U.S. senators from both sides of the political aisle found common ground on Wednesday in their efforts to help worried American homeowners and stabilize the country's housing market.
More details are expected to be announced at 5 p.m. today, but the components of the bill under discussion included $10 billion in tax-exempt bonds for refinancing subprime mortgages through local housing authorities, $4 billion for local governments to purchase foreclosed homes, as much as $200 million for homeowner counseling programs to help people avoid foreclosure, a proposed $15,000 tax credit for those who buy new or foreclosed homes, and the ability for bankruptcy judges to modify the mortgages of financially distressed borrowers.
According to news reports, the Senate bill is expected to include a $7,000 credit for buyers of foreclosed properties. Such a tax credit "is the best part of the whole program, because what our industry needs and the housing market needs is stimulation," Mick Pattinson, president of Barratt American Homes in Carlsbad, Calif., said, before the bill's particulars were released. "We need the people who have been sitting on the fence-some of them a long time-to get into the market. But right now, they are lacking confidence."
Unfortunately, the morning's economic news didn't bring much comfort to would-be home buyers or builders. Federal Reserve Chairman Ben Bernanke told Congress that "the near-term economic outlook has weakened relative to the projections released by the Federal Open Market Committee at the end of January. It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly."
Of course, builders are already feeling the pain, especially in formerly hot housing market states such as Arizona, Nevada, Florida, and of course California. "We would normally do an average of 500 homes a year," Pattinson said. "We'll perhaps do 100 this year, and some of those are fire-rebuilt homes."
Given such numbers, Pattinson considers the housing rescue market proposal an urgent matter. "We've got to make this work," he says. "It is critically important that this gets passed."
Learn more about markets featured in this article: Los Angeles, CA.