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NAR: Lower Mortgage Rates Could Reduce Housing Inventories by Twenty Percent

According to the ""National Association of Realtors"":http://www.realtor.org (NAR), a reduction, or a government buy-down, of mortgage interest rates by just one percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. The national housing inventory, currently at 9.9 months' supply, would decrease to approximately a 7.5 month supply, NAR said.
These changes would help stabilize home values and the housing industry, explained Richard F. Gaylord, NAR president. ""The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions,"" Gaylord said. ""The Administration needs to get back to the original intent of the plan -- stabilizing the mortgage and housing markets -- to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy.""
A recent consumer survey conducted by NAR member ""Realogy Corp."":http://www.realogy.com reinforces the importance of housing in a broader economic turnaround. The survey found that nine out of 10 homeowners believe that owning a home is still the best long-term investment they can make, but nearly one-third of those surveyed said they were putting plans to buy a new or existing home on hold because of the current economic environment. In a related survey, nearly half of all brokers surveyed said that they would expect sales to increase 10 to 25 percent if 4.5 percent mortgage rates were available today.
Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. ""When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,"" he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.
NAR submitted a stimulus plan to Congress and the Administration ""last month"":http://dsnews.comview_story.cfmxid=3051, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.
Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent, NAR contends. Such price gains would provide up to $760 billion in housing equity recovery for the nation's 75 million homeowners, NAR said.
""There is no question -- there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America's families protect their homes, savings, and futures,"" Gaylord said.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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