By Andy Sullivan
GAFFNEY, South Carolina (Reuters) - Republican presidential candidate Rick Santorum has a blunt message for voters such as Jim Shackleford who are trapped by falling housing prices: You're on your own.
Santorum and other Republican candidates say the government should do little, if nothing, to ease the housing crisis that plunged the country into recession and continues to weigh on the recovery.
They say that Democratic President Barack Obama's efforts to help homeowners avoid foreclosure -- which have cost the U.S. government at least $169 billion -- haven't worked well and have prolonged the pain by delaying a correction in the housing market, they say.
"Markets have to find their bottom. Let the marketplace work and then build from there," Santorum told Shackleford during a recent campaign stop in this struggling mill town.
Shackleford was unimpressed with Santorum's answer.
"Typical for a politician," said Shackleford, who wants to move back to his native Ohio to start a dump truck business but has been unable to find a buyer for his house, even at a substantial markdown. "I wasn't too thrilled but it's about what I expected."
At a time when the debate between Democrats and Republicans over government's obligations to help its citizens is particularly heated, few issues capture those contrasting views as vividly as the housing crisis.
Republicans' hands-off stance resonates with the small-government beliefs of most of the party's primary voters, even in South Carolina, which has the 10th-highest foreclosure rate among U.S. states.
In the November 6 election, Obama could be vulnerable among these and other voters because six years after the housing bubble popped, there are few signs of recovery nationwide.
Since the peak of the market in 2006, house prices have fallen by an average of 33 percent, erasing $7 trillion in household wealth, according to the Federal Reserve. More than one in five mortgage holders owe more than their house is worth.
But as Shackleford's dismay suggests, Republicans' desire to let the market sort itself out risks alienating some voters -- particularly independent ones in foreclosure-wracked states such as Florida and Nevada.
Those states are likely to be pivotal in the November 6 election, analysts say.
"Housing could be an Achilles' heel for the Republicans. There's tremendous anxiety among voters over foreclosures," said Greg Valliere, chief political strategist at Potomac Research Group, an analysis firm.
The issue could come to the fore soon, as the campaign for the Republican presidential nomination shifts to Florida and Nevada, and other states plagued by foreclosures.
Republican strategists say their nominee will have to come up with a more nuanced policy to show voters that they can tackle the problem. But the best bet, the strategists say, will be to focus on Obama's track record.
"This has to be a judgment on the president and his failed policies, and not on our Republican nominee," said Nevada Republican strategist Robert Uithoven.
OBAMA'S PROGRAMS DISAPPOINT
Obama's efforts to fix the problem have not lived up to expectations.
Fewer than 2 million households have taken part in programs aimed at lowering mortgage rates or reducing monthly payments, far below the administration's goal of 9 million households.
Government-appointed watchdog Neil Barofsky termed one of the programs a "colossal failure" when he stepped down last March.
Separately, about 2.2 million first-time homebuyers have taken advantage of a tax credit worth up to $8,000.
About 54 percent of Americans are not confident that Obama can stabilize the housing sector by this time next year, according to a survey by Trulia Inc., a real estate search engine.
"All of the housing programs that have been dreamed up are all about politics in the end. They don't do much, but they give the appearance that they are trying hard," said Douglas Holtz-Eakin, an economist who heads the American Action Institute, a conservative think tank.
Obama is expected to address the housing crisis in his State of the Union speech on February 26, and his administration is poised to unveil plans to convert vacant, foreclosed housing into rental properties in coming weeks.
The Federal Reserve has been urging Obama and Congress to do more.
It suggested this month that Fannie Mae and Freddie Mac should play a greater refinancing role, which could lead to further losses at the two government-controlled housing finance giants, which have cost taxpayers at least $169 billion to date.
Fed officials also have suggested that the government could reduce the amount of money struggling homeowners owe on their mortgages.
Both proposals are likely to be toxic among Republicans, who have blamed Fannie and Freddie for the housing crisis.
'STAY THE HECK OUT'
Outrage at the perception that the Obama administration was going to bail out irresponsible homeowners helped spawn the conservative Tea Party movement in 2009.
In South Carolina, Republican voters say government intervention, rather than market speculation, is to blame.
"I've been out of work since 2009 and I haven't seen a paycheck since 2008, all because of government intervention. So I think they should stay the heck out," said homebuilder Duane Hartgrove, a member of the Columbia Tea Party.
But many economists say the approach advocated by Republicans would deepen the crisis.
"If the government had followed the prescriptions that most of the candidates seem to be advocating now, I think the bad recession we had would have been much, much worse," said New York University economics professor Mark Gertler. "Standing by and doing nothing (now) would just prolong the pain."
Despite the administration's limited success, Democrats see housing as a winning issue in battleground states hit hard by the crisis.
Democrats already have run an attack ad in Arizona featuring Mitt Romney, the front-runner for the Republican presidential nomination, talking about foreclosures to a Las Vegas newspaper in October.
"You have to let it run its course and hit bottom," Romney said.
Romney's stance is not as simplistic as Democrats suggest. He has expressed support for refinancing assistance, and said lenders should not be allowed to peddle exotic loans that were widespread before the crash.
He also has said that an effective job-creation program would help boost home prices.
Still, his 59-point economic program makes no mention of housing and he has stood by his position that the market needs to recover on its own.
"I want to get the government out of the housing business, let the market work," he said in Charleston on Saturday.
Democrats are eager to draw contrasts.
"President Obama took swift action to stabilize the housing market, helping more than a million responsible Americans avoid foreclosure," said Zac Petkanas, a senior adviser to the Nevada Democratic Party.
"Meanwhile, Romney said foreclosures should 'hit the bottom' and we should do nothing to help struggling homeowners."
THE TROPHY HOUSE PROBLEM
Romney's houses could be a liability as he looks to connect with voters who are trying to keep a roof over their heads.
He owns a $10 million vacation home on the shore of Lake Winnipesaukee in New Hampshire and he is planning to quadruple the size of a $12 million beachfront house near San Diego.
The party's 2008 candidate, Senator John McCain, faced an embarrassing moment when he told an interviewer he didn't know how many houses he owned.
Uithoven, the Republican strategist, said Romney will have to deflect Democratic attacks from taking hold with independent voters.
"It'll certainly cause his campaign some time and resources to try to explain how we got into the housing problem," he said.
Republican strategists say their nominee will have plenty of time to craft a more nuanced policy while primary voters focus on broad-brush issues such as taxes, spending and abortion.
"Republican primary voters have a fairly narrow-cast set of issues they use to decide their vote," Republican pollster Bill McInturff said. "It is difficult for housing policy, even in states where foreclosures are an issue, to get significant attention during a Republican primary."
(Additional reporting by Nick Carey and Deborah Charles in South Carolina and Margaret Chadbourn in Washington; Editing by David Lindsey and Xavier Briand)