With the $800 billion-plus economic stimulus package trickling through the House and Senate, at least one industry group is pleading the case for a substantial home buyer stimulus credit to spark demand for and reduce supply of housing amid heightened economic recession. "What we are seeing is some of the worst housing news that we've seen since the Great Depression," said National Association of Home Builders (NAHB) chief economist David Crowe at a media conference Wednesday. "We continue to see sales fall, starts fall, prices fall and general economic conditions fall." A member of the Fix Housing First Coalition, the NAHB has vocally supported a home buyer credit as a feasible method of fixing the housing sector and in turn fixing the economy. Former National Association of Realtors chief economist David Lereah, now president of Reecon Advisers, has argued the housing sector and broader economy are inextricably linked; The burst of the housing bubble may have first harmed the economy, but it's a weak economy that continues to harm the housing sector. The usual methods of promoting home ownership and preventing foreclosure will not do the trick, Lereah said. Loan modification programs have resulted in a re-default rate as high as 50 percent, according to Lereah's research, and the Hope for Homeowners program has sparked too low a turnout to make a difference. It's up to the government's few remaining economic defenses, but with the federal funds rate already hovering at a range of zero to 0.25 percent, the Federal Reserve may have to fuel money into the banking system in other ways, Lereah said. The last option may soon come in the form of the economic stimulus package. The plan's main weaknesses, according to Lereah, are its dependence on spending programs -- which may take some time to implement -- and its lack of consideration for a housing stimulus. "I'm not suggesting the housing sector become a primary target for fiscal stimulus in the ... package, because they do have a good mix of spending and tax cut programs," Lereah said. "I'm not here to criticize their package, but housing needs to be included in a meaningful way because of its unique ability to jump-start an economy.... I believe that the housing sector is poised to recover." The housing stimulus NAHB is advocating involves a temporary program that would be effective for any home -- new, existing, or foreclosure-sale -- purchased in 2009 as a primary residence. The buyer would not be required to repay the credit, which would range from $10,000 to $22,000 depending on the local mortgage limits regulated by Fannie Mae (FNM) and Freddie Mac (FRE). The credit could be "monetized," or moved up from the buyer's tax return to the date of closing, to be used as the down payment for the home. It would act in concert with a federal mortgage rate buy-down, which would vary depending on which part of 2009 the buyer closed the purchase in. The main benefit to this plan -- parts of which are included in legislation already put before the Senate by Senator Johnny Isakson, R-Ga. -- would be its timeliness, said Dwight Jaffee, a professor at the Haas School of Business at the University of California, Berkeley. Whereas spending programs will take time to affect the economy, an incentive program of "timed events" to spark demand for housing in early 2009 will have a more immediate effect, he said. "A strong and direct stimulus to housing demand is absolutely essential if we're going to have a timely and dependable economic recovery," Jaffee said in the NAHB media conference. The buyer stimulus aims to achieve far-reaching effects in the economy, such as increased gross domestic product and job creation as a result of increased demand for housing, as well as building initial equity for home buyers. The program would pay for itself after a few years because of increased tax revenues -- particularly at the state and local levels, which would benefit greatly from increased property tax, state income tax and sales tax revenues associated with drawing in more and more home buyers, according to Jaffee. The buyer stimulus "creates a positive virtuous cycle rather than the vicious cycle that we're currently in," he said in the NAHB media conference. It was unclear at the time this story was published whether the legislation will have any support in Congress as the House and Senate are expected to negotiate toward some form of the bill for presidential approval in February. The House is reported to be nearer to passing its own version, so NAHB in particular is focusing its argument to the Senate, according to Crowe. Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.