(Corrects the name to James "Jamie" Dimon instead of James L. "Jamie" Dimon as originally published.)
Across the U.S., millions are agonizing about their inability to buy and sell a home. Most feel powerless, unable to control their financial destinies. They are buffeted by low housing prices, resetting mortgage payments, stagnant salaries, and elusive financing. They are waiting for the market to stabilize, for the economy to rebound, for consumer confidence to revive. But this sort of relief doesn't just happen. It takes time, planning, and lots and lots of money.
It also takes the right people in the right jobs. The real estate industry is vast, interlocking, and disorderly. The men and women whose job it is to make sense of real estate—to regulate it, pump money into it, and perhaps even keep it from blowing up again—are also the ones with the power to fix it. These are the economists and bankers, politicians and developers, portfolio managers and homebuilders who make up the first-ever list of Bloomberg BusinessWeek's 50 Most Powerful People in Real Estate.
Who are these people? The list, shaped in interviews with industry experts, includes head of banks such as JPMorgan Chase (JPM) CEO James "Jamie" Dimon; investors such as David Neithercut, CEO of Equity Residential (EQR), one of the largest apartment owners in the U.S.; leaders of key lobbying organizations such as Vicki Cox Golder, president of the National Association of Realtors; and economists such as professors Robert Shiller and Karl "Chip" Case, who developed the influential S&P/Case-Shiller Home Price Index. In addition, the heads of landowning organizations were also included, such as Mark Tercek, chief executive of the Nature Conservancy, which controls more than 2.8 million U.S. acres.
Some on our list have more power than others. President Barack Obama is an easy pick, but many are less obvious choices. For example, Edward DeMarco appears because he oversees Fannie Mae (FNM) and Freddie Mac (FRE), the nation's two largest mortgage finance lenders, in his capacity as director of the Federal Housing Finance Agency.Chinese Premier Wen Jiabao is listed because China holds $895 billion of U.S. debt.
Government: the ultimate power player
It is important to stress that this roster is not a ranking. There is no accurate yardstick to compare a banker with, say, an academic. To arrive at the list, we assembled a universe of several hundred names, grouped them by sector—economists, government, mortgage lenders, residential brokerages, home builders, and so forth—and then started whittling. We looked at the biggest lenders and homebuilders, the most influential politicians and economists, the largest landholders and REITs. Since we focused on the U.S., important players in say, Indian or British real estate were not considered. We concentrated on the most senior decisionmakers—those with whom the buck stops or who have played a significant role in the industry over a number of years. For example, instead of choosing newly minted Bank of America (BAC) CEO Brian Moynihan, we went with Barbara Desoer, who has led BofA's home loans and insurance business since mid-2008. Desoer supervises a $2 trillion servicing portfolio that accounts for about one-fifth of U.S. mortgages, according to company figures.
Government stands above the other categories. "The government has become the lender of last resort, the market maker of last resort, and the portfolio manager of last resort," says Lawrence A. Souza, an economist, broker, and investment adviser for the Johnson Souza Group in San Francisco.
The Obama Administration has maintained policies to stabilize housing markets and improve credit. Under the Home Affordable Modification Program, lenders have converted 168,708 loans into permanent loan revisions and placed more than 835,000 borrowers in trial repayment plans as of the end of February, reported the U.S. Treasury Dept. To encourage mortgage lending, the Federal Reserve has purchased $1.25 trillion worth of mortgage-backed securities.
This power may be short-lived. According to Souza, it is not the government's role to maintain such a large position in the industry. He expects that as the economy stabilizes and employment rebounds, its profile will slowly shrink. (The Fed recently affirmed plans to stop buying mortgage-backed securities, but will keep interest rates near zero.) Until then, Souza says, the government should reduce its swollen portfolio and gradually liquidate its mortgage-backed securities, returning control to the market.
"still in triage mode"
It's not clear, however, when the market will be ready. "The system is in quite a bit of disarray. There is no clear vision for how to move things forward," says Rick Sharga, senior vice-president of Realty Trac, a foreclosure data company based in Irvine, Calif. "There are relatively few people I could identify as visionaries in the real estate industry," as many influential organizations and companies are still in triage mode, he says.
For individuals in the government and elsewhere, accountability is emerging as a major priority. Financial reform efforts in Congress and the onset of new business practices will affect how the industry conducts business in the future. "There needs to be an ability to hold people accountable for things they did years ago," says John Burns, president of John Burns Real Estate Consulting in Irvine, Calif.
Without pointing fingers, Burns says, incentives must be changed to mitigate risk for a long-term, sustainable recovery. The ubiquity of real estate issues means that leaders now operate on a more public and transparent platform. How some of the people who were powerful during the housing bubble escaped accountability in the past, Burns says, "is beyond me."
Most of those people have vanished from their positions of power. Whether voted out of office, retired, fired, or indicted, the majority of individuals who helped inflate the real estate market are now historical footnotes. One hopes that the people on this list will show greater wisdom in how they wield power and that, instead of nearly wrecking the U.S. economy, they will help restore it.
Click here to see the 50 Most Powerful People in Real Estate.