How Much Will the Bailout Help Housing?

While the $700 billion financial bailout will shore up the banks’ ability to lend, “The key to recovery is finding stability for the housing market,” says Susan Wachter, professor of real estate and finance at the University of Pennsylvania’s Wharton School.

The pace of foreclosures shows no sign of abating, Wachter says, predicting that foreclosures will increase in the coming months and drive down housing prices still further.

"I do not expect a turnaround, unless prices stabilize, until 2010," she says.

Another concern is tightened credit. "There is no question that lending standards for the foreseeable future will be high," says Jay Brinkmann, chief economist for the Mortgage Bankers Association.

But Mark Zandi, chief economist for Moody's Economy.com, believes housing will be less affected than other parts of the economy by the bailout.

"The events that we've gone through, despite the government's efforts, will hit the economy hard. We are in full-blown recession," Zandi says. "Layoffs are going to mount and it will be a tough six to 12 months. But the housing market will be the least affected part of the economy because of these things the government has done to shore up housing."

Source: USA Today, Anna Bahney (09/26/2008)