Government’s Budget Shows Housing Expected to Have Big Effect in 2008

Washington, D.C.–The fiscal 2009 budget released Monday by the Bush administration suggests that the housing slump will be an ongoing problem for the U.S. economy this year, the Wall Street Journal reports.According to budget documents, “it now appears that the effects of the housing slump on real (gross domestic product) growth will persist into 2008, holding down growth and delaying the expected rebound in activity.” However, the administration said that beyond 2008, housing “should cease to be a negative influence on growth.”The budget also indicates that, because of major bank consolidation, the banking sector may see significant damage from the housing situation. Bush’s 2009 budget includes a number of suggestions to help calm the housing decline’s effect. One calls for an overhaul of the Federal Housing Administration, increasing regulation of Fannie Mae and Freddie Mac. Another notion includes possible plans to spend $65 million to offer housing counseling. An additional suggestion proposes increasing the Federal Housing Administration’s loan limit to $417,000 from $362,790. The budget also recommended new standards and incentives to bolster the FHA, which would allow it to service 280,000 first-time buyers in 2009. In addition, the Department of Housing and Urban Development will finalize regulations this year to give consumers with more clear credit card and mortgage disclosures, according to the budget.