The battered housing market has steadied and is ready to bounce back off an inevitable pullback from its boom times in the earlier part of the decade, said Ron Peltier, the CEO at Warren Buffett's Homeservices of America real estate company.
"I think the real truth is the market has been in a phase of correction," Peltier said on CNBC this morning. "We are seeing some light at the end of the tunnel."
At the same time, Peltier gave a candid analysis of what led to the housing meltdown in the first place.
He said the market sprinted ahead of itself price-wise, while unscrupulous lenders and appraisers compounded the industry's problems by putting too many people in houses they couldn't afford.
"We knew it was an overheated market," Peltier said. "There were people for the first time ever having opportunity to buy part of the American dream under credit conditions and credit guidelines that were very, very shaky at best.
"And they were buying at the peak of the market with very low teaser rates, not fully understanding the implications of that adjustable-rate mortgage setting some time in the future and the probability that they could not afford that home under the new reset conditions. That's a travesty, because there are a lot of people that got hurt."
Peltier put much of the blame squarely on lenders who often doled out mortgages that did not require documentation regarding assets or income.
"A lot of people bought ahead of themselves," he said. "Frankly, I think to some degree the lending industry, the mortgage business, lost its moral compass in terms of providing the proper credit standards and qualifications."
As for how things shape up going forward, Peltier said market has returned to its pre-boom times, with home sales tracking at about 5 million annually.
"I think that's a normalized market and I think that's a sustainable level," he said.
But he divides the market into two parts: the primary market of discretionary sellers, and the distressed market, which includes some of the areas that saw the meteoric rise and now are suffering the consequences of excess.
"Housing prices are still within 8 to 10 percent of all-time highs," Peltier said. "The markets that have fallen off the most are actually the markets that were the most overheated."
Speculators hurt those markets, with 25 percent of all sales from 2001 to 2006 going to those betting on making quick profits rather than buying homes in which they planned to live for an extended period.
As the market normalizes, Peltier believes stability will return and prices and sales numbers will get back to sustainable levels.
He worries, though, about pressure on the consumer from soaring fuel costs and tightened credit standards at the institutions that were beaten down by the collapse of the subprime lending market.
"Buying a home is a function of how they can finance it," Peltier said. "If credit standards are extremely tough and expensive, the ability to close a sale is that much more difficult."
He called on Congress to find a workable solution to the housing crisis, something that has been elusive as the legislators and President Bush spar over who should benefit from pending legislation.
On the broader political landscape, Peltier said the housing industry generally does better when Republicans are in office, though he did not endorse a specific candidate in the presidential race.
"There has been more showboating and discussion than actual rubber that meets the road," he said regarding the legislative impasse. "The fact of the matter is we really need to have some new legislation in place to slow down and stall the foreclosures where people basically bought into a home under mortgage financing programs they didn't understand."