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February 20, 2009

Help for housing?

Most economists say the current recession began in the housing market. Therefore, it can be argued that the recession won't end until the housing market is back on its feet. What are some of the proposals for doing this?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Two ideas are being floated and discussed. One is to have the government - federal government - back a mortgage that homeowners can use with a very, very low interest rate and a fixed rate, maybe 4 percent, the idea being that if it's cheaper to get a mortgage, your payments are going to be lower. That's going to stimulate more people to go out and buy homes. The second idea is to have a very, very large tax credit for homebuyers. Now, a tax credit is much better than a tax deduction. A tax credit reduces your taxes dollar for dollar. A tax deduction does not. The tax credit that's been discussed may be in the range of $7,000 to $10,000, so that means if you bought a house, you would see your taxes drop immediately for that year by $7,000 to $10,000. Now if you don't have enough tax liability - that is, if your tax bill isn't that high - one idea is to take what's left over and use it to apply to the down payment. Both of these ideas obviously are designed to stimulate home buying. Many economists say that we have to get the housing market back on track - sales up - in order for this recession ultimately to be over. These are a couple of ideas."

Posted by Dave at February 20, 2009 08:00 AM