Stimulus Plan Will Boost Market for High-End Houses

WASHINGTON — To help reverse a severe housing slump, Congress will include measures to boost home sales as part of its economic stimulus plan, Rep. Barney Frank, D-Mass., said Thursday.

While the changes would not help residents in low-price areas of the Midwest, it could get more houses moving in expensive markets in Florida, California and elsewhere, Frank said.

The chairman of the House Financial Services Committee said that as part of the stimulus package, Congress will temporarily make it easier for home buyers to get "jumbo" loans over $417,000.

For one year, Frank said, the legislation would allow the Federal Housing Administration to insure loans of up to $729,750, or 125 percent of a market's median home price, whichever is lower.

In addition, Fannie Mae and Freddie Mac, the government-backed corporations that buy mortgages on the secondary market, would be allowed to raise their limits to a similar level.

"The market has closed off mortgages above $417,000," Frank said, which he called "the dumbest policy" in government. And even when such mortgages are available, the interest rates are much higher, hurting middle-class families in those areas where ordinary houses sell for more than $500,000.

The legislation will also include changes to immediately help families facing foreclosure refinance their loans and get the housing counseling they may need, said House Speaker Nancy Pelosi, D-Calif.

Last fall, both the House and Senate approved legislation updating rules governing the FHA, and now negotiators are nearing agreement on a single, final bill. Frank said that with the need to boost the economy so obvious, the FHA reform bill would now become part of the economic stimulus bill.

Congressional leaders have said they want to send a stimulus bill to President Bush by Feb. 15.

Frank's announcement came as the National Association of Realtors released figures showing just how slow the housing market has become.

The trade group said that for all of 2007 there were 5.65 million sales of existing homes — including single-family dwellings, townhomes, condominiums and co-ops — 12.8 percent below the 6.48 million transactions recorded in 2006.

The national median price for all types of existing homes was $208,400 in December, down 6.0 percent from a year earlier when the median was $221,600, the group said.

"Home sales remain weak," Lawrence Yun, the Realtors' chief economist, said in a statement. "But we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate."

Yun said jumbo loan rates remain "well above" the rate for regular mortgages, and that is hurting sales. "It isn't surprising that the share of single-family homes selling for more than $500,000 fell to 12.4 percent of transactions in December from 14.2 percent a year ago," he said.