January 13, 2010
Haas School of Business Media Contact:
2010: The US Housing, Mortgage and Commercial Real Estate Markets
Fisher Center Chair Ken Rosen discusses his policy and reform proposals at the Financial Crisis Inquiry Commission's (FCIC) first public hearing
Washington D.C. — Real estate expert Kenneth Rosen testified before the Financial Crisis Inquiry Commission (FCIC) this morning and said the current US housing market will continue a slow recovery of three to four years. Rosen is chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley's Haas School of Business. The FCIC is a bi-partisan, 10-member panel established by Congress to examine the causes of the financial crisis. Rosen presented the commission with several policy and reform proposals to combat the crisis.
"The embryonic recovery in housing has been highly dependent on massive federal government intervention rather than an organic increase in buyer demand," said Rosen. However, he notes the termination of several federal programs will stunt the market's recovery. His recommendations included:
- A loan modification plan to address "underwater" mortgages when a home's value is well below the mortgage balance
- A shared appreciation second mortgage that allocates part of the future appreciation of the home to the government and to the private lender to encourage loan modification
- A government-sponsored "unemployment bridge loan" to address unemployed households who do not qualify for a loan modification
On the commercial real estate front, Rosen said vacancy rates and falling rents continue to dominate the market. He proposed:
- Maximum loan to values set "counter-cyclically" to minimize the number of borrowers becoming overextended at the market's peak.
- Construction and development loans restricted to 50% of costs to ensure developers have a greater financial stake in their projects
- The amendment or repeal of the Foreign Investment in Real Property Tax Act (FIRPTA) in order to attract much needed capital to the domestic real estate market