At a hearing on the State of the Nation’s Housing Market, Senate Banking Committee Chairman Chris Dodd (D-CT) joined Sen. Johnny Isakson (R-GA) in calling for an extension of the homebuyer tax credit. “As part of the economic recovery package, we created an $8,000 first time homebuyers’ tax credit, replacing an unsuccessful and overly complex loan program with one that is already having an impact,” Dodd explained. “The homebuyer tax credit has already been used by nearly two million first time homebuyers. In addition to helping middle class families achieve the dream of homeownership, the tax credit has helped to stabilize housing prices and the market at large.”
“The credit is set to expire in five weeks. But the work of stabilizing the housing market won’t be done. We still need to use every tool at our disposal to try and fix this problem,” Dodd argued. “So our first witness, Senator Johnny Isakson, and I have proposed extending the tax credit through the end of next June, as well as expanding it so that more middle class families can take advantage of what I believe has been an effective program.”
In his testimony before the committee Isakson warned “I believe it is important as we look at the current termination on November 30th to consider what is going to happen if we don’t extend that credit. What’s going to happen is you’re going to go into the three worst months of the year in housing sales--December, January and February--with the only incentive out there for a normal sale to take place gone.”
“Nobody argues that the tax credit hasn’t worked,” Isakson concluded.
The committee also heard from Shaun Donovan, Secretary of the U.S. Department of Housing & Urban Development (HUD), who testified before the committee on the Administration’s efforts to stabilize the housing market.
He was followed by a panel of stakeholders which included Diane Randall, executive director of the Partnership for Strong Communities; Ronald Phipps of the National Association of Realtors (NAR), Emile J. Brinkmann, chief economist of the Mortgage Bankers Association (MBA) and David Crowe, chief economist of the National Association of Home Builders (NAHB).
Below is the Chairman’s statement as prepared for delivery:
“We examine a catastrophic problem that has undercut the financial security of millions of American families and nearly destroyed our economy, and that is the U.S. housing market.”
“Housing prices, everyone in this room knows, fell by nearly a third from mid-2006, when the bubble was at its peak, to this summer. That decline has hurt middle-class Americans acutely. Most Americans don’t own huge stock portfolios. Their wealth, for most Americans, nearly all of their savings is in their homes. Too many have seen that wealth wiped out in the last couple of years.”
“In fact, one study suggests that as many as 15.2 million families in the United States now find themselves with mortgages that are higher than the values of the homes in which they live. That is an astonishing, and deeply, deeply disturbing, figure. Meanwhile, housing inventory remains high, home sales bottomed out earlier this year, and foreclosures continue to ravage communities across our nation.”
“As part of the economic recovery package, we created an $8,000 first time homebuyer tax credit, replacing an unsuccessful and overly complex loan program with one that is already having an impact. And I want to congratulate my colleague here from Georgia. He was the one who pushed that idea. I was glad to join him in that effort, back a number of months ago, but if it weren’t for Johnny Isakson I’m not sure that idea would have been incorporated as a part of that recovery plan, so many Americans owe you a debt of gratitude.”
“The homebuyer tax credit has already been used by nearly 2 million first time homebuyers. In addition to helping middle class families achieve the dream of homeownership, the tax credit has helped to stabilize housing prices and the market at large.”
“The credit is set to expire in five weeks. But the work of stabilizing the housing market won’t be done.”
“We still need to use every tool at our disposal to try and fix this problem.”
“So our first witness, Senator Johnny Isakson, and I have proposed extending the tax credit through the end of next June, as well as expanding it so that more middle class families can take advantage of what I believe has been an effective program.”
“But the utility of the homebuyer tax credit will be maximized only if it operates in tandem with an effective program to protect struggling homeowners from foreclosure as well. And our second witness, Secretary of Housing and Urban Development Shaun Donovan, will discuss with us some of the steps the administration is taking to prevent foreclosures, as well as other steps we can take to stabilize the market and to strengthen communities for all families.”
“The success of the housing market isn’t only important to homeowners of course. In our third panel, we will be joined by four stakeholders in the area of housing policy – David Crowe from the National Association of Home Builders, Jay Brinkmann from the Mortgage Bankers Association, Ronald Phipps from the National Association of Realtors, and, from my home state of Connecticut, Diane Randall, who is the Executive Director of the Partnership for Strong Communities.”
“Those witnesses will offer us a variety of perspectives on how the housing market affects those who build, sell, and finance homes, as well as those who rent their homes and rely on our low-income housing stock.”
“Throughout, we should all keep in mind just who the most important stakeholder is. And that is, of course, the hard working American families in our country who want and deserve their piece of the American Dream.”
“Whether they’re renting, hoping to own a home, or looking to use their equity to build a more secure financial future for themselves and their families, the American people need a stable housing market. And it’s up to us here to make sure they can rely on one.”
“Let me say something about Diane as well, Diane Randall from my home state of Connecticut. She is doing tremendous work in our state to fight for affordable housing. But these days her job could not be tougher. I was reading her testimony last evening and she will testify that nearly half of the renters in Connecticut are spending over 30 percent of their income on housing alone.”
“She says ‘For many of these folks, managing the family budget is a high wire act, deciding among the priorities of food, healthcare, transportation and clothing.’ Those statements could be made, I suspect, by her counterparts in almost every state across the country where the stock of rental housing has not kept pace, and therefore you are seeing a tremendously high percentage of family budgets where people can’t afford to get into a home or pay for rental housing.”
“I think she hit the nail on the head. That is the kind of devastating problem that we are faced with today. And that is why this hearing is so important.”
For more information, visit Dodd.Senate.gov.