November 9, 2008

Housing Can Save the Economy

National Association of Realtors in Orlando

Lawrence Yun, economist for NAR at the Orlando conference notes that the depth of the current recession depends on the housing market’s recovery, and that will depend on stabilizing prices and inventory absorptions

Home sales showed their first increase in three years during the last quarter. Yun “We are beginning to come back, but recovery won’t happen until inventories are reduced from their current 10-month levels back to a more normal six months. Even more critical to a housing recovery are stabilizing home prices. Only then will new buyers get back into the marketplace and underwater buyers be able to consider moving up, he added" via the Palm Beach Post.

NAR had some proposals for the next administration:

1. NAR to urge Congress to create a housing-specific stimulus package. Its chief component, Yun said, would empower the government to "buy down" mortgages to as low as 4.5 percent.
2. A one-year program in which the federal government would cover the mortgage fees or points, enabling borrowers pay to lower interest rates.
3. NAR also proposed that the $7,500 tax credit be made permanent.
4. Yun said a buydown of 1 point, "might be sufficient to absorb 800,000 homes in the marketplace". That would cost the US Govt about 100 billion. With as many as 4 million homes thought to be late or in default nationwide, this would help a great deal.

To date, the focus has been on the banks. The $25 billion given to the top banks will not go towards new loans as intended. They have already indicated that this money will go toward bonuses and mergers. New tax law favorable to banks that merge and take on bad debt is already in place.

The housing crises is now in the steepest price declines since the great depression. Housing is the key cause and the solution. These proposals will help soak up available supply and halt the onslaught of many homes on the market. Keeping people out of foreclosure and bankruptcy and able to pay bills is the key to stabilizing the economy.

Thanks for Reading
Howard Bell
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