To Fix the Economy, Fix Housing

In today's Wall Street Journal, economics editor David Wessel writes about the impact of lowering barriers that prevent millions of Americans from refinancing their homes. Wessel notes that on average, refinancing could save some 28 million homeowners an average of $2,600 in the first year, according to an estimate by the Congressional Budget Office.

Those savings would do two things: they'd pump billions, maybe tens of billions, of dollars into the economy as consumers would have money to spend on something other than mortgage payments, and they would allow numerous homeowners teetering on the edge of default to be able to make more comfortable payments and thus reduce the shadow inventory of homes.

The full article is available here, but if you don't have a subscription here's the bottom line:

The prolonged depression in housing is both a reflection of a lousy economy with a lot of unemployment and one of the reasons the economy is so lousy. Making refinancing easier isn't a miracle cure. But it will help, and the economy needs all the help it can get.

As we've pointed out numerous times, the economy isn't going to improve until housing - and especially homebuilding - improves. We would urge policymakers in Washington, D.C., to reflect seriously on Wessel's colum.