Economic Stimulus Plan Still Leaves Some Questions Unanswered

This stimulus plan that President Bush is expected to sign shortly contains a few housing provisions–but is that enough?

A few points to consider:

  • One Federal Regulator Isn’t So Sure. The head of the Office of Federal Housing Enterprise Oversight (who likely doesn’t have a small business card–that’s a mouthful) yesterday criticized the plan’s measures to give Freddie Mac and Fannie Mae larger loan limits, saying it would just get the agencies–which lawmakers have argued already need more regulation–wrapped up in some of the messiest housing markets in the U.S.

(MHN’s blog expressed a similar concern in January about encouraging the agencies to offer jumbo loan help–jumbo loans that pushed homeowners into properties they couldn’t afford is what got us into trouble in the first place.)

  • Limits Will Be Local. Also, the new Freddie and Fannie loan limits will be altered for different regional markets. Who is going to determine the limits for each area? And what data will they use? As we have all seen in recent months, housing data varies.

According to Deutsche Bank just eight markets–which include metro areas of New
York, Boston, Los Angeles-Orange County and Washington–have high enough home prices for the new loan limits to really help.

The bank’s study said the new, higher limits would have only a small impact in Miami, Sacramenta and California’s Inland Empire region; in Phoenix, Las Vegas, Chicago and most large Southern
markets, the loan limits won’t have any effect at all.
      

  • Will the refunds spur spending? And then there are the rebates. Taxpayers making under $75,000 taxpayers will receive rebates of up to $600 for individuals and $1,200 for couples. Families will get $300 per
    child.

The rebates were designed to reinvigorate the slumping U.S. economy–the plan’s supporters estimate it will add $152 billion to the economy this year. But is a real figure, or wishful thinking? A debate about whether or not consumers would go shopping with the cash–or bank it or apply it toward growing debt, which wouldn’t have much of an affect on spending–has been going on for weeks. According to the International Council of Shopping Centers and UBS Securities–which
jointly commissioned the study of 1,005 households between January 31
and Sunday–about half plan to use the rebate to pay off debt; a quarter plan to save it,  CNNMoney.com reported today.

The rebates are expected to be en route to citizens in late spring. We won’t know until then if the plan  will pay off: But what’s your first reaction? Will the higher loan limits offer enough help in those costly markets to have a ripple effect on more moderately priced housing? Or are we just buying time to help high-end homeowners avoid foreclosure with a year of higher loan limits?

Tell us your take by posting your thoughts…