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Center for Real Estate Analytics

Center for Real Estate Analytics Explores Impediments to a Real Estate Recovery

What obstacles must the real estate market overcome before it can achieve market revival? This was the center of discussion at the Center for Real Estate Analytics' fall conference, Exploring Impediments to a Real Estate Recovery: A Policy Discussion. The objective of this conference, which was hosted by the Federal Reserve Bank of Atlanta on December 1, 2011, was to examine possible obstacles and solutions from several points of view, with an eye toward policies that promote recovery. This goal was achieved through the organization of three dynamic panels that considered insurance, housing, and commercial real estate perspectives. The panels fostered open dialogue on pressing issues and elicited diverse opinions on recovery solutions.

The first panel tackled the topic of insurance. Panelists examined property insurance issues and solutions, and focused on policies that promote rational insurance pricing but do not impede recovery in real estate markets. They discussed high-risk areas for natural disasters as well as the amount of capital necessary to provide appropriate property damage restitution for property owners in these areas. Panelists also considered the implications of insurance companies' decisions to offer coverage in high-risk areas. Attendees heard from a governmental insurer, private reinsurers, and academics on the state of property insurance. They also heard ideas on encouraging recovery.

The second panel honed in on the housing market. Panelists highlighted the role of negative equity in previous housing busts and explored present conditions. They discussed how the incidence of negative equity is playing out on the ground and what some potential solutions might be. Participants heard from economists and a servicer about the foreclosure overhang, moral hazard issues, and shared appreciation modification programs.

The final panel explored financial issues in the commercial real estate market, including the capital position of banks. They also looked at the relatively dormant commercial mortgage-backed securities market and its potential to continue to make investing in nonresidential structures a drag on the economy. Panelists discussed a variety of other subjects, including problems with overleverage and filling the debt gap, as well as the current lag in construction. The panel also looked at how current high unemployment rates are hindering improvement in the commercial real estate market. The audience heard from bankers and corporate officials on current market trends.

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