During the Great Depression, my grandfather ran a golf course during the day, worked nights as a policeman, and turned his backyard into a two-acre vegetable garden. For the rest of their lives, he and my grandmother kept their savings in a coffee can under their bed. They kept the garden until they were well into their 80s.

Greg Brooks Judging by the news these days, it's time to clean out a coffee can and invest in a rototiller. Marketwatch.com is sounding the alarm about "soaring" unemployment. Bloomberg.com is calling it The Great Recession and predicting "the longest slump in the post-World War II era." Fortune.com is headlining "8 Really Really Scary Predictions." And don't even bother with the true pessimists. They're saying it's the end of Western civilization unless we return to the gold standard (and selling advice on how to buy gold).

Housing experts are not about to be outdone. NAHB's November projection was that 2008 starts would finish 31% below 2007, then decline another 25% in 2009. Perennial bear Ivy Zelman of Zelman & Associates is bullish by comparison, projecting a mere 11% decline next year. Builder magazine says "three dozen major builders have declared bankruptcy" so far, and "hundreds more are on life support, hanging on only because their lenders choose to look the other way."

We've Seen Worse

I'm having trouble feeling appropriately bleak. Things are bad, but 7% unemployment is a far cry from 25% during the Great Depression, and well below 10% during the 1980-82 downturn. The longest economic slump since World War II lasted 16 months; as we've apparently just discovered, we're already 12 months into this one. We're poorer on paper than we were five years ago, but we're still miles ahead of our grandparents-adjusted for inflation, the median home price has not quite doubled since 1949, while median household income has nearly tripled.

As for Western civilization, the World Economic Forum's 2008-09 Global Competitiveness Report was just released, and the United States still ranks No. 1. We're only slightly ahead of Switzerland, Denmark, and Sweden but well ahead of China (30), India (50), and Russia (51). If the United States is on the verge of becoming a second-tier economic power, it's up to Switzerland to make it happen.

There are even rays of hope for the housing market. IHS Global Insight just released an analysis of home prices in the top 330 U.S. markets as of the third quarter of 2008. Yes, they dropped like a rock. The result is that "extreme overvaluation is now essentially nonexistent," says Global Insight. Only 31 markets are still overvalued by 15% or more, while 214 are actually undervalued--even in California, Nevada, and Florida.

The price correction has run its course, and that's a prerequisite for the recovery because neither buyers nor lenders will jump until they can accurately value what they're buying. That doesn't mean the market won't overcorrect; continued foreclosures would push prices lower. But for better or worse, the government is about to come to the rescue.

Housing Needs To Take Priority

Policymakers, including Federal Reserve chairman Ben Bernanke, have recently come around to what nearly everyone else been saying from the start: The economy can't be fixed until housing is fixed. You may or may not agree with a bailout, but the housing industry has reached the head of the line at the Treasury Department's soup kitchen, and something is going happen.

So far, efforts to stem foreclosures have depended on lenders reducing principal. That's a legal problem because most of those loans were sold into the securities market; they belong to investors, not lenders. It's impossible to negotiate with investors because, as mortgages are packaged into bonds and bonds into derivatives, each original loan is split up-portions of it may be contained within hundreds or even thousands of different securities.

There are only two ways to extract a loan from the system: foreclose or refinance. The FDIC wants lenders to refinance distressed borrowers with lower interest rates and extended terms to make their payments affordable, in exchange for government backing if the new loan goes bad. The principal would not be reduced, so it wouldn't affect home values overall.

Homeowners who make their payments are screaming bloody murder, and rightfully so. It's too early to say how the plan might play out if it is implemented, but if the bank bailout is any indicator, it may well be expanded to include homeowners who aren't in default-and maybe everyone. Some people say that's socialism. If so, Truman and Eisenhower were socialists. The FDIC's plan is very close to the way FHA and VA loans worked in the 1940s and '50s. From a practical standpoint, if my taxes are going to be used to guarantee mortgages, I want a few creditworthy borrowers in the mix.

But foreclosures are still a sideshow. The bigger issue is reducing the 10-plus months' worth of unsold inventory on the market. There are plenty of prospective buyers out there with good credit and ample equity, plus plenty of banks willing to lend money. Citigroup might not be one them, but everywhere I go, I can find at least one local community bank with a marquee sign reading, "We're still lending." The challenge is priming the pump, and NAHB has a plan.

The "Fix Housing First" Plan

The association is proposing a tax credit of $10,000 to $22,000 plus a special 2.99% interest rate on all homes purchased during 2009. It's simple and not radical--it's exactly what was done to end the 1973-75 downturn.

The program was launched at the end of 1975. Housing starts began to climb within a month, and a year later, says NAHB, "the level of housing starts was nearly double (that) of the prior year." There's no indication so far that the proposal is under consideration, but if something like this is put into place, we could conceivably be back on our feet by this summer.

And you can help make it happen. Go to www.fixhousingfirst.com for more information, and don't forget to register and add your name to the hundreds of companies supporting the proposal.

There's no question that the situation is bad right now, and yes, the media is partly to blame. But if hyping the bad news has contributed to the panic, even that isn't all bad. It has also motivated people to get off the dime and do something about it.

Greg Brooks is a former editor of ProSales who now is president of Building Supply Channel Inc., a training and consulting firm based in New Albany, Ind. Contact him at [email protected] or at 866.272.4776.