US Home Builders Propose Home Buyer Plan to Help Housing Market

Home sales unexpectedly jumped 2.7 percent in September, giving hope for a bottom to the housing market. Home builders, hit hard by the collapsing housing market are now presenting Congress with their own recovery plan. The plan pulled from the history books would include a generous tax credit and a federal program to subsidize current market rates.

Home builders are looking to the 1970s housing slump for ideas on their own housing recovery package. In 1975 the government gave a temporary $2000 tax credit to buyers of new homes. During the same time Ginnie Mae, a government corporation, subsidized mortgage rates by paying lenders the full market rate for loans made at below market rates--at that time cutting the average 30-year fixed rate loan from 9 percent to 7.5 percent.

The proposal currently being prepared is expected to recommend Congress pass a similar two step new home buying program. The program would give home buyers a minimum of $12,000 and up to $20,000 tax credit, indexed on the median home price of the area and Ginnie Mae would subsidized current 30-year fixed rate mortgages averaging 6.25 percent down to 2.99 percent. The plan, like the 1970s plan, would be proposed as temporary. However, unlike the 1970s plan this proposal would include new and existing home sales.

FHA's refinance assistance programs already offers a $7500 tax credit to help home buyers. However, experts like Lawerence Yun the National Association of Realtors' chief economist, say that the requirement to pay back the government for that $7500 creates a huge psychological barrier.

Builders are lobbying that this would quickly soak up excess housing inventory that continues to put downward pressure on housing prices.

Home builders are moving swiftly to try an get their plan into Congress in time to be tacked onto an expected post-election Democratic stimulus package. A stimulus package that is already expected to include: the extension of unemployment benefits and infrastructure projects.