By Alexander Bolton - 06/14/10 10:00 AM EDT
Senate Majority Leader Harry Reid (D-Nev.) has underscored his campaign theme with a new proposal to help homebuyers.
Political experts in Nevada say real estate could emerge as a major issue in Reid’s difficult reelection fight.
“There seems to be a direct line from the economic conditions to the melees in the housing market; people recognize that and it’s the No. 1 issue on people’s minds,” said Dan Hart, a Democratic political strategist in Nevada.
“It has the potential to be a huge issue in this campaign,” he said.
Reid took a significant step to address the problem Thursday when he introduced a three-month extension for homebuyers who qualify for the federal tax credit.
Reid’s proposal, which he is seeking to add to a package of tax and unemployment aid provisions, would give homebuyers an extra 90 days to finish up paperwork in time to qualify for the credit. He would push the deadline from June 30 to Sept. 30.
The credit is worth $8,000 for some first-time homebuyers and $6,500 for some current homeowners.
“This is a popular program, especially here, given our foreclosure rate,” said Ted Jelen, a political science professor at the University of Nevada, Las Vegas. “This strikes me as a very good place to start.
“The theme of his campaign is: Harry Reid, a senator who can help you,” Jelen said.
Reid’s measure would extend the deadline for closing home purchases for buyers who signed contracts before the April 30 deadline.
The tax credit was popular enough to usher in a crush of home purchases in April, creating a paperwork backlog for lenders.
The purchase of foreclosed-upon homes is especially problematic because the sale of those properties often takes more time to finalize.
“A chunk of those are distressed sales,” Lucien Salvant of the National Association of Realtors said of the April home-buying spree. “They take a long time to close, usually beyond 45 to 60 days.”
Nevada’s foreclosures are concentrated in Clark County in Southern Nevada, where more than 70 percent of the state’s population lives.
“Considering we have nation-leading foreclosure activity, it’s a major concern for homeowners and mortgage borrowers in southern Nevada,” said Brian Gordon, a principal at Applied Analysis, a Nevada-based economics and real estate research firm.
Gordon said home prices doubled during the boom period that ran from 2004 until 2007, reaching a peak median price of $285,000 per unit.
Since then, the median home price has plummeted to $125,000 per unit, leaving many homeowners sitting on property that is worth much less than what they paid for it.
During the boom, Nevadans could take out loans using the inflated values of their homes as collateral. This fueled retail spending and the broader economy.
As the state’s economy grew, more people moved in and created additional demand for housing. This pushed up housing prices and fed a construction boom, which spurred the economy to new heights.
But that dizzying trend unraveled in 2008 and 2009. The median price per home unit has plummeted to $125,000, stalling the economy statewide.
The state’s unemployment rate grew 0.3 percent to 13.7 percent in April.
The trend is especially threatening for Reid’s reelection prospects because the unemployment rate dropped in 34 other states in April.
Jon Ralston, one of Nevada’s foremost political commentators, said Reid’s reelection will depend on his ability to convince voters that he can improve their economic situations.
“The biggest issue in Nevada is jobs, the economy and the fact that it’s the foreclosure capital of the country,” said Ralston. “Reid has to emphasize to people back home that he can do things for them.
“The more that Harry Reid can show that he’s doing things to help people hurting in Nevada, it will inure to his benefit,” Ralston added.
Reid launched a television ad Wednesday touting his power to help constituents.
“No one can do more,” the ad claims.
Reid, who has an approval rating hovering around 40 percentage points, has taken a page out of the political playbook of his frequent adversary, Senate Republican Leader Mitch McConnell (Ky.).
McConnell won a bruising reelection fight in 2008 by emphasizing his ability to deliver federal funding and services for constituents. The strategy worked well enough for McConnell to win 53 percent of the vote.