Fixing the Housing Market May Help End the Recession
Those debating the form of a new federal economic stimulus package cannot ignore the struggling housing market. It is the single-largest component of the U.S. economy, and its positive and negative impacts reach into every nook and cranny. Housing’s long-term prospects are bright due to positive demographics, and the market has the proven ability to lead the nation out of recession as demonstrated several times since World War Two. The problem at the moment is that the financial wreckage caused by irresponsible financial institutions needs to be cleared out, the surplus housing stock reduced and consumer confidence restored. A carefully crafted stimulus component can do all of that, and more.
A new study commissioned by the Fix Housing First Coalition indicates a significant tax credit for all homebuyers from $10,000 to $22,000 (depending on Federal Housing Administration loan limits) with a subsidized mortgage interest rate of 2.99% would increase GDP by 1% annually, create 940,000 new jobs annually, increase average homeowner equity by $25,000 by 2012, increase aggregate homeowner equity by more than $2 trillion by 2012 and generate revenue at the federal and state levels that would exceed the cost of the program. That kind of public investment will surely pay better dividends than the hundreds of billions of dollars spent to bail out financial firms that largely caused the housing mess. Those companies seem to be more interested in executive bonuses, office renovations and corporate jets than America.