For bailout to work, housing market needs to mend

NEW YORK (AP) - Washington’s financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right?

Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it’s safe to start doling out money again.

The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good - and those that have come on the market because of soaring foreclosures - before home prices start appreciating.

Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly - from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.

“Housing traditionally does lead the economy through a recovery. I think it’s going to be critical for a sustained recovery in this cycle, too,” said Gary Thayer, senior economist at Wachovia Securities.

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For bailout to work, housing market needs to mend

And what do WE do if this doesn’t work?? If the housing market doesn’t kick back into gear?

Last week the wife and I went looking around in far N.E. Dallas county, Rockwall county and over into Hunt county a bit. We went to different developments that are under construction sites, home sites, subdivisions, some free market, some home owners associations, and the thing that struck us almost immediately was this; it’s the middle of the day and 98% of the sites that had been under construction were idle.

There were no workers, no trucks, no tradesman, no nothing. Home sites, just sitting there in various stages of construction, and none appeared to have been active in the recent past.

“Credit, by definition, means trust and faith, and for many reasons trust and faith have been damaged,” said Sung Won Sohn, an economics professor at California State University, Channel Islands.

Sohn said the near certainty of a recession makes it too risky for the thousands of small and medium-sized banks across the country to lend to people like Elliot.

“Banks know the economy is getting worse, so … they will keep being cautious,” said Sohn, a former banking executive.

Therein lies the problem, small to medium banks are the heart of America, and even if they KNOW that a loan default means they take possession of a home property, if THEY can’t sell it, then that particular small to medium banking institution is now in a financial bind.

The solution? It won’t be found in this Wall Street bailout, the *little guy* is hurting, *Mom and Pop* business is dead or dying, and Wall Street, and massive business institutions spend like drunken sailors on shore leave, and Uncle Sam is giving them the money to spend, literally.

Stand by folks, we haven’t seen the last of this bailout thing, in fact, I am fairly confident that we’ll see more, much more. Business is now feeding at the public trough, make it or break it, We, The People are bailing them out, and bankrupting OUR lives in the process.