How Government Can Spur Home Sales

There are four steps the U.S. government can take to encourage more home buying, says Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University.

"First, the regulatory body writing the Dodd-Frank rules can hurry up and complete their task," says Dotzour. "They are way overdue. The uncertainty this creates causes lenders to be risk averse, especially toward mortgage borrowers."

Another step is for Fannie Mae and Freddie Mac to make home loans to buyers with less available cash. That will open up the housing market to many people who do not have a 20 percent down payment.

"Third, the Office of the Comptroller of the Currency can relax its tough guidelines that discourage banks from making loans for new subdivision developments," says Dotzour. "The lack of new building sites makes lots and new homes more expensive. In several good markets, the lot shortage is acute."

Finally, there's a serious labor shortage in many parts of the new home construction industry, says Dotzour. The government can help by enhancing the guest worker program to provide much-needed craftsmen, such as carpenters.
Source: David S. Jones, Senior Editor, Real Estate Center at Texas A&M University