International conference on collateral risk: Moderating housing cycles and their systemic impact
Cosponsored by the Collateral Risk Network, Robinson College of Business at Georgia State University, and AEI
Video
About This Event

 

Event Summary

The relationship between collateral value and housing cycles has thus far received scant attention from US policymakers. However, the importance of fundamental indicators of value in moderating housing cycles took center stage during AEI's two-day international conference on collateral risk that began on Wednesday.

The first panel examined housing cycles, with Stephen Oliner of AEI presenting the preliminary results from an extensive study on the relationship between house and land prices, suggesting that rising land share presents a clear signal about overvaluation at the submarket level. Shaun Wang of the Geneva Association described the results of research identifying key supply-and-demand factors useful in determining home value.



During the second panel, Robert Avery of the Federal Housing Finance Agency (FHFA) described a new National Mortgage Database that includes loan-level mortgage characteristics and demographic information on borrowers. Jed Kolko of Trulia described a bubble-watch monitor that uses home price-to-income, home price-to-rent, and home price changes to measure fundamental value.



Karl Case, cofounder of the S&P/Case-Shiller Index of Real Estate Prices, gave a luncheon keynote in which he emphasized the relationship between house price and per-capita income as an important factor in evaluating deviations between home prices and fundamental value.

The next panel addressed international approaches to value and risk. Reiner Lux of HypZert presented a methodology for rating property and markets and Andreas Kunert of vdpResearch outlined a transactional database used to develop residential property indexes at Germany's national and micro levels.



Santiago Herreros de Tejada of Sociedad de Tasación discussed the impact government policies had in creating a speculative construction market in Spain, whereas Maurizio d'Amato of Italy's Politecnico di Bari presented on cyclical capitalization methodologies as a means to integrate valuation practice and property market cycles. Finally, Finn Poschmann of the C. D. Howe Institute discussed trends in the Canadian real estate market.

Wednesday's final panel covered countercyclical policies. Scott Smith and Jesse Weiher of the FHFA underscored the need for a rule-based capital adequacy stress test and outlined a countercyclical capital regime based on accumulating sufficient capital during periods when home prices deviate from long-term real price trends. Andreas Lehnert of the Board of Governors of the Federal Reserve System submitted a presentation outlining the history of US cyclical macroprudential policy. Tom O'Grady of Pro Teck Valuation Services then discussed the effect of higher combined loan-to-value ratios on market price volatility.



A second keynote by former chairman of the Federal Deposit Insurance Corporation William Isaac attributed the differences between the recovery following the recession in 1980 and that following the 2006 recession to divergent policy responses.

Thursday's first panel discussed stabilized lending value and countercyclical loan-to-value ratios. Rep. Bill Foster (D-IL) outlined a "feedback loop" approach to dampening housing bubbles through the use of countercyclical combined loan-to-value limits. Ted Durant of the Mortgage Guaranty Insurance Corporation then discussed appropriate equilibrium trends, highlighting the use of income trends as an anchor.



In the next panel, AEI's Edward Pinto compared the practices of the US Department of Veterans Affairs (VA) loan guaranty with those of Federal Housing Administration insurance programs. Mike Frueh of the VA described how the changes implemented by the VA, including a shift from directing to evaluating the work of servicers, have contributed to the success of the VA program.



The final panel debated whether appraisers and appraisals are up to the challenge of assisting in moderating housing cycles. Steve Linville of the National Association of Home Builders concluded that guiding principles need to include shared data and a consideration of all pertinent approaches to value.



Reflecting on the conference as a whole, Wang, Pinto, the Collateral Risk Network's Joan Trice, and AEI's Stephen Oliner encouraged:

•    A continuation of promising research efforts identified at the conference;
•    An expansion of international efforts to share research, knowledge, and data;
•    The development of transparent data sources; and
•    The organization of a pilot valuation project that looks beyond price to address value.

--Lilla Lukacs

Event Description

Though policy responses to and studies about the causes of the US housing crisis abound, the relationship between collateral value and housing cycles has received scant attention. The summer 2013 conference — cosponsored by the Collateral Risk Network, Robinson College of Business at Georgia State University, and AEI — will focus on housing cycles and their domestic and international systemic impact. Experts from the US, Europe, and Canada will address efforts and proposals to moderate housing cycles by using countercyclical lending policies.  

More than 150 people attended last year’s conference. At this year’s conference, Karl Case, cofounder of the S&P/Case-Shiller Index of Real Estate Prices, will give a keynote address and will be designated as a Bowles Distinguished Scholar. A keynote by Bill Isaac, chairman of Fifth-Third Bank and former chairman of the Federal Deposit Insurance Corporation, will conclude the first day of the conference. Overall, you will hear from six panels of experts from academia, the appraisal industry, the financial community, and regulatory bodies.

We welcome you to participate in person or to watch the event live on this page. Full video will be posted within 24 hours.

 

Agenda

Day 1
Wednesday, July 31

7:45 AM
Registration and Breakfast

8:10 AM
Welcoming Remarks:
Edward J. Pinto, AEI
Joan Trice, Collateral Risk Network
Shaun Wang, The Geneva Association

8:30 AM
Panel 1: The historical perspective — two examinations of housing cycles

Presenters:
Stephen D. Oliner, AEI
Shaun Wang, The Geneva Association

Discussants:
Robert Dorsey, FNC Inc.
Norrine Brydon, Marshall & Swift

Moderator:
Edward J. Pinto, AEI

10:15 AM
Break

10:30 AM
Panel 2: Fundamentals of value

Presenters:
Robert Avery, Federal Housing Finance Agency
Jed Kolko, Trulia

Discussants:
Morris Davis, Wisconsin School of Business at the University of Wisconsin–Madison and AEI
Chris Killian, Security Industry and Financial Markets Association
 
Moderator:
Stephen D. Oliner, AEI

12:00 PM
Buffet Lunch and Bowles Distinguished Scholar Designation

Keynote Address:
Karl Case, Wellesley College

1:30 PM
Panel 3: International approaches to value and systemic risk

Presenters:
Maurizio d'Amato, Politecnico di Bari
Santiago Herreros de Tejada, Grupo Sociedad de Tasación
Reiner Lux, HypZert
Finn Poschmann, C.D. Howe Institute

Discussant:
Lance Coyle, Appraisal Institute

Moderator:
Shaun Wang, The Geneva Association

3:05 PM
Break

3:30 PM
Panel 4: Countercyclical policies

Presenters:
Andreas Lehnert, Board of Governors of the Federal Reserve System
Tom O'Grady, Pro Teck Valuation Services
Scott Smith, Federal Housing Finance Agency
Jesse Weiher, Federal Housing Finance Agency

Discussant:
Susan Wachter, Wharton School of Business of the University of Pennsylvania

Moderator:
Edward Pinto, AEI

5:15 PM
Keynote Address

Introduction:
Alex J. Pollock, AEI

Keynote Address:
William Isaac, Former Chairman of the Federal Deposit Insurance Corporation

6:00 PM
Cocktail Reception

7:30 PM
Adjournment

Day 2
Thursday, August 1, 2013

7:45 AM
Registration and Breakfast

8:15 AM
Panel 5: Stabilized lending value and countercyclical LTVs

Presenters:
Ted Durant, Mortgage Guaranty Insurance Corporation
Bill Foster, US House of Representatives (D-IL)

Discussants:
Patrick Sheehy, Lender Processing Services
Joseph Tracy, Federal Reserve Bank of New York

Moderator:
Alex J. Pollock, AEI

9:25 AM
Panel 5A: Best practices: Alignment of incentives

Presenters:
Edward J. Pinto, AEI
Mike Frueh, US Department of Veterans Affairs

Discussant:
James Carr, Center for American Progress

10:20 AM
Break

10:30 AM
Panel 6: Are appraisers and appraisals up to the challenge?

Presenter:
Steve Linville, National Association of Home Builders

Discussants:
John Brenan, Appraisal Foundation
Alan Hummel, Forsythe Appraisal 
Greg Stephens, Metro-West Appraisal Company 

Moderator:
Joan Trice, Collateral Risk Network

12:00 PM
Buffet Lunch and Discussion of Next Steps

1:30 PM
Adjournment

 

Event Contact Information

For more information, please contact Emily Rapp at [email protected], 202.419.5212.

Media Contact Information

For media inquiries, please contact [email protected], 202.862.5829.


 

 

 

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

Holder will regret his refusal to obey the Constitution
image 'Flood Wall Street' climate protesters take aim at their corporate allies
image 3 opportunities for better US-India defense ties
image Is Nicolás Maduro Latin America's new man at the United Nations?
AEI Participants

 

Stephen D.
Oliner

 

Edward J.
Pinto

 

Alex J.
Pollock
AEI on Facebook