For bailout to work, housing market must mend - KWWL - Eastern Iowa Breaking News, Weather, Closings

For bailout to work, housing market must mend


NEW YORK (AP) -- The financial bailout plan is intended to get credit flowing again, but experts say one more thing needs to happen for the 700 billion dollar package to work: Home prices must stop falling.

That would send a signal to banks that the worst is over and it's safe to start lending money again.

At the moment, mortgage loans are tough to come by for everyone except those with the best credit. That's led to a glut of houses on the market, either built when times looked better or available because of foreclosure. And that brings things full circle, since the glut is keeping home prices down.

So, the equation is this: the lending freeze makes mortgage loans difficult to get, the lack of loans leads to a glut of housing, the glut keeps prices down and that makes banks wary of lending.

With about one in eight jobs in the country tied to housing, one senior economist at Wachovia says housing will be critical for a sustained economic recovery

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