A Shift in Mindset: Homeownership to Renting

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Fall is the time of the year for various states to hold meetings that address regional economic woes. The Governor's Housing Summit is one such gathering making the rounds. It is sponsored by home loan banks, investment banks, construction companies, et al. Nashville hosted the summit Oct. 19-20, and Albuquerque just finished their summit Nov. 3-5, 2010.

Nicolas Retsinas, a senior lecturer at the Harvard Business School and director emeritus of Harvard University's Joint Center for Housing Studies, spoke at the opening lunch of the Governor's Housing Summit in Albuquerque.

He prefaced his remarks by noting the housing boom that peaked in 2005 and was a once-in-a-generation phenomenon, and that the housing bust that began in 2007, has been the worst housing slump since records started being kept in the 1960s.

He cited some stats:

• Fewer than 400,000 single-family homes were built in 2009, compared to the 2 million built three and four years ago.
• 20 million mortgage holders owe more on their homes than they are worth.
• Home prices have dropped 30 percent nationally.
• 2.5 million homes have been lost to foreclosure during the down cycle.
• 1.5 million homeowners are "seriously delinquent" in making their mortgage payments.
• By the time the downturn is over, 10 million families in the U.S. are expected to lose their homes.

"Something is wrong in a country with more foreclosures than there are college graduations," Retsinas said.

He noted that part of the housing problem was that in the 1980s, two-thirds of mortgage originations were done by depository institutions. In the 1990s, 80 percent were originated by mortgage banks, which "essentially weren't regulated," and almost none of the subprime mortgages were originated by deposit-taking institutions.

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