Nearly half of all California homes sales in September were foreclosures. Reversing that trend is not going to be easy; home prices are expected to continue to fall, San Francisco Federal Reserve bank President Janet Yellen said.
"First, the ratio of house prices to rent still remains high by historical standards, suggesting that further price declines are needed to bring housing markets into long-run balance," Yellen said. "Second, the large inventories of unsold homes, that also can be expected to continue to put downward pressure on prices."
It will take long-term solutions to address the economic downturn, Yellen said, and the group of 300 leaders from the academic and banking world is hoping to come up with some break-through ideas.
"Well, there will be various proposals that we'll probably hear that will do with write-downs on the amount of mortgages that some of the troubled homeowners have; that's one possibility," Haas School of Business professor James Wilcox said. "I wouldn't be surprised if people start to talk about tax cuts that would give stimulus to people who buy houses during 2009."
Some participants also recommend that one agency take charge of regulating the lending industry, replacing several with overlapping duties. Others suggest Congress will need to consider changing laws, such as lifting the ban on bankruptcy courts modifying loan contracts on principal residences.
"They need to inspire home buyers to buy property -- to share in the American Dream," Wells Fargo executive Brad Blackwell said. "Second, to educate them, and third is the enable them through a healthy financial market."