Home builders lobby for help

Washington —- With lawmakers angling to pass an economic recovery package by the middle of next month, desperate home builders from around the country flew to Washington to spend Wednesday pushing a $150 billion plan to revive the housing market.

The National Association of Home Builders brought around 80 builders —- mainly from smaller, privately owned companies —- for meetings with lawmakers from their districts, particularly those on committees that will handle President-elect Barack Obama’s economic rescue package.

“Don’t take their usual squishy answers,” exhorted Jerry Howard, chief executive of the home builders’ trade group in a feisty Wednesday morning pep talk. “We need to know today: Are you with us or not?”

The home building industry has been devastated by the housing market bust. The builders argue that plunging home prices and sales are causing widespread suffering for businesses ranging from interior decorators to sellers of faucets, lumber and blinds. Massive government intervention is needed, they say, to boost home sales and prevent foreclosures from further flooding the market.

Builders want a package of subsidies that would bring mortgage rates to just under 3 percent for the first half of this year. They also favor a tax credit of up to $22,000 for home purchases.

Still, broad housing aid is not expected to be part of Obama’s economic stimulus plan. Housing relief seems more likely to be part of a separate bill outlining new rules for the remaining $350 billion in financial industry bailout money.

“They want to get the stimulus passed quickly,” said Mark Zandi, chief economist at Moody’s Economy.com. “If they bring in the housing-related issues, it might get unwieldy.”

Responding to public outrage over the bailout plan, lawmakers also plan to mandate limits on executive pay among banks that receive government bailout money. They also plan to require more disclosure of where the bailout dollars are going.

Obama’s advisers are developing an economic plan that could cost nearly $800 billion over two years. The president-elect has made few references to housing, mortgages or foreclosures in remarks about the economy recently, after having stressed the issue repeatedly during his campaign.

But Obama and Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, have agreed on the rough outlines of a plan to direct some of the remaining bailout money to foreclosure prevention, said Steve Adamske, a spokesman for Frank.

That plan is still being drawn up. But it may be modeled after a proposal drawn up last year by Sheila Bair, chairman of the Federal Deposit Insurance Corp.

Analysts aligned with Democrats say it would be better for the economy to prevent as many foreclosures as possible by giving lenders an incentive to modify loans at lower rates, rather than spending taxpayer dollars to try to boost home sales and prop up prices. With the economy sinking, lower mortgage rates and tax incentives may not be effective.

Buyers “are concerned that they’re not going to have a job next month,” said Andrew Jakabovics of the Center for American Progress, a liberal think tank aligned with the new administration. “The solution doesn’t necessarily lie directly in giving people cash to buy new homes.”

With median sales prices back to levels last seen in early 2004 and rates on 30-year mortgages hovering around 5 percent, homes have become far more affordable in most of the country. But some analysts still worry that government intervention could cause the U.S. housing bubble to re-inflate.

“You still have considerable overvaluation in many markets,” said Dean Baker, an economist and co-director of the Center for Economic Policy Research in Washington.

But Scott Eckstein, a custom-home builder from Naperville, Ill., said Wednesday he has been forced to lay off all but one of his company’s 12 employees, is now doing only remodeling jobs and has moved his family to a smaller home to try to save money.

“Unfortunately, as a homebuilder I can’t afford my own product anymore,” said Eckstein, who came to Washington to lobby lawmakers from Illinois. “It’s a critical situation, and we need something done and something done fast. We can’t be talking about this in six months.”

The National Association of Realtors is pushing a more modest proposal to provide a $7,500 tax credit for all home purchases.