panel on the economy, held recently, was very worthwhile and beneficial to the business community. The business people who attended provided a great networking opportunity, and the information was very vital in helping with our economic situation right now. I hope that these organizations will follow through on their plan to have more of these type meetings."

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On March 17th at the Sheraton Norfolk Waterside, Cox and Inside Business assembled heavy hitters in Hampton Roads to discuss: "The Real Stimulus: What Will it Take to Stabilize the Housing Market?" Moderated by Joel Rubin of Rubin Communications.

The panelists were:

• G. Robert Aston Jr., Chairman and CEO of TowneBank, co-founded TowneBank in 1998 and is a member of the Hampton Roads Partnership Board of Directors.
  
  
• Steve Rockefeller, Vice President of SunTrust Mortgage Inc. (and member of the Virginia Mortgage Lenders Association, Tidewater Builders Association and the Hampton Roads Realtors Association) also writes a column, "Mortgage Matters," which appears regularly in the real estate section of The Virginian-Pilot.
  
  
• Dr. James Koch, Board of Visitors Professor of Economics and President Emeritus of Old Dominion University writes the well-known and well-respected Hampton Roads Annual "State of the Region Report."
  
  
• Pete Alex Kotarides, President of Tidewater Builders Association and a partner in Kotarides Builders.
  
  
• Van Rose, President of Rose & Womble Realty is a member of the National Association of Home Builders and the Institute of Residential Marketing.

America is in a recession of historic proportions. Consumers are tightening their belts and not spending. Investors have seen their portfolios cut in half because of plummeting stock markets. Foreclosures haven't been higher since the 1930s. Home values are dropping, leaving some homeowners owing more on their house than they can sell it for. Unemployment is predicted to hit 10 percent in another year.

Some responses from the panelists:

• What role, if any, did super regional banks play in the events that led to the problems in the housing market? Regional banks did not dictate what products are available to the market. They are simply a facilitator of credit. Lenders are charged with making loans. Under the product guidelines, if the borrower qualified for the loan, the loan was made. The issues with today’s housing market reach far deeper then any loan product. Fuel prices, the lack of available credit, loss of employment, the normalizing of housing prices, the diminishing stock market and finally an abundance of housing inventory are all contributing factors to today’s housing crisis. Today’s homeowner has very little, if any, discretionary cash available.
  
  
• What role do they play in its recovery? Today’s financial institutions are going over and above the call of duty to facilitate credit within the credit guidelines. Banks simply do not want non-performing assets (foreclosed homes) on their books. Today’s banks have specialized departments designed to work through their consumer’s temporary financial difficulty.
  
  
• How important is it to the overall economic system to stabilize the housing market? Was the housing market the clear cause of the crisis and is stabilizing it the foundation on which recovery must be built? The housing market was the place where the current crisis was manifested, but it was a highly visible effect, not the cause. The cause of the current crisis is decades of overspending by U.S. citizens and the U.S. government (low savings rates, budget deficits, current account trade deficits), along with a variety of unwise financial practices by banks, regulators and individuals. Improving the housing market certainly will benefit many individuals, but does not directly address $1 trillion budget deficits and huge trade deficits.
  
  
• What role did community banks play in the events that led to the problems in the housing market and what role do community banks play in solving the crisis? Simplistically, the mortgage market can be viewed as two distinct segments defined as manufacturing and distribution. The major mortgage players, government agencies and the secondary market create, design, and manufacture the mortgage products with the guidance of Wall Street who packages and sells the underlying investment products into the world capital markets. The role of community banks is generally limited to the retail distribution of these "approved" products in their local communities. Accordingly, community banks have played only a minor role in the current mortgage crisis. Due to the size and scope of the overall mortgage market, the role of community banks is likely to be limited to providing assistance to their individual clients who may be experiencing difficulties while continuing the flow of credit to credit worthy borrowers.
  
  
• Where does a recovery of the housing market begin from the perspective of home builders – is it in the hands of the government, lenders, consumers, etc.? Our economy, including housing, depends on consumer confidence. With interest rates at historic lows, relatively stable local employment, a great selection of homes available at all price ranges, a federal housing tax credit for new home buyers and home buyer traffic increasing throughout Hampton Roads, consumer confidence is the only missing ingredient. When people feel better about the direction of the economy, we expect the pent-up demand to materialize and we’re hopeful for a strong turnaround in 2009.
  
  
• From the perspective of a realtor, how did we get to where we are today in terms of the housing crisis? Greed and lack of accountability.