This is a rush transcript from "Your World With Neil Cavuto," October 27, 2008. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: Well, by the way, 401(k)s may be down, but home sales are up — yes, up — new home sales unexpectedly rising 2.7 percent in September, compared to the month before. Last week, we found out existing home sales were up as well.
Are we seeing a turnaround?
Who better to ask than Richard Dugas Jr.? He's the CEO of Pulte Homes.
Richard, good to have you back.
RICHARD DUGAS, CEO, PULTE HOMES: Thanks, Neil. Thanks for having us.
• Video: Watch Neil's interview with Richard Dugas, Jr.
CAVUTO: You had this novel idea that maybe we could really goose these sales if we gave people essentially a $20,000 credit to buy a home. Why would that be a good idea?
DUGAS: Because we have a severe housing crisis in the country, and, frankly, a severe economic crisis in total.
In 1975, the Ford administration passed a tax credit combined with a mortgage rate buy-down that took housing from its worst level since the Great Depression prior to then to, within a year or two, back on solid footing. And...
CAVUTO: But it wasn't the credit that did that just as much as it was a turnaround in the economy, right?
DUGAS: No, that is not true.
Actually, to give you an idea, the credit was in effect for about two months with nothing else attached to it, and it did not do anything. When you added a 150-basis point mortgage buy-down at that point, that is when housing took off. And, in a matter of about six months, home sales really boomed. And 1976 and then ''77 were much better years.
So, what we need is something to just get us moving.
CAVUTO: All right. But you could argue that $20,000 is just a spit in the ocean to a $200,000, $300,000, depending on the area, much more expensive home. And if you can't get a loan anyway, the credit notwithstanding, it does not change the math, right?
DUGAS: Well, frankly, that's why we need a two-pronged approach.
The way the credit would work, it would be $10,000 in low-cost areas, up to $22,000 in high-cost areas. But, when you combine it with mortgage rates around 3 percent, which I believe the federal government could issue today, since they are in control of Fannie and Freddie, now you have got real stimulus.
You can say to something, look, a 30-year mortgage at 3 percent, combined with a significant tax credit from the government. Neil, something short of that, frankly, I think we are in for a much longer housing downturn.
CAVUTO: Well, would this, Richard, be for just new homes?
DUGAS: No, all homes.
CAVUTO: So, all homes? So, it would not be just you guys benefiting?
DUGAS: That's right.
DUGAS: Eighty percent of housing in this country is resale, so you have got to attack that, too.
CAVUTO: Does it make any difference to your business, Richard, whether Barack Obama or John McCain wins?
DUGAS: No, it doesn't.
Frankly, what need is either candidate to really deal with housing. Housing is the fundamental linchpin of the economic problems we're dealing with today.
And, unfortunately, all the other discussions of stimulus to date are leaving housing out. We need housing to lead us out of this recession. Candidly, it led us in.
DUGAS: And I believe it can lead us out. We just have to attack the root of the problem, not the symptoms.
CAVUTO: All right, interesting idea.
Richard Dugas, thank you very, very much.
DUGAS: Thanks, Neil.
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