When will the Homebuilding and Housing Industry Turnaround?

From the Chicago tribune today:

The housing industry could see a turnaround before the end of this year, but only if Congress takes action beyond the current economic stimulus plan, and the credit markets stabilize, the head of the National Association of Home Builders said here Friday.Overhaul of federal agencies responsible for the housing industry has been on hold for five years, and action is needed quickly, said Jerry Howard, CEO of the builders' group."There has been a lot of finger-pointing, but action has been too slow," he said. "Current regulation has been dysfunctional and has been too slow to help the industry."Action is needed on an overhaul of the Federal Housing Authority and on regulation of Fannie Mae and Freddie Mac, the two private, government-backed firms that provide a lion's share of mortgage financing, according to Howard.He said a much-needed element for turning around the housing industry would be a tax credit of perhaps $10,000 for buyers of a new home. This could be aimed at first-time buyers, or it could be more broadly based, Howard said. In some cases, the tax credit could be as much as $15,000.A similar step taken in 1975-1976, during the administration of President Gerald Ford, helped the country out of a recession at that time, he said. That tax credit was for $1,000. Howard spoke with members of the Tribune's editorial board, telling them that the housing industry is in a recession that is affecting all parts of the economy."Home building traditionally is the first sector to go into a recession, but it is also the first to come out," he said.The housing industry could recover before the end of 2008, provided that the rest of the economy doesn't tumble into a recession, Howard said. Currently, builders are faced with about 10 months worth of unsold homes."The housing downturn is affecting lumber mills and a wide range of manufacturers, and the situation for builders is dire," Howard said. Part of the problem, admittedly, was caused by overbuilding, he added.But additional blame should go to poor regulation of mortgage lenders, some of whom made predatory loans that have tumbled into foreclosure, Howard said. Additional blame should go to appraisers who overvalued properties, and mortgage brokers, who encouraged consumers to take inappopriate loans. As part of the current government stimulus plan, conforming loan limits for mortgages were raised above $417,000 for houses in California, Florida and other high-price areas. But the limit was unchanged for the Chicago area. That is hurting buyers who are looking at homes priced in a range of $500,000 or more, analysts said.Locally, sales of new homes have fallen by about two-thirds, "but by summer we will be through the worst of the situation here," said Peter Schwartz, chief executive officer of the Home Builders Association of Greater Chicago, who also attended the session.A harsh winter and late spring have hurt sales, he said, but builders are poised for a rebound.