CHICAGO—Much of the talk at this week's REITWeek, NAREIT's Investor Forum, has of course focused on the nitty-gritty details provided by the more than 100 presenting companies. But at Thursday's lunch session, participants were encouraged to take a step back and look at some of the fundamentals that will affect the economic recovery.

Austan Goolsbee, the former chairman of President Obama's Council of Economic Advisers and a professor of economics at the University of Chicago's Booth School of Business, gave the lunchtime address and began by saying that frustration with the slow recovery is understandable. When he first got to Washington, there was a lot of chatter about a V-shaped recovery, which after a short time changed to hoping for a U-shaped recovery, which in turn morphed into talk about an L-shaped recovery and “L is not even the shape of a recovery.”

Things have certainly improved since those dark days. But Goolsbee also said that conference-goers should not depend on a housing recovery to lead the country back to economic health. That would mean going “straight back to doing what we did before” which “got us to almost six million vacant homes. Here I fear we are attempting to relive the joke Onion headline” from 2008, “Recession-Plagued Nation Demands New Bubble to Invest In.”

For eight decades, he added, housing was a slow, steady asset. And if we depend on returning to the soaring home prices of the previous decade we're “back in Onion headline territory.” Something else, perhaps several things, needs to happen “as we get through this inventory of six million vacant homes.”

Sometimes, however, it's difficult to see what that something will be. Exporting our way out of trouble will be difficult, primarily due to the double whammy of an already-sour European economy and a developing slowdown in the Asia. And Goolsbee has a succinct response when asked what Washington will do to build the economy: “Nothing. I don't foresee policymakers doing anything healthy.”

But all the pent-up demand that you would expect to develop during a long recession “still does exist in the economy.” Goolsbee said we'll know the economy is about to take off once the nation's 25-year-olds feel financially-secure enough to move into their own homes. “We should get a significant bump-up in consumer spending” once all those young people purchase everything needed to establish new households. However, “they will probably rent that space instead of buy it.”

Instant Insights /

Goolsbee Issues Cautionary, Hopeful Notes About Economy

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