WASHINGTON – Feb. 3, 2009 – Home buyers could see lower mortgage rates and get tax credits as part of a sweeping economic stimulus package being considered on Capitol Hill.
Lawmakers are heeding the pleas of two powerful and well-heeled interest groups: real estate agents and home builders. Those industries have lobbied hard in recent weeks for more expansive assistance for their flailing members.
The Senate took up a $900 billion version of the stimulus legislation on Monday after an $819 billion version passed the House last week without a single Republican vote.
Any government aid for the housing sector should be temporary and apply to all buyers to help boost sales of expensive homes as well as low-priced ones, said Wachovia Corp. economist Mark Vitner.
“Nobody wants to buy a home before prices have bottomed out,” Vitner said. “Unfortunately if everybody has the same idea, prices are going to keep falling.”
With median sales prices back to levels last seen in mid-2003 and rates on 30-year mortgages hovering around 5 percent, homes have become far more affordable in most of the country. But some economists say they still have farther to fall, particularly in former bubble markets like California and the Northeast.
Plus, some question the amount of money going toward relatively wealthy home buyers, instead of renters or those who can’t qualify for a mortgage.
“I’m amazed,” said Dean Baker, an economist and co-director of the liberal Center for Economic Policy Research in Washington. “We’re giving people way more money – just because they bought a home – than if they’re unemployed.”
Meanwhile, Senate Minority Leader Mitch McConnell, R-Ky., told reporters Monday that Republicans would offer a plan to have the government step in to reduce mortgage rates to around 4 percent, which could shore up home prices and lower housing payments for millions of Americans.
“A stimulus bill must fix the main problem first, and that’s housing,” McConnell said. “That’s how all of this began. We think you ought to go right at housing first.”
Sen. Charles Schumer, D-N.Y on Sunday told “Face the Nation” on CBS that Democrats would support a GOP-backed idea to double a home buyers’ tax credit from $7,500 to $15,000 and make it available to all buyers instead of those purchasing their first home. He also said the Obama administration is considering ways for the government to lower mortgage rates.
“There seems to be real bipartisan support for a stronger housing focus,” said Mary Trupo, a spokeswoman for the National Association of Realtors, which has rallied its members to push for more aid to the hobbled market.
The Realtors group spent more than $17 million on lobbying last year, with more than $6.5 million coming in the final three months, according to disclosure forms.
The building industry, which has been devastated by the housing bust, has been pushing a package of subsidies that would bring mortgage rates to just under 3 percent for the first half of this year. The National Association of Home Builders – which spent more than $4.5 million lobbying last year – favors a tax credit of up to $22,000 for home purchases.