Wall Street Journal: Home Builders Want $250 Billion Stimulus

$250 Billion more? Just slap it on top of everything else. Why not - it's all free money and we have unending pockets. Keep in mind, the homebuilders got a generous handout... err, subsidy just this spring which was "sold" to America as a home owner help package - but as a top 10 lobbyist group they are going to keep going to the trough. If you want to see the dirty dealing behind the scenes and why all lobbyist groups should end read on ---> [Apr 4: Congress is Rushing to Help Homeowners (NOT!)]

But that was the last handout they got, this is now half a year later - let's focus on the latest plan! The irony is we need all home building to STOP - no new homes built - and to get people to suck up all the available inventory for the next few years so any "stimulus" should be aimed at one spot only - existing homes. But the "existing home" lobby does not exist, only the home builder lobby...

• 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.
• Builders are promoting the campaign with full-page newspaper advertisements, but face an uphill battle, with critics suggesting the proposal is too expensive and that it too heavily promotes home purchases rather than addressing loan modifications for delinquent homeowners.
• The homebuilders' proposal would offer home buyers a tax credit equal to 10% of the home's value, capping it at $22,000, nearly three times the $7,500 credit Congress offered to new buyers earlier this year. Builders say the earlier credit didn't work because it wasn't big enough and had to be repaid. (anytime you have to repay a credit is certainly not worth doing - it is much better to print money and then hand it out like it's going out of style)
• Builders for government-backed "conforming" loans, which currently are around 6.2%, also want subsidies for interest rates on 30-year fixed-rate mortgagesto 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. (sure - why stop there - how outrageous that we even have a 3-4% interest rate for people who borrow money. In fact why don't we have the government pay people interest to buy homes?? Any person who buys a house not only gets 0% interest but the government will pay them 5% interest for every dollar they borrow. I'm really aghast at these half steps - why bother with 3-4% interest when we can go full monty and pay people to borrow money?)
• A rate reduction of about 1% on a 30-year mortgage typically costs the lender -- in this case the government -- around 4% of the principal. So a 2% buy-down on a $200,000 mortgage would cost $16,000. The NAHB estimates the subsidy portion of its proposal would cost the Treasury $143 billion. (peanuts! That's just one AIG Bailout)
• 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. (Shhhh!! Don't speak sense - we're in the middle of bailouts - this is a No Sense Zone Mr Lawler) "The government does not have the tools to rewrite the laws of supply and demand," said Harvard University economist Edward Glaeser. "By artificially increasing prices, we are encouraging more building." (but they are trying hard to rewrite the rules)
• "You can offer people all sorts of credits, but if they don't have a job or income I don't know that they're going to take the bait," said Jared Bernstein of the Economic Policy Institute. (more sense - please stop it; look Mr Bernstein - we are only selling this as a stimulus plan - much like last April this is going to be a handout for the new home builders - nothing else)
• Another potential hitch is that creating an incentive to buy, but not a mechanism to refinance existing mortgages, could prompt some people to purchase a new home on more favorable terms and then bail on their existing one. (oh the laws of unintended consequences - full out socialism is fraught with it)