The housing industry has been appealing for a coherent policy that will end the market's five-year-old downturn and get real estate moving.
What President Obama offered Tuesday night in his State of the Union address, though welcomed by many, does not appear to be all the industry had in mind.
The president proposed to allow up to 4 million homeowners to refinance into loans guaranteed by the Federal Housing Administration, an action Obama said would save individuals an average of $3,000 annually.
Eligible would be mortgages not held by Fannie Mae and Freddie Mac, but by other companies. In October, the administration added an FHA-guaranteed refinancing program for a potential 1 million Fannie and Freddie borrowers who owe more on their mortgages than the value of their houses.
It was unclear whether the plan Obama offered Tuesday night would target such "underwater" borrowers, as well. The program's estimated $10 billion cost would be paid through fees from lenders.
The proposal requires approval by Congress, since the law limits the ability of FHA to refinance loans exceeding the current value of a home.
"The odds of this getting through Congress with a levy on financial institutions are low," said Mark Zandi, chief economist of Moody's Analytics in West Chester, Pa. There are growing concerns about the financial health of FHA, which since the financial meltdown of 2008 has been guaranteeing an ever-increasing share of U.S. mortgages -- about one-third of them now compared with just 3 percent in 2005, during the easy-money years of the housing boom.
Though acknowledging that something needs to be done, Joel L. Naroff, of Naroff Economic Advisors in Holland, Pa., said he isn't certain the proposal would increase demand for housing and increase home prices.
"I don't know the details of the plan, (but) if it doesn't include a reduction in value, you still have underwater households who cannot sell their homes, so the positive effects are largely on consumer demand," he said.
Naroff agreed that asking the banking industry to finance the program through fees has little chance of congressional approval.
While applauding the effort to help homeowners, the National Association of Realtors said Obama's plan fell short of making "housing a national public-policy priority." Realtors association President Moe Veissi said his members believe more must be done to stem the rising inventory of foreclosed homes and address the shortage of mortgage financing, "which is inhibiting a meaningful housing-market recovery."
Coincidentally, the group published its December index of home-sales contractsWednesday , which showed a 3.5 percent drop from November but was 5.6 percent ahead of the same month in 2010. On Thursday, the Commerce Department reported that new-home sales fell 2.2 percent in December, wiping out the gains from a strong November.
National Association of Home Builders Chairman Bob Nielsen applauded Obama's statement that "there has never been a better time to build," but he added that wouldn't be possible without easing credit for the group's members and buyers.
The rental-apartment industry has benefited from for-sale housing's troubles. National Multi Housing Council senior vice president Cindy Chetti urged a national policy that would "meet the country's changing housing preferences" -- about seven million new renter households during this decade.
In his address, Obama proposed a new effort to investigate mortgage fraud, which, in light of the pending $25 billion settlement of the "robo-signing" scandal between loan servicers and state attorneys general, struck some as odd.
Zandi said establishment of a task force could be counterproductive in getting servicers to agree to the settlement with the attorneys general.
Anthony Sanders, of the Mercatus Center at George Mason University, described the task force as "regulatory overkill" that "boggles the imagination" and won't make recovery easier. "I am surprised that lenders lend at all, given the leviathan oversight from the government," Sanders said.
Economist Kevin Gillen of Philadelphia's Econsult Corp., said he must have "missed the lecture ... that taught how punishing businesses will get them to produce more of their product."
"If that's true, I certainly hope he punishes my bartender soon," Gillen said.
