The push is on for enactment of housing stimulus legislation before Congress leaves for its July 4th recess, and NAHB members are being urged to participate in the association's current lobbying blitz. For more information, click here. For a related story in this week's NBN, click here.
With the severe housing downturn taking a mounting toll on the U.S. economy, the nation’s home builders in a June 16 news media teleconference stressed the urgency of Congress enacting a housing recovery plan before it leaves Washington for its July 4th recess.
“Too much time has passed, too many home owners are in trouble, too many home buyers are waiting and too many home builders are going out of business,” said Jerry Howard, NAHB’s executive vice president and CEO.
The U.S. economy has lost jobs for five straight months, shedding 324,000 jobs this year, Howard noted. Residential construction has thinned its ranks by some 500,000 jobs since February 2006; more than 1 million homes are now in foreclosure, the highest ever recorded; and aging home owners are starting to lose the equity in their houses they need to pay for their retirement, he said.
“Another 15,000 Americans will lose their jobs this week and more than 47,000 home owners will go into foreclosure,” Howard said.
The Federal Reserve has done what it can to stem the damage from the housing downturn, Howard said, and “now it’s up to Congress to break that negative spiral. Nothing will change on the ground until Congress finishes the job.”
At the top of the list of provisions that are needed, he said, is a temporary home buyer tax credit to stimulate home buying and reduce excess inventory. To maximize its effectiveness, the credit should be as big and unencumbered as possible, he said, and it should be geared to taking effect “as rapidly as Congress can make it.”
Revitalization of the Federal Housing Administration, reform of Fannie Mae and Freddie Mac, expansion of the mortgage revenue bond program and enhancements for the low-income housing tax credit are other components of the final bill that the Congress should soon be presenting to the President for his signature, Howard indicated.
To hasten consideration of a stimulus package, Howard said that the association had decided to jettison its support for a provision to allow businesses to carry back their net operating losses (NOLs) over an additional timeframe. “Though NOL would have been helpful, even our big builders agree that the best way to get housing back on its feet is to enact a temporary home buyer tax credit,” he said.
The Worst Housing Downturn Ever
Participating in the teleconference to provide a perspective of the dire conditions that home builders are facing around the country, Vincent Napolitano, president of Napolitano Homes in Virginia Beach. Va., said that “this is without a doubt the worst housing downturn I’ve experienced in the 31 years we’ve been in business."
Since noticing the beginnings of a housing slowdown in the summer of 2005, Napolitano said that his company has reduced its annual housing production from the 200 to 250 range to about 70 homes this year. And, as a matter of survival, he has had to cut his employees from 60 to 25.
The inadequate availability of mortgage credit is the biggest problem for the housing industry, he said. One-third of the sales contracts he signs aren’t going to closing, because the buyers can’t qualify for the mortgage.
And even those who can qualify for a loan still have their previous home to sell, and they “have to keep their fingers crossed” that they will be able to find a qualified buyer, he said.
For the most part, people in the Virginia Beach market are only buying homes out of necessity, because of a job relocation or changing family needs, Napolitano said. The discretionary buyers who typically account for a large portion of the market are “staying on the sidelines waiting to see what happens to the economy.”
Layoffs of construction subcontractors and suppliers have now spilled over into retail sales, Napolitano noted, with one major furniture store in Virginia Beach shuttering its business, and state and local governments have seen revenue surpluses turn into shortfalls.
Near-Term Outlook Not Encouraging
On hand to announce the June results for the NAHB/Wells Fargo Housing Market Index, NAHB Chief Economist David Seiders said that builder confidence in the single-family housing market is continuing “scraping along the bottom,” where it has languished for the past 10 months. (For a related story in this issue of NBN, click here.)
“The implications for the near-term housing outlook are not encouraging,” he said.
While NAHB still sees housing sales bottoming out in the second and third quarters of this year, Seiders conceded that “right now risks are piling up on the down side” of that forecast. If conditions don’t improve soon, it is possible that sales won’t start turning around until the start of next year, he said.
Sharp downward momentum in home prices is accelerating, he warned, and prices on the national average are likely to erode further throughout 2009.
Last week’s upward “jog” in mortgage interest rates prompted by new concerns over inflationary expectations, Seiders said, is the latest worry for the industry. Although this was precipitated by remarks by Fed Chairman Ben Bernanke, with further economic weakness ahead, the “Fed will have to change its tune a bit.”
In its weekly Primary Mortgage Market Survey, Freddie Mac reported that 30-year fixed-rate mortgages averaged 6.32% for the week ending on Thursday, June 12. This was their highest level in nearly eight months.
Mortgage interest rates should start easing back down in a couple of weeks, Seiders said; otherwise, interest rates could become an unanticipated problem for an already beleaguered housing industry.
