Housing deal looms large in Washington

Congress failed to strike a deal to ease the subprime pain before taking off for the holidays. But it's likely just a bump in the road. The deal will get done. (Link here.)

One part of the deal is to make it easier for subprime borrowers to move into straight 30-year mortgages. More critically, the proposed legislation would give a final out for homeowners facing foreclosure to refinance their homes.

This, of course, is a nobrainer, and it takes into consideration the fact that politicians allowed the loose lending market to take hold, and stayed on the sidelines when it drove the economy. As a result, home ownership is up to a record 72 percent in the US, a remarkable run for a country whose Constitution was, in many ways, written by landowners for landowners. What's more, 60 percent of new job growth since 9/11 is due to residential home construction and sales. But as the market now unspools, Washington has a role to play.

The dynamics, however, are likely to change dramatically if the Democrats win the White House.

Real estate professor John Baen at the University of North Texas tends to be right on with his assessments. This is what he told me last week about the shakeout, especially if Washington mans up and takes some action:

"I really believe the housing market is going to come back pretty strong in two years. The reason I say that is that the value of the dollar has fallen 50 percent and as a result the govenment is printing money like wildfire and keeping interest rates artificially low to save the federal budget. The Fed and the Democrats are going to inflate out of this mess, and when they do, houses are going to be the greatest invesment there ever was."

In other words, hold on, keep the chin up and, in the words of Walt Disney, "keep moving forward."