2008-11-23wsj.com

The builders' lobby is ramping up its sales pitch for a $250 billion stimulus package called "Fix Housing First," arguing that financial markets won't recover until home prices stop falling. They are calling for a generous tax credit for home purchases and a federal subsidy that would lower a homeowner's mortgage rate.

Uh... don't we already have all those things?

And call me insensitive, but isn't a great way to have something "stop falling" to simply let it reach the bottom?

Also, weren't the major builders "doing fine" and "weathering the storm"? They haven't exactly been imploding in droves (though small builders are).

Builders also want subsidies for interest rates on 30-year fixed-rate mortgages for government-backed "conforming" loans, which currently are around 6.2%, to bring rates down to 3% for loans made in the first half of 2009 and 4% for those in the second half of the year. Realtors are pushing a 4.5% interest-rate buy-down for new loans. Lawrence Yun, the chief economist for the National Association of Realtors, estimates that each 1% decline in interest rates could generate between 500,000 and 800,000 home sales.

...

But to some economists, "Fix Housing First" strikes an all-too-familiar refrain of "build more homes." Housing economist Thomas Lawler implores builders to "stop building." He and others argue that effectively setting a floor for home prices will prolong the pain because it will keep supply and demand out of sync.


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