The reason for a stagnant housing market is that homeowners cannot refinance/sell since similar housing (in certain cases exact home models) are being sold by the builders at current fair market value. With houses values underwater but still having to pay mortgage makes discretionary income scarce and makes homeowners less mobile and likely to spend
Therefore,
- limit permits on new home construction, provide incentives for used home purchase and/or remove incentives for brand new property purchase
- provide a guarantee to banking institutions for refinance for amount a property is 'underwater' allowing people who qualify to flip over into 30 year fixed. As activity resumes the values will stabilize rendering the 'guarantee' unnecessary.
- Incentive for remodeling existing homes