WASHINGTON - Top lawmakers threw their support yesterday behind a proposal to use $24 billion in government funds to help struggling borrowers, as reports showed U.S. home prices sinking in four out of five cities and home builders reported their worst-ever business outlook.
With a clear and present threat to the U.S. economy, Democrats stepped up pressure on the Bush administration to direct taxpayer money to help more troubled borrowers. Massachusetts Democratic Rep. Barney Frank, chairman of the House Financial Services Committee, said "it is essential" to use some of the funds in the government's $700 billion financial rescue program to stem the tide of foreclosures.
Likewise, House Speaker Nancy Pelosi publicly urged Treasury Secretary Henry M. Paulson Jr. to support a proposal that would use some of the government's bailout funds to help about 1.5 million households avoid foreclosure.
But Paulson isn't budging.
"It is hard to imagine, no matter what program we have, that we're not going to have a good number of foreclosures," he said at a House hearing yesterday.
Paulson, testifying along with the heads of the Federal Reserve and the Federal Deposit Insurance Corp., two other crucial players in the economic rescue efforts, said they were focusing on economic stabilization, but Frank complained that the underlying problem of foreclosures was not being effectively addressed.
At one point, when Paulson said that "we've been working very, very aggressively at helping the individual," Frank interrupted, saying that pouring money into banks to strengthen them was no substitute for helping distressed homeowners - and cut the answer short.
Lawmakers' have the power to impose new conditions on the use of the bailout money, but new legislation appears unlikely before President-elect Barack Obama takes office in mid-January.
And any government aid won't rescue thousands of homeowners like Bernice Ramos, 39, of Antioch, Calif. She lost her home through foreclosure this month. She was part of a faith-based group, the Pico National Network, that came to Washington yesterday to press for more aid to homeowners.
"It's too late for me, but it's not late for millions of people that are [going] through the same pain," Ramos said outside the stone pillars of the Treasury Department, where dozens from the group staged a morning prayer session.
Meanwhile, the latest reports brought more bad news for the hobbled housing market.
Home builders' confidence in a near-term housing recovery sank to a new all-time low this month. The National Association of Home Builders, which started a market index in January 1985, said that barometer tumbled 5 points to 9 in November, reflecting growing worries about the U.S. financial crisis, rising unemployment and weakening consumer confidence.
Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.
Also yesterday, the National Association of Realtors said that 120 out of 152 metropolitan areas it tracks saw the median home sale price decline in the July-September quarter compared with a year ago. Nationally, sales fell by almost 8 percent compared with last year.
Sales fell in all but four states. The exceptions were Nevada, California, Arizona and Virginia, where buyers have been able to snap up foreclosed homes at a bargain.
Foreclosures and other distressed sales made up about 40 percent of transactions in the quarter, dragging down the median sales price by 9 percent from a year ago to $200,500.
Builders and Realtors alike have grown increasingly convinced that only government intervention will help stem the downward spiral in home prices and rising foreclosures.
"We are in a crisis situation," Sandy Dunn, chairman of the builders' association, said in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back."
In recent weeks, home builders have ratcheted up pressure on Congress to take steps that go beyond trying to reduce foreclosures. The industry wants lawmakers to enact new incentives aimed at getting reluctant homebuyers back into the market.
Specifically, the group is asking for a 10 percent tax credit of up to $22,000 for homebuyers who purchase a home over the next year and a temporary interest-rate reduction on 30-year mortgages. The Realtors group also seeks housing assistance.
The Associated Press and New York Times News Service contributed to this article.
Median sales price of existing homes and percentage change for the third quarter:
Baltimore-Towson: $279,200, -4.2 percent
Cumberland: $102,500, -4.8 percent
Hagerstown-Martinsburg: $181,500, -12.9 percent
Philadelphia-Camden-Wilmington: $241,100, -0.8 percent
Washington-Arlington-Alexandria: $332,700, -24 percent
Source: National Association of Realtors