Congress Needs to Do Something Big, Bold, & Quick
November 22nd, 2008
Stabilizing home values and getting the housing market moving again has to be a fundamental goal of any new economic stimulus package considered by Congress. Otherwise, we are doomed to see more of the same – more foreclosures, more problems with toxic mortgage assets and a deepening slump in home sales, which in turn will drag down home prices even more and put millions of additional Americans underwater on their mortgages.
The numbers are alarming. In the past year, home values have dropped an average of 16 percent in the nation’s top 20 markets. New home sales are down more than 60 percent from just a few years ago, and housing production has dropped to the lowest level since World War II. Total job losses in housing and housing-related industries are now approaching three million, and millions more Americans are in danger of losing their homes.
To break this self-reinforcing downward cycle, Congress needs to do something big, bold and quick. Specifically, NAHB is calling on Congress to:
- More than double the size of the current $7,500 tax credit, which is now limited to first-time home buyers. In addition, Congress should make the tax credit available to all buyers and make it a true tax credit, eliminating the current payback provisions.
- Reduce interest rates on conforming loans (mortgages backed by Fannie Mae, Freddie Mac, VA or FHA) for homes purchased by the end of 2009. Under this plan, buyers could obtain 30-year mortgages with interest rates as low as 2.99%.
- Keep the Fannie Mae/Freddie Mac conforming loan limit at $729,750. Under current law, it is scheduled to drop to $625,500 at the beginning of 2009– a move that would devastate California and other high-cost markets.
A combination of tax credits plus mortgage interest buy-downs was very successful in stimulating a recovery from the 1974-75 recession. A similar program could work again – helping to restore consumer confidence, triggering a rebound in home sales, stabilizing values and getting the overall economy moving again.
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