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At Symposium on Real Estate : U. S. Economic Dependence Cited

June 07, 1987|DICK TURPIN | Times Real Estate Editor

SAN FRANCISCO — The American housing and real estate industries can no longer determine their destinies, prominent economists and financial authorities declared in strong terms here at a symposium dealing with real estate and economics.

Representatives from the fields of realty, finance, government and education--and a national gathering of real estate editors--were told that the "globalization of the economy" now rules and dominates financing of all kinds.

Sam Zell, a Chicago-based major syndicator, pinpointed the issue: "The economy is no longer domestically (controlled). It is world-dominated finance--yen, dollar, mark, gold."

He attributed ailments within the nation's economy to a "lack of discipline" by business interests, leading to wholesale overbuilding and inconsiderate lending. He was bluntly critical of builders and lenders who are guilty of such practices.

Lack of Discipline

The nation's current glut of construction and the ensuing vacancies are the direct result of the industry's lack of discipline, he said.

"Nowhere else in the world is there any vacancy (factor)," the veteran developer emphasized. Access to the market in other nations is limited and determined by market conditions--"someone has to have a need," he added, before money is borrowed and building begins.

Anthony Downs, economist, senior fellow at the Brookings Institution and former chairman of the Real Estate Research Corp., said globalization of the economy has set in, and the development boom has resulted in serious overbuilding.

The present status of the United States as the world's largest debtor nation means "mortgaging our children," he said, citing a two-pronged problem.

Quality Education

At the same time that future generations face this problem, about 25% of the nation's children are from black and Latino families, and they must be given quality education to improve their future status and, consequently, the educational level of the nation, he said.

Downs, a realty consultant to a number of private and public firms, also stressed the inherent problems throughout the nation caused by traffic congestion. Big-city density is and has been forcing people to live nearer to their place of work, hence the proliferation of satellite towns and planned communities.

Yet, he added, the basic strength of the nation will continue to attract global investors, notably the Japanese who already own five of the 11 major banks on the West Coast.

Tony Frank, the energetic and outspoken chairman and chief executive officer of First Nationwide Bank, gave a chapter-and-verse discourse on the continuing "dismantling" of the savings and loan industry through competition, fraud, bad management and economics.

It will not be around much longer in its traditional role--that of servicing home loans without loss, he added. The industry, he predicted, will merge into the banking system within two years, its members opting to become either a commercial or consumer oriented bank, and both systems will be insured properly.

The insolvency of the Federal Savings & Loan Insurance Corp. will help institutions in making such decisions, he said, and will lead to more corporate-owned banks. His own, San Francisco-based First Nationwide Bank, is owned by Ford Motor Co.

The 10th annual symposium on Real Estate and Economics, sponsored by UC Berkeley's Center for Real Estate and Urban Economics at the Fairmont Hotel, had headlined the appearance of one of the nation's eminent economists, Henry Kaufman, as keynote speaker.

But his cautious commentary of the state of the economy and financial markets provided little grist for reporters' notebooks and was in complete contrast with his fellow speakers' remarks, which were often interspersed with topically ribald asides.

Kaufman, chief economist and member of the executive committee of Wall Street's Salomon Brothers, essentially traced the stock market's volatility and behavior to date this year.

He said the economy's growth will be moderate for the remainder of 1987, and that the Federal Reserve will be careful in its actions on tightening or loosening its money reins and "would not drain the punch bowl."

He concluded with the classic advice that there are always risks and chances for profitability.

Other speakers included Dale Stuard, president-elect of the National Assn. of Home Builders and Orange County builder; James Rouse, retired chairman of the Rouse Co., major building firm, and currently chairman of the Enterprise Foundation, a charitable corporation which supports nonprofit housing groups in rehabilitating housing for the poor.

Housing Priority

Also, two financial managers and investment specialists, Claude Rosenberg and Arthur Goldberg, and John Molinari, member of the San Francisco Board of Supervisors, chairman of the board's finance committee and a mayoral candidate.

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