Housing crisis needs fixing now

Finally.

By Thomas Oliver, Atlanta Journal-Constitution — Feb 08, 2009

Home builders and their ancillary business partners were the first in the unemployment line. Others from other industries soon followed; to be followed by ever more as the fallout continues to reach into every corner of the economy.

Until we fix housing, we’re just whistling in the dark while offering to fix or build or underwrite this and that. The mother of all stimulus packages was amended in the Senate last week with U.S. Sen. Johnny Isakson’s (R-Ga.) $15,000 tax credit for home buyers.

Assuming it makes it through the legislative process, it would help entice potential home buyers from off the sidelines.

A similar jump-start to housing took place in 1975, during one of the worst recessions of the 20th century.

Then, Isakson was helping run the family-owned Northside Realty. He remembers a $2,000 ($8,000 in today’s dollars) tax credit for home buyers helped remove in short order two-thirds of a three-year inventory of unsold homes.

Two longtime metro area home builders, John Wieland and Hugh Morton, also remember 1975. They support Isakson’s amendment. Both said that housing was essentially dead in the water.

“Home building is non-operative,” Wieland said. The chief executive of Wieland Homes said his company needs to sell about half of its current inventory of homes before even thinking about building new ones.

As bad as it is, Morton said it could get a lot worse. “If we don’t get housing back, many of the remaining players will not survive,” said Morton, the president and owner of Peachtree Homes.

“Obama and our leaders need to understand that housing has led us out of every recession since World War II,” Morton said.

We still need to address the foreclosure problem, and the president and congressional leaders have said they will deal with that separately.

But this tax credit would help.

So would a plan to use Fannie Mae and Freddie Mac to essentially borrow at less than 4 percent and issue or buy mortgages at 4 or a little more. To oversimplify, this would result in 4.5 percent, 30-year mortgages.

Think refinance. Those with ARMs or struggling to avoid foreclosures. Some estimates say 40 million homeowners would trade in their mortgage, saving the average family $400 a month.

If the 4.5 percent, 30-year mortgage were coupled with the $15,000 tax credit, housing would take off.

“Housing started this mess,” Wieland said, “and housing can help us get out of it.”