CORRECTED - US Senate Budget chair wants housing aid in stimulus

(Corrects meeting of Democrats in paragraph 5)

WASHINGTON, Jan 7 (Reuters) - Senate Budget Chairman Kent Conrad on Wednesday urged short-term measures to address the crumbling housing market be included in the massive stimulus package being put together to help the ailing U.S. economy.

Noting that the housing market represents some 16 percent of the U.S. economy, Conrad suggested that the stimulus could include a tax credit for homebuyers, possibly $7,500, as well as steps to lower mortgage interest rates.

"It's a little hard for me to see a stimulus package going through that doesn't have a significant housing component," Conrad told reporters. "One of our problems is collapsing home prices, and most economists are saying until that's arrested you're going to have a hard time having economic recovery."

"I personally don't think it should apply to second homes," Conrad said of the tax credit concept, but made clear he has not fully formulated his ideas yet.

The North Dakota Democrat said he has yet to talk with colleagues about his ideas, but would do so at a meeting of Democrats slated for Thursday.

Congress is expected to craft an economic stimulus package that could cost $775 billion over two years and include a variety of tax breaks and funding for various infrastructure projects.

Conrad said lawmakers could address concerns about rising home foreclosures in either the stimulus package or when Congress considers releasing the second half of the $700 billion bailout for financial institutions.

His remarks follow the release of a forecast by the Congressional Budget Office that the national average price of a house will likely fall by 14 percent more between the third quarter of 2008 and the middle of 2010. (Reporting by Jeremy Pelofsky, editing by Leslie Adler)