No Economic Recovery Without Housing Stabilization, Say NAR

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(WASHINGTON, DC) - The National Association of Realtors® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis.

"Our members see firsthand the impact that an unstable housing market is having on communities all across this great country," said Richard F. Gaylord, NAR president. "The U.S. Treasury and Congress need to work together to ensure that the American people - not Wall Street and large banks - benefit from the economic recovery plan."

NAR sent a letter last week to U.S. Treasury Secretary Henry Paulson calling on him to refocus the Federal Housing Finance Agency's efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.

NAR today provided an economic analysis demonstrating that a reduction, or a buydown, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months' supply would decrease to approximately a 7.5 month supply.

"These changes would help stabilize home values and the housing industry," Gaylord said.  "The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan - stabilizing the mortgage and housing markets - to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy."

A recent consumer survey conducted by NAR member Realogy Corp. reinforces the importance of housing in a broader economic turnaround. The survey found that nine out of 10 homeowners believe that owning a home is still the best long-term investment they can make, but nearly one-third of those surveyed said they were putting plans to buy a new or existing home on hold because of the current economic environment. In a related survey, nearly half of all brokers surveyed said that they would expect sales to increase 10- 25 percent if 4.5 percent mortgage rates were available today.

Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. "When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery," he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.

FDIC Chairman Sheila Bair has presented some ideas aimed at helping millions of homeowners by guaranteeing their mortgages. "NAR would support this effort," said Gaylord. "The government must focus on protecting homeowners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy."

Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.

Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation's 75 million homeowners.

"There is no question - there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America's families protect their homes, savings and futures," Gaylord said.