Will This New Stimulus Plan Help the Housing Market in the USA?

The housing market turmoil has played a pivotal role in the economic and credit mayhem that spread across U.S. and worldwide, with countless number of U.S. homeowners saddled with mortgages they are unable to pay. If one were to compare the reason for recession of the economy with that during the Great Depression, one could easily conclude that this economic crisis is no less severe. The U.S. Federal Reserve recently revealed that the economy is expected to shrink by between 0.5 percent and 1.3 percent in 2009, weighed down by mounting joblessness, frozen credit and the housing crisis.

Amidst such tough times, people of USA require an economic plan which would promise to alleviate the financial crisis, help to boost the economy and provide the much awaited relief to homeowners in more than one ways. The $789 billion economic stimulus package proclaims to revive the housing market by countering the crisis in home mortgage as well as providing relief to the plummeting housing values. However, one can hardly deny the fact that the U.S. financial experts are skeptic about the prospects of this stimulus package proclaiming to help stem the tide of home foreclosures. Can this plan provide relief to the hardest hit areas in such as Arizona, California, Florida, Nevada, and certain areas in the East Coast?

The Walls Street exhibited little confidence in the stimulus plan as the stock prices plunged to record lows after the stimulus plan was announced as the government figures confirmed a drop in housing starts and descended further; portend more limitations in the housing market despite the stimulus plan.

Real Estate pundits such as John Courson, the chief executive of the Mortgage Bankers Association, expressed his concerns over the projection the package can actually provide homeowners. He expresses his deep apprehension as he like other housing experts feel that this stimulus plan “offers little help to borrowers whose loan exceeds their property value by more than 5 percent”. According to Wall Street Journal report by Simon Constable, Weiss Research analyst Mike Larson delineates the fact that this plan would lead to massive government spending and eventually result in driving mortgage rates higher. This hike in the interest rate would further revoke the opportunity of a recovery in housing.

Experts also believe that the stimulus plan could create colossal federal deficits for years to come. The U.S. budget deficit to $533 by 2013, a deficit that stood at $1.3 trillion before the recent stimulus plan was passed. According to the Wall Street Journal, this deficit may now exceed or can be as much as $1.9 trillion after taking the stimulus plan into account.