Industry Gets Involved in Fix Housing First

The National Association of Homes Builders (NAHB) says it has an answer concerning how to start correcting the mess that is the housing industry.

Speaking to reporters on December 17, Jerry Howard, NAHB president and CEO spared no words when he summed up the current state of the housing industry.

"If any of you have doubts about how bad the market is the data released this week tells the story," says Howard. "The housing market index remains at an all-time low. Housing permits are at the lowest levels ever recorded-the lowest since World War II as determined by our analysts. Then couple that with foreclosures and shattered consumer confidence …. all of this is not only contributing but is in our view the root cause of the recession."

Phil Hoffman of Hoffman Custom Built Homes in La Place, La., and Patrick Abercrombie, of Lowe's Cabinet and Lighting Gallery in Cleveland, Tenn., also spoke to the media to reiterate how this is in fact affecting all aspects of the building industry.

Hoffman, a third-generation builder, who once had six employees, including his son, who he had to tell to go get another job, said the phones stopped ringing in the middle of 2006, which had a huge effect on his business.

"We've gone through all of our family savings in the last 20 months," says Hoffman. "Now it's just my wife and I. I haven't touched my retirement but I don't look at my statements as the last time I looked they were down 40 percent."

"Building a house takes 80-100 people," he says. "We just affect so many people."

To fix this problem, the NAHB is spearheading Fix Housing First, one of the largest coalitions of housing advocates ever assembled in the United States, to push for a housing recovery plan that will revive the economy.

"If we are going to successfully pull our nation out of recession, we must address housing first," says Howard.

Fix Housing First consists of more than 600 organizations, home building companies and manufacturers pressing for a major stimulus package to stem the decline in home values, stabilize financial markets and reignite consumer demand. To get the economy moving again, the coalition is urging Congress to support enhancements to the home buyer tax credit and provide below-market 30-year fixed-rate mortgages for home purchases.

"If Congress enacts a meaningful tax credit, coupled with an aggressive interest rate buy-down program, we are confident that these measures will help to stabilize home prices, prevent future foreclosures, restore consumer confidence and start creating jobs," says Howard.

The housing stimulus proponents are calling for significant enhancements to the current $7,500 tax credit for first-time home buyers which Howard says had virtually no impact. Among the improvements:

• All primary home purchases between April 9, 2008, and December 31, 2009, would be eligible;
• The credit amount would be increased to 10 percent of the price of the home, capped at 3.5 percent of FHA loan limits, bringing the credit to a range of roughly between $10,000 and $22,000;
• The current recapture provision would be eliminated. Repayment would only be required if the home was sold within three years; and
• The credit would be available at the time of closing, making it easier to be used as a down payment.

The second component of the stimulus plan would provide qualified home buyers with 30-year fixed-rate mortgages at 2.99 percent on contracts closed until June 30, 2009, and 3.99 percent on closings between June 30 and December 31, 2009.

The American Architectural Manufacturers Association (AAMA) is one group that has joined the coalition.

"A majority of AAMA members have been adversely impacted by the dismal drop-off in both new construction and remodeling activity during the past two years," says Rich Walker, AAMA president and CEO. "As the mortgage meltdown runs its course, a stimulus package is sorely needed to jumpstart both residential and commercial construction.

But both Walker and Howard are quick to point out that this is a stimulus package and not a bailout.

"Once the industry is back on its feet and lenders are utilizing valid lending criteria, a full and rapid recovery is expected," says Walker.

"With all due respect, bailing out the auto makers is only a small part," says Howard. "If you put housing back in, you'll stimulate those who sell carpets, televisions, etc."

"If adopted, the Fix Housing First stimulus recommendations provide the catalyst to start the flow of money to builders and consumers. As the housing demand recovers, the attendant jump in new home starts will trickle down to the building products suppliers in a hurry. It will take some time to work through the idle and unfinished housing stock, but the short-term Fix Housing First incentives are aimed squarely at boosting both new and existing home sales," adds Walker.

Howard points out that Congress should be looking at stimulating housing as "In a healthy economy, housing makes us the largest component of gross domestic product. So it makes sense that you would start with housing."

When one reporter asked if builders contributed to this oversupply Howard said, "Builders are doing the right thing and not building more to contribute to oversupply. That oversupply is due to foreclosures so that has to be addressed."

And Howard says that taking such action will have an immediate impact.

"If this were put into place home prices would stabilize almost overnight and fewer people would be thrown into foreclosures."

The NAHB is encouraging the new Congress and President-Elect Obama to take a hard look at this plan. "You may see something signed into law as soon as inauguration day," says Howard.

Opponents of the proposals have said that putting this into place would create another housing bubble. "We are in favor of tightening underwriting standards," says Howard. "If you do that you won't see the housing bubble that we saw in 2005-06."

In fact he says not building, which is happening now, can create a new set of problems.

"If we're not building then in a few years we'll need homes and builders will build again then raise prices and we'll be right back where we are now."

Although Howard says, if passed, the plan will have an immediate effect, he says it would take 4-6 months to work through the housing inventory. "But it would create 600,000 jobs in the first year," he says.

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