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Obama to Outline Proposals to Bolster a Lagging Housing Sector

President Obama, on a three-day trip to reclaim the political spotlight, spoke to autoworkers on Wednesday in Wayne, Mich.Credit...Doug Mills/The New York Times

WASHINGTON — The job market is stirring, gas prices are plunging and stocks are near record levels, but a housing sector that dragged the nation into the worst recession since the Depression remains the black spot in an otherwise resurgent economy.

President Obama, often criticized for inattention to the housing sector, will seek to address the problem Thursday, lowering insurance rates on federally issued mortgages to first-time home buyers, minorities and struggling Americans. The move is modest, producing savings of $900 a year per home buyer.

However humble, the move illustrates just how difficult it has become to stimulate the housing sector since the 2008 financial crisis. Mr. Obama’s proposals could bring 250,000 new home buyers into the market and lower refinancing costs for an estimated 800,000 homeowners, administration officials said. That is a fraction of the two million to 2.5 million homes that go to first-time home buyers a year in a healthy market. But there are no quick fixes. While housing usually leads the country out of recession, this time, it is an anchor.

The financial crisis chased private lenders out of the mortgage market, leaving the federal government with a virtual monopoly. Tighter lending rules imposed after the crisis have made loans more difficult to come by. And young workers who should be first-time home buyers are saddled with student-loan debt in a job market just gaining steam.

“There are an awful lot of chickens and eggs and ducks and geese,” said Julia Gordon, director of housing finance and policy at the Center for American Progress, a liberal research organization.

Mr. Obama’s announcement will come during a three-day trip that is intended to steal the political spotlight from the newly empowered Republicans on Capitol Hill during their first week in control of Congress. He began the trip Wednesday in Detroit, where in a speech at a Ford plant he claimed credit for the improving economy, in part by highlighting the auto industry’s robust recovery after the 2009 federal bailout.

“Saving the American auto industry was the right thing to do,” Mr. Obama told autoworkers. “Betting on you was the right thing to do.”

And like the auto industry, the importance of the housing sector cannot be overstated, said Mark Zandi, chief economist at Moody’s Analytics. Construction of a single-family house typically creates 3.5 jobs and multifamily units an additional 1.5 jobs. That means that if the housing sector improves from 1 million units a year — the current level — to the 1.7 million found in a more typical housing economy, the country would be at full employment.

The president is only tinkering around the edges, said Stan Humphries, chief economist at Zillow, the real estate website. Mr. Obama’s new proposal and others like it will have little impact until incomes rise more broadly, savings expand and young adults dump their roommates and move out of their parents’ houses.

“It’s not monkeying around with insurance premiums that’s going to fix demand,” Mr. Humphries said. “The fix has got to come primarily from fixing the fundamentals, especially income growth.”

There should be room for improvement in the housing numbers. Devastated by the Great Recession’s crash, the homeownership rate, at 64.5 percent, is where it was 19 years ago, Ms. Gordon said, and rates are far lower among minority families.

But as members of the Baby Boom generation move into retirement communities, more housing will become available. And rents are soaring, an ideal environment for would-be buyers. The buyers, however, are not showing up as they should.

“The younger generation should be surging into the market, bolstering demand, and they’re not,” said Dowell Myers, a demographer at the University of Southern California who has consulted with the Obama administration on the problem. “They’re underemployed, underpaid, and they have no savings.”

Just before Thanksgiving, Treasury Secretary Jacob J. Lew invited economists, demographers and real estate and credit agency executives to dinner to try to find solutions.

The problems laid out by the guests — who included Mr. Humphries, Mr. Myers, Ms. Gordon and Mr. Zandi, among others — appear intractable. Members of the millennial generation — Americans born from the early 1980s to the early 2000s — are marrying and starting families at a very low rate, and their savings are meager.

Private lenders have been reluctant to re-enter a mortgage market that is almost wholly owned by the federal government, either through the Federal Housing Administration or Fannie Mae and Freddie Mac, the giant mortgage consolidators that were taken over by Washington at the height of the crisis. Tight credit is making it virtually impossible for millions of Americans to buy their first homes.

Stephen D. Oliner, co-director of the American Enterprise Institute’s International Center on Housing Risk, said he was worried about the direction the administration was taking, shaving costs for risky borrowers instead of trying to improve wages and incomes. Lowering F.H.A. mortgage insurance rates will only make that worse.

“F.H.A. has become a large-scale government subprime lender that doesn’t charge enough to risky borrowers,” said Mr. Oliner, who would prefer that the administration press for a large infrastructure program to improve the working-class job market.

Senator Bob Corker, Republican of Tennessee, who has been pushing to unwind the government’s control of the mortgage market, called it a “head-scratching decision.” The move will increase competition between government agencies — pitting the F.H.A. against Fannie Mae and Freddie Mac — and could put the F.H.A.’s stretched capital reserves at risk.

Administration officials are not as dour in assessing the housing market. Jeffrey Zients, director of the White House National Economic Council, said home prices have risen 30 percent from their recession lows. In addition, more than eight million homeowners have been able to refinance their mortgages, either through the Obama administration’s Home Affordable Modification Program or because of industry standards set by the program. Another three million have been helped by a companion Home Affordable Refinance Program.

Of the roughly 13 million homeowners whose mortgages were once larger than the value of their home, about 10 million have since come up from under water.

The president’s F.H.A. move is aimed at the key problem, first-time home buyers, said Julián Castro, the housing secretary. Typically, such buyers account for 40 percent to 45 percent of home purchases. In the bubble years before the crash they made up half of all home buyers, Mr. Zandi said. Now they are less than a third.

The president’s proposal could open the market to millions just by allowing mortgage access to people now barred by their credit scores, said Barrett Burns, chief executive officer of Vantage Score Solutions.

“That’s boring,” Mr. Burns said, “but boring works sometimes.”

Michael D. Shear contributed reporting from Phoenix.

A version of this article appears in print on  , Section A, Page 14 of the New York edition with the headline: Obama to Outline Proposals to Bolster a Lagging Housing Sector. Order Reprints | Today’s Paper | Subscribe

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