Editor’s note: This week, we will post a series of blogs that highlight some of the critical business and policy issues discussed at last Thursday’s Wharton Economic Summit 2013, held in Jazz at Lincoln Center in New York City. This post covers the topic of real estate.

The real estate situation in the United States appears rosy, or at least that is the picture the Real Estate Panel painted for attendees of the Wharton Economic Summit.

Richard A. Smith, leader of the real estate brokerage franchiser Realogy Holdings Corp., started off his participation in the panel by explaining why he is bullish on real estate for the first time in six years. With brands such as Century 21 and Coldwell Banker, Realogy’s footprint is global. Domestically, their perspective in particular markets is improving. Smith reported, for instance, that Miami’s market does not have enough inventory to meet demand.

“We’re seeing that virtually play out in every market,” he said.

Jon Gray, C’92, W’92, global head of real estate at Blackstone, was equallyoptimistic. New housing is simply not keeping up with the demographics; the American population grows roughly 2.5 million every year. Many homes today are trading below physical replacement cost. The trends thus point to a correction in home prices, which will occur faster, he added, if interest rates remain low and unemployment drops.

“This is a very optimistic panel,” Jeff Blau, WG’92, CEO of Related Cos., said to laughter from the audience.

Joseph Gyourko, the Martin Bucksbaum Professor of Real Estate and chair of the Wharton Real Estate Department, moderated the panel.

Joseph Gyourko, the Martin Bucksbaum Professor of Real Estate and chair of the Wharton Real Estate Department, moderated the panel.

Yet when the topic turned to real estate public policy and the mortgage business, panel members grew cautious.

The U.S. government essentially operates 90 percent of the mortgage market, in large part because it placed the two government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac into conservatorship in September 2008. American taxpayers are on the hook for as much as $7 trillion in mortgage exposure.

Jim Millstein, chairman and CEO of the financial services firm Millstein & Co., called for an end to the GSE conservatorships and a careful wind-down of the government’s role in the mortgage business. He supports a system by which private dollars would back mortgages and the government’s role would be reduced to reinsurer, similar to the FDIC’s role in consumer banking.

“Most people in the middle of the spectrum say this is what we should do,” Millstein said.

At the moment, policymakers are not populating the middle ground, nor seemingly contemplating the risk of the American government’s current position in the mortgage market.

On March 7, 2013, the Wharton Economic Summit convened a number of experts from across the spectrum of business and economic policy, including Wharton alumni, faculty and others, to discuss some of the most critical issues faced by business leaders today. Read more about the Summit’s panels by clicking on one of the following topics: energy, innovation or health care.