Media Turn to Michael Carney for Answers About Housing Market

Media Turn to Michael Carney for Answers About Housing Market
Michael Carney

As the California housing market worsens, most of the major media companies have sought College of Business Administration Professor Michael Carney to explain the downturn and forecast what's likely to happen in the next couple of years.

Over the course of his tenure at Cal Poly Pomona, Carney has become one of the university's most well-known experts, even being quoted in the New York Times and the Wall Street Journal.

Since summer, Carney has been quoted in many publications including the Los Angeles Times, Orange County Register, San Francisco Chronicle and Sacramento Bee offering insight into the subprime mortgage meltdown.

Carney has been a go-to source for reporters since 1983 when the Real Estate Research Council relocated to Cal Poly Pomona. As director of the nonprofit, Carney produces quarterly housing reports for all the major California counties. To publish these reports, Carney and students in the Finance, Real Estate & Law department collect and analyze data including new and existing home sales and prices, building permits as well as defaults and foreclosures.

Carney's most recent report published in August showed a 135 percent increase in Southern California real estate loan defaults from 2006. Cal Poly Pomona's neighbors – Riverside and San Bernardino counties – have some of the highest increases default in the state. As for forecasts, Carney told the Los Angeles Times that he expects Southern California house prices to fall an average of 5 percent a year through 2009.

Carney doesn't need to pull any of his reports or look at computer-generated housing models to explain the mistakes banks, lenders and homebuyers made.

“The fundamental problems in the housing market stem from people buying houses with no money down, with no equity in the home,” Carney says. “And many lenders made loans without checking the borrower's income, employment and credit history  - so-called 'stated-income' and 'no-documentation' loans.”

When housing prices began to slump there was no incentive for many borrowers to make their home loan payments because they had no equity in the home. So, they defaulted, Carney says.  After that, the lenders that held the defaulting home loans, began to face their own troubles with their creditors and underwriters.

Many analysts were concerned with the recent lessening of lending standards and the rapid increase in subprime loans, and, Carney adds, many remain very concerned that the deterioration in housing markets still has a long way to go.

Find out what might happen to next year's housing market at the 3rd Quarter 2007 Real Estate Research Council luncheon meeting Wednesday, Dec. 12, at Kellogg West Conference Center. The topic will be “Why 2008 Housing Markets Will Be Much Worse Than Expected,” and the featured speaker will be Bruce Norris, president of the Norris Group.

For more information visit the council's Web site