Virtual Open Houses

Bailouts are in fashion. The financial industry got one. The automakers have their hands out. Now the National Association of Home Builders and the National Association of Realtors are pushing their own multi-billion-dollar stimulus proposals.

The proposals are designed to get buyers off the fence and rejuvenate the flagging home sale market. The more expensive proposal comes from the home builders who want a $250 billion Fix Housing First package, which calls for a home buyer tax credit of 10% of the purchase price (up to $22,000) and a heavy subsidy from the federal government that would bring 30-year mortgage rates down to 3% for homes bought in the first half of next year and 4% for purchases in the second half, according to The Wall Street Journal.

The Realtor plan sounds is somewhat modest by comparison. The group also wants taxpayers to subsidize mortgages to bring down rates by about 2% -- at a cost to taxpayers of about $100 billion. And it wants the homeowner tax credit approved by congress this year to be changed so that the $7,500 credit can be given to all buyers, not just first-time buyers and that it no longer would have to be paid back. That part of the plan would cost another $40 billion, the group's chief economist Lawrence Yun told me today, adding that he thought the builder plan was too expensive.

Finally, the Realtors want the higher limits for federally-backed jumbo loans of up to $729,000 to be permanently extended (They're set to expire next year).

The lower mortgage rates should last about one calendar year, he said. "There should be some type of window where it closes," Yun said. "The main purpose is to get fence sitters off and bring them into the marketplace."

The real estate industry, which had a spectacular run earlier this decade, has reason to worry, especially as problems in the real estate sector spread to the larger economy. Buyers are more reluctant than ever to get into a falling housing market.

The National Association of Realtors said Nov. 24 that the median home price dropped 11.3% from October 2007, the largest annual drop since the group started tracking prices in 1968. Builders say that new-home buyers are backing out of contracts at an alarming rate. In October, the ratio of cancellations to sales was 42.6%. It was up from 34.8% in September, the month that Lehman Brothers failed.

What would be your advice to Obama? Are these stimulus proposals worth it?