The big news this week was the Obama administration’s budget proposal, which takes on what has long been considered a sacred cow by trying to reduce the mortgage-interest tax deduction for top earners. Meanwhile, Iceland’s government has started selling off real estate to stay afloat. Here’s what else was going on:

LOCAL NEWS
Condo auctions come to New York City (New York Times) Some New York buyers, meanwhile are walking away from six-figure deposits on apartments. (NYT)

The population of Maricopa, Ariz., soared during the housing boom, rising to 37,000 last year from 1,400 a decade ago, making it one of the nation’s fastest-growing towns. Now the town is struggling as many homeowners are trapped in houses that are worth less than their mortgage and others are walking away. (The Wall Street Journal)

Boston’s luxury condo market headed down. (Boston Herald)

$10,000 state tax credit for buyers of newly-built homes in California goes into effect Sunday. (L.A. Land) Meanwhile, home sales in California jumped 100% in December, according to the state’s association of Realtors. (Hot Property)

BUYING AND SELLING
One blogger suggests it’s time to encourage renting to keep Americans more mobile and to discourage sprawl. One idea: tax incentives that get people to live closer to their place of work. (Greater Greater Washington)

Meanwhile the relative cost of owning versus renting is swinging back in favor of homeownership in some U.S. markets, buoyed by several quarters of sharp declines in home prices. (WSJ)

The economic stimulus bill contains provisions to compensate service members who sell their home at a loss or have been foreclosed upon because they were forced to move after a base closure, reassignment or a combat wound required them to be relocated near a health facility. (Washington Post)

Boomer wealth is evaporating due to housing bust. The homeowner in 2009 will have less–not more–wealth than their non-home-owning counterparts, according to a new report out from economists David Rosnick and Dean Baker. (Center for Economic Policy and Research)

HIGH-END LISTINGS
Strapped for cash, Iceland’s government puts its ambassador’s homes up for sale in Washington, D.C., New York and London. (WSJ)

A Denver couple build their home and an apartment building next door to an art museum in Denver. (WSJ)

Where Nixon once dwelled. Just hitting the market: a house newly built on land that was formerly part of the so-called ‘Western White House’. (WSJ/House of the Day)

Ten priciest listings in Los Angeles. (The Real Estalker)

Good deals on luxury vacation homes. (NYT)

Michael Corkery reports:

If you are facing foreclosure, don’t look to your state law to help you. In most cases, homeowners have fewer legal rights to fight eviction than renters.

That’s the conclusion of the National Consumer Law Center, an advocacy group, which is calling for an overhaul of state foreclosure laws. The group points out that:

The Consumer Law Center argues that renters have more due process protections in the eviction process, after a series of reforms of landlord-tenant laws. But even in states such as Florida where homeowners are ostensibly afforded more legal protection from lenders the strain on the court system from mass foreclosures may be compromising homeowners’ due process. (See A Florida Court’s ‘Rocket Docket’ Blasts Through Foreclosure Cases)

It’s unclear whether more homeowner friendly laws would ultimately prevent foreclosures or just buy the homeowner more time. But over the long term, it seems only fair — to both homeowners and lenders — that foreclosures laws be standardized across all states so that the fate of one’s property does not depend on where it happens to be located.

Economists and others weigh in on a raft of negative economic news, including a rise in claims for unemployment benefits and declines in new-home sales and durable-goods orders.

Compiled by Phil Izzo

Treasury Secretary Timothy Geithner, in an interview with PBS’s Jim Lehrer to air Wednesday evening, offered the Obama administration’s strongest declaration yet knocking down talk of nationalizing banks. “I think that’s the wrong strategy for the country and I don’t think it’s the necessary strategy,” he said. Mr. Geithner also defined capital injections that would follow the stress tests as “insurance from the government” designed to improve the likelihood of banks attracting private capital.

Following are excerpts from his interview, based on a transcript released by The NewsHour With Jim Lehrer:

On details of the stress tests and capital program announced Wednesday:

“There’s this careful health assessment designed to sort of look forward, make sure these institutions have an additional cushion of resources necessary to withstand a more severe economic environment. But we’re also providing the details on the terms of capital the government will be willing to provide where that’s necessary. Of course, we want these firms to be able to raise capital in the private markets, but we’re providing sort of a backstop in the form of insurance to make sure that again they’re strong enough to get through a more challenging economic environment.”

What stress tests will look for:

“The basic framework is designed again to look at the scale of losses they might face … if we went through a more challenging environment — economic environment. And again so that they can reassure the world and we can be confident that they’ve got that necessary cushion of resources that allow them to lend to support recovery. Because you know right now there’s this cloud of uncertainty over the economy and the financial system because of uncertainty about how deep and how long the recession might be and that’s making the financial system more defensive. People are hoarding capital and liquidity. And the best way to break that and arrest it is to try to ahead of that and get these institutions to look forward at again the range of — they might face as we go forward and critically to make sure they’ve got the cushion of resources. You can think of this as a form of insurance from the government that they can get through that.”

Might some banks fail the stress test?

“It’s not a pass-fail test. … It’s directed to making sure they have the margin of additional resources they need. …. These banks now have very substantial amounts of capital relative to what you would have seen in the U.S. economy going into previous recessions. But we want to make sure again they have that additional cushion, even if things deteriorate further going forward, that they’re going to be able to lend and be in a strong position.”

On the question of nationalization:

“Jim, I think that’s the wrong strategy for the country and I don’t think it’s the necessary strategy. What we need to do is to make sure that these institutions have the resources necessary to perform their critical function on an ongoing basis in our economy as a whole, these major banking institutions. Now, there may be circumstances in which we have to provide for the benefit of the economy as a whole exceptional levels of support and when we do that as the President said last night we’re going to be very careful that that comes with conditions to make sure our support is helping support lending, that it comes with conditions to make sure these institutions restructure so they are stronger, so that there is accountability, and so that we make it more likely and not less likely that private capital comes in and replaces the government’s capital as soon as that’s possible.”

On whether the government would run banks in exchange for propping them up:

“I think our system works better if these institutions are managed and remain in private hands. But again we’re going to have to make sure that they have the support necessary to get through this and play their critical role and we’re going to do that.”

What are the strings attached to the financial support?

“The conditions are going to be very important so you will see conditions to make sure that the support generates more lending than would have been possible, that the support does not go to play dividends or excess compensation, to make sure that the conditions come with the kind of changes in the structure of the entity necessary to make them stronger going forward, and they provide accountability. And the terms are very important too because not just to protect the taxpayer but because we want the terms designed so that as conditions normalize, our support is expensive and unattractive and therefore these firms will have a big incentive to go out and get private capital to replace the government’s capital as soon as possible, and this will allow us to solve this more quickly than governments that typically address these crises.

“The big lesson of financial crises is that governments tend to underestimate the scale of the problem, they move too slowly, they’re too tentative and gradual, they escalate late, and that makes crises deeper, that causes more damages to businesses and to households and to families, and they’re ultimately more expensive to the taxpayer resulting in higher long-term deficits. So we’re trying to get ahead of this by moving more aggressively to try to resolve this uncertainty, provide capital to the system and help get those credit markets flowing again.”

Economists and others weigh in on the larger than expected drop in existing-home sales.

Compiled by Phil Izzo

Offer your reactions in the comments section.

Dig into an interactive summary of economists’ forecasts for the coming year from the latest WSJ.com survey.

A roundup of economic news from around the Web.

Compiled by Phil Izzo

Nick Timiraos reports:

President Barack Obama’s housing stability plan is less accessible to homeowners in the nation’s hardest hit housing markets, according to data from real estate Web site Zillow.com.

The plan offers borrowers with little to no equity in their homes the opportunity to refinance their loans, among other provisions. But there are two major restrictions that limit borrowers’ eligibility to refinance. That plan is limited to loans within the conforming limits that are eligible for backing from Fannie Mae and Freddie Mac, which stand at $417,000 for most of the country but rise to as high as $729,750 in the most expensive housing markets, and to borrowers that have a loan-to-value of 80% to 105% on their first mortgage. A separate initiative would allow some underwater homeowners to apply for a government subsidized loan modification.

Nationally, one in four mortgage holders meet two major eligibility criteria for the refinance proposal, but that number falls in certain housing markets that have been the hardest hit by the housing downturn.

Only 9% of mortgage holders in the Los Angeles metro area are eligible to refinance, according to Zillow research. An additional 8% of borrowers have a loan-to-value that exceeds 105%, and another 8% of borrowers have loans that meet the 80%-105% loan-to-value criteria but are so-called “jumbo” loans that exceed the conforming limits. (An article in today’s WSJ looks at some of the other problems hitting jumbo borrowers: Jumbo Mortgages, Jumbo Headaches)

The result? “Not as many people as you would expect in these markets that were previously overheated are going to be able to avail themselves of the plan,” says Stan Humphries, vice president of data and analytics for Zillow.com.

Here’s a closer look at how many borrowers are — and aren’t — eligible to refinance in specific housing markets:

• In Miami-Fort Lauderdale, around 17% of mortgage holders meet the refinance criteria. Of the borrowers that don’t qualify, one-quarter have conforming loans that exceed the required 105% loan-to-value and 6% have jumbo loans.

• In New York and northern New Jersey, nearly 16% of all borrowers could be eligible to refinance. In the pool of ineligible borrowers, 3% of borrowers are too far upside-down in their homes, and nearly 9% of borrowers have jumbo loans.

• In the San Diego region, some 12% of borrowers could qualify for the plan. Of the excluded borrowers, some 13% of conforming borrowers exceed the 105% loan-to-value limit, and 17% have jumbo loans.

• In San Francisco, some 8% of borrowers could be eligible. Of the excluded borrowers, around 7% of conforming borrowers exceed the 105% loan-to-value limit, and 21% have jumbo loans.

• In the San Jose-Santa Clara, Calif. metro area, just 7% of borrowers could qualify for the plan. Of those excluded, 3% don’t have enough equity and 25% are jumbo borrowers.

While Mr. Humphries says the plan is “certainly better than nothing,” he says that the limited impact on the nation’s hardest-hit markets could undermine the goal of stabilizing home price declines by stemming foreclosures.

Readers, what do you think? Will you be able to take advantage of this component of the housing stability plan? If you’re planning to refinance through this program, or if you’d like to but you’re excluded by loan limits or loan-to-value limits, we’d like to hear from you. Email: nick.timiraos@wsj.com.

Economists and others weigh in on the much larger than expected decline in U.S. consumer confidence.

Compiled by Phil Izzo

Offer your reactions in the comments section.

Dig into an interactive summary of economists’ forecasts for the coming year from the latest WSJ.com survey.

A roundup of economic news from around the Web.

Compiled by Phil Izzo

A roundup of economic news from around the Web.

Compiled by Phil Izzo