Unbelievably, the housing market is back where it started.

After more than a year of rising hope that the downturn might finally have bottomed out, we are back to the desperate days of early 2009, when sales and prices were in free fall.

And as things go from bad to worse over the summer, maybe it’s time to brush off an ingenious plan put forth a year ago by one of the Hub’s brightest academic stars, Northeastern University economist Barry Bluestone.

Under Bluestone’s Uncle Sam Insurance Plan, the federal government would issue an unusual guarantee to homebuyers. If you jump into the market anytime over the next 18 months, the government will make sure you are made whole, even if housing prices drop.

It may sound like a desperate measure, but it certainly looks increasingly desperate out there right now with our troubled real estate market.

And as pressure builds on Congress and Beacon Hill to do something, let’s hope this time we get something better than another round of silly homebuyer tax credits, one of the more wasteful and disastrous government gimmicks of all time.

“What is needed is an agile, proactive, temporary program that nudges in the right direction at the right time,” Bluestone writes.

How It Works

The danger with economic proposals put forth by academics is that they often appeal mainly to other professors.

But Bluestone’s Uncle Sam Insurance Plan is brilliant in its simplicity and broad populist appeal.

Anyone who buys a home or condo over the next 18 months would receive a guarantee from the U.S. Treasury. The government would agree to cover up to 85 percent of any loss the homebuyer might experience in the years ahead when it comes time to resell. The amount would be capped at $100,000.

The beauty of this approach is that it would encourage homebuyers, many now already expecting a double dip in home prices, to jump in now. Like the tax credit, the insurance offer would have a limited life span – if you miss the 18 month window, you miss the boat.

Of course, by bringing more buyers into the market, prices will stabilize, taking the government off the hook for huge payments and encouraging more buyers to step in, or so Bluestone’s theory goes.

There are a few restrictions, all pretty reasonable.

The buyer would have to stay in the house for at least three years, and pay a $500 “administrative fee” to the federal government at the time of the closing.

Buyers would also have to put 10 percent down – a good way of making sure those who rush to take advantage of this government guarantee are credit worthy.

“Waiting for prices to fall further would be a mistake,” Bluestone writes.

Embracing Gimmickry

It’s a great idea, but is the market ready for Bluestone’s sweeping home loss insurance plan?

Well, if it’s not, just wait a few months, because the real estate market is sliding backwards fast.

If nothing else, the homebuyer tax credit succeeded in pulling forth months of demand, triggering a buying frenzy in March and April of a kind not seen since the bubble years.

But with the credits’ expiration April 30th, the last two months have seen the real estate market crash land.

Pending home sales have cratered, falling 30 percent in the Bay State in May and 16 percent in June. July saw another 18 percent dive, according to the Massachusetts Association of Realtors.

We are suddenly back to a market where sales are falling, prices are under heavy downward pressure, and whatever buyers that are left are sitting scared on the sidelines, afraid to jump in now only to get slammed by another round of price drops.

Greater Boston is now No. 4 in the nation when it comes to price cutting, real estate website Trulia.com recently reported.

The danger now is that if and when the real estate market slips back into a deep funk, Congress will eventually wind up embracing more gimmickry instead of sound proposals like the one put forth by Bluestone.

I can certainly see Congress toying with reviving the tax credit – the one that emptied billions out of the federal treasury while failing to boost the real estate market in a sustainable way.

It offered the worst kind of incentive, a seemingly quick and easy $8,000 or $6,500 score that in too many cases became a reason in itself to buy a home. Hence the millions in fraudulent tax credit filings the IRS is now sifting through, from parents submitting claims in the names of tots to prisoners on death row.

And instead of creating sustainable market momentum, it unleashed an $18 billion roller coaster ride, one that seems destined to end in a ditch.

Bluestone’s proposal is not likely to come cheap, either – he throws out figures ranging from $9 billion to as much as $30 billion under a worst case scenario.

But it’s also possible it might not cost much of anything, especially if it finally succeeds in putting a floor under the market and stabilizing prices. In that way, it may work more like what FDIC insurance did to revive the banking industry back in the 1930s.

That innovation provided a basic comfort level for jittery, Depression-beleaguered bank customers, who suddenly found they could open up an account in their local bank without fear of losing everything should it go under.

Take some of the fear out of the real estate scene, and we just might start getting more buyers.