Capital Lumber Company brings industry news to you:

This column was developed with our customers, suppliers and employees in mind. Check back to keep up-to-date on the latest industry news and information.

Economy Still Sputtering

Wednesday, April 30, 2008

The nation's economy continued its sluggish growth in the first quarter, according to a government report Wednesday that showed a slightly better-than-expected gain in economic activity.

Gross domestic product, a broad measure of the economy, rose at an annual rate of 0.6% in the first three months of the year, when adjusted for inflation. That matched the rise achieved in the fourth quarter as well as in the year-earlier period.

Economists surveyed by Briefing.com had forecast a 0.5% gain for the first quarter.

There has been a growing belief among many economists that the economy is in a recession, having fallen into it either late last year or during the course of the first quarter. Employers cut 232,000 jobs in the first three months of 2008 and consumers pulled back on spending in the face of higher prices.

The most common definition of a recession is two consecutive quarters in which GDP is negative, although the official designation of an economic downturn is based on broader measures as determined by the National Bureau of Economic Research.

The GDP reading was helped by a strong build in business inventories, following a deep cut in the fourth quarter. It was also helped by a smaller trade gap as a weaker dollar made U.S. exports more competitive elsewhere in the world. A pickup in government spending, particularly a 6% rise in defense spending by the federal government, also boosted GDP.

Source: CNN/Money

Builders Applaud Fed Rate Cut; Seek Swift action on Housing Stimulus Package

Wednesday, April 30, 2008

The National Association of Home Builders (NAHB) today applauded the Federal Reserve for continuing to take aggressive action to inject liquidity into the financial markets by moving for the seventh time since September to cut short-term interest rates.

"The Fed's action to cut the federal funds rate by a quarter of a percentage point will help prop up the ailing economy. Now it's time for Congress to do its part," said NAHB President Sandy Dunn, a home builder from Point Pleasant, W. Va. "Today, more than 1,200 builders are in Washington calling on lawmakers to avert an economic crisis by swiftly enacting a housing stimulus package that will jump-start housing, save jobs and restore confidence."

The best way for Congress to bolster housing and the economy is to enact a temporary tax credit for home buyers, Dunn said.

"This will provide an immediate shot in the arm. It will get consumers off the fence, stimulate home buying and reduce excess supply in housing markets," said Dunn. "The home buyer tax credit worked in the 1970s when the economy was in recession. We need it now."

Source: NAHB

back to top

Credit Tightening on Builder Loans Threatens to Prolong Housing Downturn

Wednesday, April 30, 2008

The mortgage credit crunch has spilled over into the housing production loan market, threatening to prolong the current housing downturn, the National Association of Home Builders (NAHB) told Congress today.

"The mortgage credit crunch will continue to be the most significant factor impacting the home building industry into the foreseeable future," Scott Eckstein, a home builder from Naperville, Ill. and president of the Illinois Home Builders Association, told the House Small Business Subcommittee on Finance and Tax. "There is deep concern that the dislocations in the financing markets will increase the depth and length of the housing downturn."

Despite concerted efforts of central banks here and abroad, Eckstein said that the credit crunch appears to be actually worsening. "Tighter mortgage lending terms have made it difficult for home buyers to obtain financing to purchase new homes. Likewise, builders are reporting an adverse shift in terms and availability on loans for land acquisition, land development and home construction (AD&C)."

Residential AD&C loans are used to purchase land; develop lots; build a project's infrastructure such as streets, curbs, sidewalks, lighting, and sewer and utility connections; and construct homes.

Builders with outstanding AD&C loans are facing mounting challenges because lenders receiving current appraisals that reflect lower values on lots and homes are seeking additional equity for outstanding credit and balking at loan extensions.

"Defaults on AD&C loans are rising. In this environment, banks are actively reducing exposure levels to home credit," said Eckstein.

To broaden sources of AD&C credit, Eckstein called for:

- Fannie Mae to ramp up activity in its AD&C loan purchase program and for Freddie Mac to create a similar program.

- Federal Home Loan Banks to improve AD&C liquidity by accepting housing production loans as collateral for the secured advances they make to member institutions.

- The Federal Housing Administration to help increase competition in the AD&C market by insuring the construction portion of these loans in order to attract new originators such as mortgage banking companies. "As in the case of the end-loan mortgage market, FHA could be a crucial stabilizing force in AD&C lending in turbulent times such as these," said Eckstein.

- Wall Street specialists to develop a prototype private security instrument for AD&C loans. In particular, changes to tax provisions relating to Real Estate Mortgage Investment Conduits and Taxable Mortgage Pools could be helpful in securitizing construction loans.

- Banking regulators to take a balanced approach when evaluating bank lending, especially in regard to AD&C loans. "Overly pessimistic assumptions about future home sales and values will result in an unnecessary extension of the credit crunch and housing recession," said Eckstein.

"Draconian restrictions on lending or forced reductions in AD&C concentrations will only serve to exacerbate the present crisis and delay, or even prevent, future recovery."

Meanwhile, stimulating demand for homes and stabilizing housing prices during the important spring home buying season would do the most to relieve the financing and other business difficulties faced by home builders, he said.

As Congress continues work on housing stimulus legislation, Eckstein urged lawmakers to pass a final bill that would provide a temporary home buyer tax credit, allow businesses to carry back net operating losses beyond the current two years and expand the mortgage revenue bond program.

Source: NAHB

Builders Lead the Way in Energy Efficient Housing, Congress Told

Thursday, April 24, 2008

Calling green building "the next evolution in residential construction," the National Association of Home Builders (NAHB) told Congress today that the best way to help small home builders promote residential energy efficiency and sustainability technology in home construction is by extending tax incentives for new energy-efficient homes.

Testifying before the House Small Business Committee, Michael Hodgson, president of the Stockton, Calif.-based energy consulting firm ConSol, said these incentives dovetail with the normal supply and demand for home construction. "A tax credit program leaves important production decisions in the hands of builders, buyers and home owners and does not require expensive administrative oversight that is usually associated with a mandate," he said.

Source: NAHB

back to top

Invest Wisely During National Home Remodeling Month

Monday, April 21, 2008

Remembering the three "Rs"--repair, rehab, and remodel--will help preserve the value of the home, a family's most important asset. In recognition of Home Remodeling Month this May, the National Association of Home Builders (NAHB) Remodelers will highlight the financial incentives of remodeling and offer suggestions for consumers on projects that provide the best return on investment.

"Remodeling not only enriches a homeowner's quality of life, but it can also provide numerous financial rewards," said NAHB Remodelers Chairman Lonny Rutherford, CGR, CAPS, a professional remodeler from Farmington, N. M. "Smart remodels increase home value and save homeowners money by improving home performance."

With interest rates at historic lows, homeowners can now move forward with long-delayed projects that help maintain their home's value by modernizing and adding amenities. Attention to home maintenance adds comfort, enhances home performance and avoids future costly repairs. And there are immediate savings on energy and utility bills after upgrading home efficiency.

"It doesn't take much effort to increase home values. Adding a full bath or renovating the kitchen are great investments, but smaller projects such as replacing siding or adding a deck improve the space and beautify a home," adds Rutherford.

According to the experts at NAHB Remodelers, the best return on investment doesn't always mean spending big:

- Fix drafts for better air flow, or repair the roof to stop leaks. Even simple repairs can drastically improve home performance and protect the structure's integrity.

- Add the most value for the least cost by replacing siding or adding a small bathroom.

- Expand your home to the outdoors by adding a deck, patio or porch where you can relax or entertain.

Source: NAHB

Take Steps to Save Energy on Earth Day, Says NAHB

Monday, April 21, 2008

As Earth Day approaches, the National Association of Home Builders (NAHB) encourages home owners everywhere to take simple steps to reduce energy use - and to think green when they buy a new home.

"We are all proud of the significant steps our members have taken to make new homes more energy efficient," said NAHB President Sandy Dunn, a West Virginia home builder. "More than 100,000 green homes have been built by our members in home builder association programs around the country. We're moving the market - in a voluntary, cost-effective way."

Per square foot, new homes consume less than two-thirds the energy of older homes for heating and air conditioning, according to federal utility use audits and research by NAHB economists. "Americans who have bought a new home recently should all take a big bow on Earth Day," Dunn said. "Today's energy-efficient homes leave a lighter footprint -- and that's something new homeowners can be very pleased about."

Energy efficiency is an important driver in the green building movement and usually accounts for about half the costs of making a traditional home a green home, NAHB studies show. In the new NAHB National Green Building Program, homes must be 15 percent more energy efficient than required by the prevailing building code to meet the Bronze level of certification.

Consumers can choose a builder or remodeler who participates in the NAHB National Green Building Program and local home builders association programs or who is a Certified Green Professional[tm] when they are ready to buy a new green home or renovate their existing home.

"As many advances as we've made, NAHB recognizes that new energy-efficient homes are only part of the solution. We need to be better energy stewards in the homes we have now. That's the most efficient way to make a noticeable impact on the amount of power we use," Dunn said.

Dunn also suggested three simple measures that can make a noticeable difference for a home owner's bottom line:

Switch out some light bulbs. The U.S. EPA estimates that if every home replaced its five most frequently used traditional light bulbs and fixtures with ones bearing the Energy Star label, the U.S. would save about $8 billion in energy costs and the greenhouse gas equivalent of emissions from 10 million cars.

Change the air filter in your heating and air conditioning system. The EPA recommends changing the filter at least every three months and more if it looks dirty. A dirty filter slows down air flow, making the system work harder and use more energy.

Seal and insulate. Home owners can typically save up to 20 percent of heating and cooling costs by air sealing their homes and adding insulation in attics, floors over crawl spaces, and accessible basement rim joists.

"As national leaders in the green building movement it's important for NAHB to remind our customers - American home owners - to be energy conscious. We all must do our part," Dunn said.

Source: NAHB

back to top

Housing Starts Fall Further in March

Wednesday, April 16, 2008

Builders continued to reduce the pace of new-home construction in March amidst ongoing erosion in the overall economy and credit markets, according to the latest figures released today by the U.S. Commerce Department. Total housing starts fell nearly 12 percent to a seasonally adjusted annual rate of 947,000 units for the month, while single-family starts fell 5.7 percent to a rate of 680,000 units.

"Builders are dramatically limiting starts of new homes in an environment of weak sales and heavy supply, ratcheting down production of single-family units to its slowest pace in 17 years," noted NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. "We're doing everything in our power to bring the supply and demand equation back into balance and restore housing to its rightful place as an engine of economic growth. But now that we are in a genuine economic recession, there's no question that more needs to be done at the federal level to support housing, shore up consumer confidence and limit the degree and duration of the economic contraction."

"The Senate has done a fine job already in moving forward with beneficial legislation, and we applaud its efforts to this point," added Dunn. "We urge the House to do the same thing and quickly advance a bill that can be reconciled with the Senate's version and promptly sent to the President's desk. Now is the time, during the spring home buying season, to implement measures that will have the greatest positive effect on housing and the economy."

"Builders in the field continue to report that prospective buyers are visiting their model homes, but most are either unwilling or unable to go forward with a purchase given the downward trends in employment and home values as well as the tightening of mortgage credit conditions," said NAHB Chief Economist David Seiders.

"It stands to reason that incentives such as a temporary home buyer tax credit and improvements to the housing finance system would help boost consumer confidence in the market and have a significant stimulative effect that could arrest housing's heavy drag on economic growth. Such measures, combined with the Federal Reserve's aggressive moves to lower interest rates and improve the functioning of financial markets, definitely would have substantial beneficial effects on the overall economy."

Source: NAHB

Builders Report Credit Squeeze on Loans to Build Homes

Wednesday, April 16, 2008

The mortgage credit crunch has spilled over into land acquisition, land development and home construction (AD&C) lending, increasing the challenges faced by builders in the current housing downturn.

"With private securities markets in disarray and banks retrenching, a bona fide credit crunch is underway," Bob Mitchell, a home builder from Rockville, Md. and former president of the National Association of Home Builders (NAHB), told the Senate Small Business Committee during a hearing on "Impacts of the Credit Crunch on Small Firms."

"This credit crunch actually appears to be worsening despite the concerted efforts of central banks here and abroad," he added. "Tighter mortgage lending terms have made it difficult for home buyers to obtain financing to purchase new homes. Likewise, there have been dramatic adverse swings in the cost and availability of AD&C loans for home builders."

Residential AD&C loans are used to purchase land; develop lots; build a project's infrastructure such as streets, curbs, sidewalks, lighting, and sewer and utility connections; and construct homes.

Presently, funding for viable residential development and construction projects has been severely limited or blocked entirely at federally insured depository institutions, which are the sole source of housing production credit for the small businesses that comprise most of the home building industry, Mitchell told lawmakers.

"The current financing quagmire for home builders vividly illustrates the importance of developing additional sources of AD&C credit," said Mitchell. "Furthermore, there is no secondary market for residential AD&C loans where community banks and thrifts could turn to help manage their balance sheets and obtain liquidity for additional lending."

Source: NAHB

back to top

Builder Confidence Remains Unchanged in April

Tuesday, April 15, 2008

Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI held at 20, up marginally from the record low of 18 set in December of 2007 (the series began in January of 1985).

"With the traditional home buying season now well underway, we have not seen the bump in sales activity that we normally would this time of year," said Sandy Dunn, NAHB president and a home builder from Point Pleasant, W.Va. "At this point, all eyes are on Congress and its efforts to craft meaningful legislation to help support the housing market and stabilize our nation's economy before it heads deeper into recession."

"While builders continue to report improvements in traffic through their model homes compared with late last year, this activity has not translated to actual sales. That's where Congress can make a big difference," noted NAHB Chief Economist David Seiders. "Measures that stimulate consumer confidence in the housing market, push the fence-sitters into the ring and put a floor under house prices can successfully halt the drag that housing is exerting on the national economy, and help stabilize financial markets at the same time. But such measures need to be implemented as soon as possible in order to limit the severity of the economic recession that now is underway."

Source: NAHB

Nation Now in Mild Recession, Says NAHB Chief Economist

Tuesday. April 15, 2008

The deepening slump in the nation's housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders (NAHB).

"The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers," said NAHB's David Seiders. "It's now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario."

To guard against a longer and deeper downturn, Seiders said that Congress should take immediate steps to stimulate the economy through actions specifically targeted at improving the ailing housing market -- such as a temporary home buyer tax credit, modernization of the Federal Housing Administration and oversight reform for the housing-related government sponsored enterprises.

"Stopping the downward trend in housing prices is key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that," he noted.

Given the ongoing erosion in housing finance markets and buyer demand, Seiders has adjusted NAHB's official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30 percent. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27 percent decline for 2008.

" This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009," Seiders said.

"Stimulus bills recently passed in the Senate and the House Ways and Means Committee are welcome steps in the right direction. This is one instance where prompt and appropriate efforts by the nation's lawmakers could make a significant difference in limiting the depth and duration of the economic downturn."

Source: NAHB

back to top

Obama: We Must Confront the Housing Crisis

Friday, April 11, 2008

Sen. Barack Obama said Thursday the United States must address "the immediate crisis in the housing market" in order to reinvigorate the economy.

Obama said the government should play a role in improving Americans' well-being "by providing stable macroeconomic and financial conditions for sustained growth; by demanding transparency; and by ensuring fair competition in the marketplace."

Obama called for immediate relief for those affected by the housing crisis, revamping the regulatory framework and boosting the economy with an additional $30 billion stimulus package.

Obama said the details of regulatory overhaul "should be developed through sound analysis and public debate," and detailed six guiding principles.

• Institutions that borrow from the government must be subject to federal oversight and supervision.
• Regulations for those institutions need to be updated
• The framework for overlapping and competing regulatory agencies needs to be streamlined
• Institutions need to be regulated "for what they do, not what they are"
• A crackdown on trading activity that manipulates the markets is necessary
•A process that identifies systemic risks to the financial system is needed

Sen. Hillary Clinton is also laying out her plan to get the economy back on track Thursday.

Clinton, speaking in Raleigh, North Carolina, is expected to focus on job training -- proposing a five-year, $12.5 billion program, her campaign said. Clinton will highlight state and local initiatives that work and stress her belief that the federal government needs to be a stronger partner with local governments.

Clinton focused on the housing crisis earlier this week in an address on the economy. She proposed allowing the Federal Housing Authority to guarantee more mortgages, which would let homeowners restructure their loans.

Clinton said reluctance to bail out banks and borrowers in trouble sounded like Herbert Hoover, the Republican president in office at the start of the Great Depression.

Earlier this week, a Republican committee spokesman blasted the economic plans of both Democrats.

" Both Barack Obama and Sen. Clinton's plans to increase taxes would hurt hardworking families and take money out of their pockets to place it in the hands of government bureaucrats," Danny Diaz said.

The economic slowdown caused by the credit crunch has become a top concern for voters. Consumer confidence in March dropped to its lowest level in five years, according to The Conference Board.

Source: CNN

U.S. Near Recession Amid Global Slump

Wednesday, April 9, 2008

The world economy will slow sharply this year, according to an International Monetary Fund forecast, with the United States sliding into a recession amid housing, credit and financial slumps.

The IMF, in a World Economic Outlook released Wednesday, slashed growth projections for the United States - the epicenter of the woes - and the global economy as a whole.

Economic growth in the United States is expected to slow to a crawl of just 0.5% this year, which would mark the worst pace in 17 years, when the country last suffered through a recession, the IMF said. The United States won't fare much better next year; the IMF projected the U.S. economy will grow by a feeble 0.6% in 2009.

" The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets," the IMF said.

Many private economists and members of the U.S. public believe the country has already fallen into its first recession since 2001. For the first time, Federal Reserve Chairman Ben Bernanke acknowledged last week that a recession was possible.

Source: Associated Press

back to top

Pending Home Sales At All-Time Low

Tuesday, April 8, 2008

An index of homes under contract for sale fell more than expected in February, reaching the lowest level since the index's 2001 debut, according to a report released Tuesday.

The National Association of Realtors' (NAR) Pending Home Sales Index fell to 84.6 in February, down 1.9% from a revised reading of 86.2 in January and down 21.4% versus the same period last year.

Economists were expecting the index to decline to 85.2 for the month, according to a consensus estimate compiled by Briefing.com.

" The slip in pending home sales implies we're not out of the woods yet," said Lawrence Yun, NAR chief economist, in a statement.

The Pending Home Sales Index is considered a more forward-looking indicator of home sales than the NAR's more closely watched existing home sales report, which tracks sales at the time of closing, typically a month or two after a sales contract is signed.

The Pending Home Sales index was launched in 2001, and a reading of 100 is equal to results that first year. Before the housing market began to deteriorate last summer, the steepest decline in the index's history came in September 2001, when the 9/11 terrorist attack sent the index down to 89.8.

The Realtors revised their forecast slightly for existing home sales, projecting first-quarter existing home sales to decline 23.1% versus the same period last year after saying in March they would decline 23.2%.

For the full year, the NAR predicted existing home sales to be 4.7% lower than in 2007, after saying in March they would be down 4.8%.

Existing home sales for March will be released April 22.

" February was another poor month for housing, with pending sales down in most of the country," said Mike Larson, a real estate analyst at Weiss Research.

Larson thinks tight lending standards and the absence of speculative buying are to blame for the weakness in the housing market.

The NAR also lowered its forecasts for first-quarter and full-year real GDP growth, the broadest measure of the nation's economic strength. It also cut its expectations for nonfarm job growth in the first-quarter and full-year periods.

Yun thinks that the economy will not grow in first half of the year, but he is optimistic about the second half.

" The combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half."

Source: CNN/Money

New Home Sales Slip to 13-Year Low

Wednesday, March 26, 2008

New home sales fell to their lowest level in 13 years in February, according to a key government report on the battered housing market released Wednesday.

February sales came in at a seasonally-adjusted annual rate of 590,000, the Census Bureau report showed, down 1.8% from a revised 601,000 in January and 29.8% from a year earlier.

" These historically low levels show that demand is very weak, but also that we're close to scratching the bottom," said National Association of Home Builders chief economist David Seiders.
Though home sales slipped, the reading was still above the consensus forecast of 580,000, according to economists surveyed by Briefing.com.

New home sales fell despite continued price declines. The median price of a new home sold in February was $244,100, down 2.7% from $250,800 a year earlier.

This decline in median price probably doesn't accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers' closing costs or offer other incentives such as expensive features for free in order to maintain sales.

" Falling prices are a double-edged sword," said Seiders. "Affordability of homes needs to be restored, but some prospective buyers stay away because they believe home prices will continue to go down further."

Prices have been driven down by the glut of new homes on the market.

Builders were finding it typically takes 7.2 months to sell a completed home in the current market, according to the report.

The report showed 188,000 completed new homes available at the end of the month, bringing total inventory - including new homes under construction and not yet started - to 471,000, equal to 9.8-month supply.

Total inventory for fell by 10,000 homes in the month, according to the Census Bureau, but the report does not include purchases that were cancelled and sent back to the builder.

" Inventories are still very high," said Seiders, who believes that inventories need to be whittled down to a five or six month supply to restore the balance to supply and demand.
The report is the latest sign of trouble in the overall housing market.

On Monday, the National Realtors Association reported existing home sales rose only slightly despite the largest year-over-year price drop on record since the group began reporting that measure in 1999.

On Tuesday, the Standard & Poor's/Case-Shiller Home Price 10-city index showed a record 11.4% annual drop in prices, the lowest level since the index's creation in 1987.

But some economists believe the worst of the housing slump is over.

" The lion's share of this huge collapse is behind us," said Seiders, who believes that current market conditions will allow for home sales to flatten and then rise by the second half of 2008. "Standard measures of affordability are now well off their lows, based on price, financing conditions and income growth."

Source: CNN/Money

back to top

Home Prices: Down Record 11%

Tuesday, March 25, 2008

Residential real estate has posted another record decline.

The S&P Case/Shiller Home Price index of 20 key markets, released Tuesday, shows that home prices plunged 10.7% in the 12 months ending January. That marks their lowest level since the index launched in 2000.

Of those 20 metro areas, 16 reported record annual declines. Ten of those cities posted double digit declines through the 12 months that ended in January.

The survey's 10-city index fell 11.4% year-over-year, its steepest decline since its inception in 1987.

A national decline. While regional declines in home prices are not uncommon, the current decline is the "first national decline we've had," said Robert Shiller, Yale professor of economics and co-founder of the index.

" In a historical context we're down substantially, down more than at any other time that we've been keeping track," he added.

Las Vegas and Miami reported the weakest markets in January, with each city posting an annual decline of 19.3%. Phoenix was the second worst with a decline of 18.2%.

Washington and Minneapolis also registered double digit declines in January.

Only one city, Charlotte N.C., posted a modest price increase of 1.8%.

" Unfortunately it does not look like early 2008 is marking any turnaround in the housing market," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's.

Housing glut. Michael Strauss, chief economist at investment firm Commonfund, says that steep price declines are no surprise, given the number of homes on the market.

" When inventory is so high we're likely to see a decline in prices," he said.

Cities like Las Vegas and Miami, where speculative buyers helped fuel the housing boom, are seeing sharp reversals.

" Some of the cities that soared the most are now retracting the most," according to Strauss. "Though it may be disappointing to some, from an economic stand point it makes a lot of sense."

Silver lining. The Case/Shiller data comes one day after a report from the National Association of Realtors that showed a modest increase in sales of existing single-family homes in January, thanks to the plunge in prices.

Mike Schenk, senior economist for the Credit Union National Association, says the decline in home prices is a symptom of serious economic problems, but adds that the environment is improving for home buyers.

" Affordability is actually quite high," he said. "This is a pretty good market to consider taking the plunge. And it's going to get better as we go forward."

Subprime fallout. Across the nation, the market for lower-priced homes has been the most volatile over the last 12 months, a phenomenon Shiller thinks is a result of the ongoing subprime crisis.
" It's going to take those markets a long time to recover," Shiller said.

And the housing crisis, in turn, has rocked Wall Street.

The Case/Shiller indexes compare the sale prices of the exact same homes. The industry considers this survey to be among the most accurate snapshots of housing prices.

Source: CNN/Money

Builders Support Federal Housing Finance Board Mortgage Relief Proposal

Monday, March 24, 2008

The National Association of Home Builders (NAHB) today applauded a decision by the Federal Housing Finance Board to allow the Federal Home Loan Banks to temporarily increase their holdings of Fannie Mae and Freddie Mac securities to help stabilize the mortgage finance market.

"This prudent action to allow the Federal Home Loan Banks to double their holdings of agency mortgage-backed securities (MBS) for a two-year period will help to alleviate the mortgage credit crunch by potentially injecting more than $100 billion into the MBS market," said Jerry Howard, executive vice president and CEO of NAHB.

To get mortgage money flowing again given the current chaos and stagnation in the credit markets, Howard also urged Congress to move quickly to enact FHA modernization and comprehensive reform of Fannie Mae and Freddie Mac.

"A revitalized FHA will be well-positioned to provide reasonably-priced, low-downpayment mortgage solutions to millions of home owners and potential home buyers," said Howard. "Full GSE reform for Fannie Mae and Freddie Mac will enable these financial institutions to greatly relieve liquidity and inventory pressures in the mortgage credit markets."

Source: NAHB

back to top

Record Attendance Expected at 10th Annual NAHB National Green Building Conference

Monday, March 24, 2008

More than 1,500 builders and other housing professionals are expected to convene in New Orleans to discuss the latest advancements and trends in eco-friendly home building at the 10th annual NAHB National Green Building Conference. Hosted by the National Association of Home Builders (NAHB) May 10 to13 at the Sheraton New Orleans Hotel, the event is the only national conference targeted to green building for the mainstream residential single-and multifamily building and remodeling industry.

Conference attendees will have the opportunity to attend cutting-edge education sessions, tour an impressive exhibit hall showcasing the latest green building products and ideas, and attend the National Green Building Awards honoring the best in green building. More than 60 education sessions will be offered on topics ranging from green remodeling and green building trends to building science, indoor air quality and local green building considerations. Building professionals will also learn about the new ANSI National Green Building Standard and the NAHB National Green Building Program, and will be able to work towards earning the new Certified Green Professional Designation.

"Green building is no longer a niche market, it is the present and the future of the building industry and this conference really demonstrates how far we have come," said Ray Tonjes, Green Building Subcommittee chairman and a custom home builder in Austin, Texas. "With the event's excellent education sessions, speakers and green exhibits, home tours and networking opportunities, the insights and ideas builders will come away with are unmatched."

Source: NAHB

National Housing Endowment Supports Construction Management Programs with Major Help Grants

Monday, March 24, 2008

Four institutions of higher education were recently awarded grants of $100,000 each from the National Housing Endowment, the philanthropic arm of the National Association of Home Builders (NAHB). The Homebuilding Education Leadership Program (HELP) grant is gifted to two- and four-year colleges and universities to help create, expand or enhance existing residential construction management programs.

In 2006, the National Housing Endowment launched the HELP program as the cornerstone of its education effort, and is its signature grant program. Through this program the Endowment has made a long-term commitment to establish closer relationships with institutions of higher education. Key goals of the HELP program include encouraging academic institutions to provide residential education tracks and/or programs that respond to the current issues of the home building industry, and increasing the number of qualified college graduates entering the residential construction profession.

"In order for the home building industry to continue to strive for excellence, we must foster opportunities for the next generation to learn and develop skills from educational programs that are equipped to provide the latest and greatest in technology and theory," said Gary Garczynski, chairman of the National Housing Endowment and 2002 NAHB Past President. "The four institutions awarded the grant money have shown a strong commitment to providing the best education and will raise the level of professionalism in our industry for generations to come."

The Endowment's board of trustees selected four schools who will each receive HELP grant funding over the next two years:

California Polytechnic University - San Luis Obispo in San Luis Obispo, Calif., will use their HELP funding to support the development of a unique and challenging curriculum.

Jefferson State Community College in Birmingham, Ala., will benefit from program expansion with an increased service area and the ability to recruit more traditional students to their program.

John A. Logan College in Carterville, Ill., will establish an NAHB student chapter and advisory board and incorporate Residential Construction Academy classes into the curriculum.

Middle Tennessee State University in Murfreesboro, Tenn., will build upon the strengths of their program, where 80 percent of graduates currently go to work in the residential construction industry each year.

Last year the National Housing Endowment awarded pilot HELP grants to East Carolina University, Georgia Institute of Technology and the University of Maryland Eastern Shore.

Source: NAHB

back to top

Mortgage Applications Drop

Wednesday, March 19, 2008

Mortgage application volume fell 2.9% during the week ending March 14, according to the Mortgage Bankers Association's weekly application survey.

The MBA's application index fell to 652 from 671.7 the previous week.

Refinance volume fell 4.6%, while purchase volume declined 1% during the week. Refinance applications accounted for 49.7% of total applications, the first time all year that purchase application volume was larger than refinance volume.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 652 means mortgage application activity is 6.52 times higher than it was when the MBA began tracking the data.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

Volume declined as interest rates continued their wild swings. Fixed-rate mortgage rates plummeted, while adjustable-rates continued to skyrocket.

The average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.98% from 6.37% the previous week. The average rate for 15-year fixed-rate mortgages, which are often used in refinance applications, plummeted to 5.24% from 5.72%.

The average rate for one-year adjustable-rate mortgages rose to 6.95% from 6.72%, more than one percent higher than they were just two weeks ago.

Source: CNN/Money

Good Start but More is Needed, Home Builders Say on OFHEO Capital Adjustment for Fannie and Freddie

Wednesday, March 19, 2008

Jerry Howard, Executive Vice President and Chief Executive Officer of the National Association of Home Builders (NAHB), today issued the following statement on the Office of Federal Housing Enterprise Oversight's (OFHEO) decision to reduce the capital surcharge levied on Fannie Mae and Freddie Mac:

"While we appreciate this action, it falls short of providing the liquidity required to stabilize today's credit-squeezed mortgage market. We were expecting a much bolder step by OFHEO, with a greater reduction in the capital surcharge in light of the severity of the mortgage credit crunch.

"To get the most mileage out of these additional funds, Fannie Mae and Freddie Mac must target borrowers who have been shut out of the mortgage market by the financial sector meltdown. This action is a partial step to getting Fannie Mae and Freddie Mac back on the road to meeting their housing mission. Developing a proper balance between their housing mission and the interests of their stockholders is a key provision of the pending GSE regulatory reform legislation, which further underscores the urgent need for quick Senate action on the bill.

"In addition, we believe that Fannie Mae and Freddie Mac should use this opportunity to eliminate the market delivery fees that were recently added to loans to provide a reserve against future losses. These fees are a counterproductive tax on homeownership and will work against efforts to stabilize the nation's housing market."

Source: NAHB

back to top

Single-Family Housing Starts Decline 6.7 Percent in February

Tuesday, March 18, 2008

Single-family housing starts continued on a downward trajectory in February, posting a 6.7 percent decline to a seasonally adjusted annual rate of 707,000 units, according to figures released today by the U.S. Commerce Department. Meanwhile, production in the more volatile multifamily sector registered a 14.4 percent gain to 358,000 units, limiting the decline in total housing starts to a rate of 1.065 million units -- 0.6 percent below the revised January pace.

"Builders continue to scale back production of single-family homes in an effort to contain inventories amidst ongoing problems in the mortgage finance arena and other challenges that are keeping many potential buyers on the fence," said NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. "We're doing what we can to restore balance to the supply-demand equation, but we need the Federal Reserve, Congress and the Administration to take immediate action on several fronts if there's any hope of rebuilding consumer confidence and jump-starting the economy."

"Our latest surveys of single-family builders reveal that many prospective buyers are looking into a home purchase at this time, but that they are unwilling or unable to make their move with conditions in the overall economy and financing arena what they are," said NAHB Chief Economist David Seiders.

"The Federal Reserve's latest moves to shore up financial markets have certainly been welcome developments, and a significant interest rate cut following today's FOMC meeting will be more positive news," Seiders said. "Beyond this, Congress and the Administration should follow up on the recently enacted economic stimulus package with additional measures aimed directly at boosting the housing market. If prompt action is taken in the direction of a home buyer tax credit, FHA modernization and GSE oversight reform, a housing recovery could take shape by this year's second half and the benefits of that to the overall economy would be substantial."

Regionally, housing starts were unchanged for the month in the Midwest, up nearly 4 percent in the South and up 5.1 percent in the West, while the Northeast posted a 27.7 percent decline that offset a large boost in the previous month. However, every region was down on a quarterly basis in February.

Permit issuance, which can be an indicator of future building activity, declined 7.8 percent overall in the month to a seasonally adjusted annual rate of 978,000 units, with a 6.2 percent decline registered in the single-family sector to 639,000 units and a 10.8 percent decline on the multifamily side to 339,000 units.

Source: NAHB

Builder Confidence Remains Unchanged in March

Monday, March 17, 2008

Builder confidence in the market for new single-family homes remained unchanged in March, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI held firm at 20, which is near its historic low of 18 set in December of 2007 (the series began in January of 1985).

"Our surveys confirm what I've been hearing personally from builders across the country, which is that interested buyers are out there, but they are either reluctant to go ahead with a home purchase or they are unable to find mortgage financing they can afford," said NAHB President Sandy Dunn, a home builder from Point Pleasant, W. Va.

"NAHB applauds the Federal Reserve's aggressive actions over the weekend in response to escalation of financial market pressures, and we strongly encourage the Fed to ease monetary policy substantially when the Federal Open Market Committee meets tomorrow," said NAHB Chief Economist David Seiders.

"With the deepening problems in today's economy and financial markets, Congress and the Administration should enact additional stimulative measures, and the next round should be directed squarely at the housing sector," he added. "A temporary home buyer tax credit, FHA modernization and GSE oversight reform are the three most important things that Congress can accomplish right now to help ensure that housing does not drag the economy into a full-blown recession. Provided that the necessary actions are taken promptly, a housing market recovery most likely would take shape by the second half of this year."

Source: NAHB

back to top

Redwood Forest Up For Grabs

Wednesday, March 13, 2008

The fate of 210,000 acres of prime California timberland, much of it redwood, may be decided next month in a Corpus Christi, Texas, courtroom. That’s where Judge Richard Schmidt will try to pick one of several reorganization plans for Pacific Lumber Co. (Palco), a 130-year-old logging company now facing bankruptcy in Scotia, Calif.

How the Palco case ended up in a Texas courthouse is a long story involving a corporate raider and $800 million in overdue bonds. But the resolution could unite twoof the state’s biggest redwood producers and substantially increase the amount of FSC-certified redwood on the market.

Mendocino Redwood Co., a lumber producer and distributor based in Ukiah, Calif., owns and manages 228,000 acres of timberland just south of the Palco lands. All of its land is certified by the Forest Stewardship Council. The company’s chief investor is the Fisher family of San Francisco, who founded the apparel retailer Gap.

Mendocino Redwood has partnered with one of the principal creditors in the Palco case, a New York hedge fund named Marathon. In their joint venture, both companies would invest in funds in the company, which Mendocino would operate. The plan contains safeguards for tracts of old growth redwoods whose fate also hangs in the balance.

“ Marathon came to us asking for help with the reorganization plan,” explained Sandy Dean, chairman of Mendocino Redwood Co. If the bankruptcy court ultimately approves the Marathon/Mendocino plan, “We would bring our forestry management practices to [Palco’s timberland] immediately,” Dean said. Other changes would include equipment upgrades to Palco’s mill in Scotia.

Not all the creditors agree with this plan, however. Some of the principal noteholders want to sell the 210,000 acres of redwood and Doug fir. Palco has come up with several reorganization plans of its own, including one that would raise $550 million by selling some of the company’s redwood groves on the open market and developing another 22,000-acre tract.

A coalition of environmentalists, conservationists, the Bank of America, and Atlas Holdings, an East Coast-based investment group that operates a number of wood and paper mills, has also made a bid for Palco’s assets.

Complicating matters further is the fact that Palco really only owns the sawmill and the surrounding town of Scotia; all the timberland belongs to a Palco affiliate called Scotia Pacific Co. At the very top is Maxxam, the Houston company that purchased Palco with junk bonds in 1986. None of the five reorganization plans seem to agree on what, if anything, Maxxam’s shareholders should get.

What’s a Texas Judge to Do?

Wednesday, March 13, 2008

Judge Schmidt, who opened Pandora’s Box by allowing Palco’s creditors to come up with their own reorganization plans, will send a consolidated summary to creditors for a vote on March 25. Starting on April 8, the proponents of each plan will get to argue their case in court. The final decision will be made by Judge Schmidt.

Gov. Arnold Schwarzenegger will probably be in Sacramento, 1,800 miles away, when the court hands down its ruling. Some environmentalists wanted the California governor to seek assurances that any reorganization plan would protect the 1986 Headwaters Agreement, where Maxxam and Pacific Lumber sold the state and federal government a large grove of old-growth redwoods for $380 million. The agreement also specified that Palco would develop a habitat conservation and sustained yield plan on the remainder of its 210,000 acres.

Schwarzenegger has weighed in on the Palco case, however. Although he didn’t support any one plan, the governor sent a letter in January to the U.S. Bankruptcy Court in Corpus Christi, urging the court to protect jobs and the local economy in Humboldt County, where Palco is located, by maintaining harvest levels that ensure “sustainable, high-quality timber production over the long term.”

back to top

Builder Confidence in Condo Market Declines Again

Tuesday, March 11, 2008

The Multifamily Condo Market Index (MCMI) ended 2007 on a low note, with the component of the index tracking builder confidence in current conditions standing at 18.8, down nearly 11 points from the same time a year ago, according to the National Association of Home Builders (NAHB).

"Given that the condo market became so overheated during the peak of the housing boom, it is not surprising that the market now continues to struggle, considering the difficulties in the mortgage sector and the fears about the economy in general," said David Seiders, NAHB's Chief Economist. "It is going to take time for the extra inventory to be absorbed."

The index is derived from a quarterly survey of multifamily builders and developers, in which responses are rated on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

The component of the index that gauges current conditions in the condo market has not risen above 25 during any quarter of 2007.

Builder expectations for the next six months are only slightly more optimistic: The component tracking expectations stood at 29.2 in the fourth quarter of 2007. In the fourth quarter of 2006, this component of the index stood at 49.1.

Responding to a series of special questions that accompanied the MCMI survey for the fourth quarter, 28 percent of survey respondents reported higher or somewhat higher sale cancellation rates in the fourth quarter of 2007 compared to a year earlier. The average sales cancellation rate in the fourth quarter of 2007 was 19 percent; the median was 12 percent.

About two-thirds of builders reported lowering prices to bolster sales. The average price reduction was 11 percent. When asked about other marketing strategies being used to shore up sales, more than 70 percent of the respondents reported including optional items at no costs, paying closing costs or fees, or absorbing financial points for their buyers.

Source: NAHB

Job Losses: Worst in 5 Years

Friday, March 7, 2008

Employers made their deepest cut in staffing in almost five years in February, according to a closely watched government report that showed the labor market to be far weaker than expected.

The weak report fueled already mounting recession fears and is likely to influence the Federal Reserve's decision on interest rates later this month.

There was a net loss of 63,000 jobs, according to the Labor Department, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists surveyed by Briefing.com had forecast a gain of 25,000 jobs in the most recent reading.

" These poor jobs data are the strongest evidence yet that the economy has slipped into a recession of uncertain depth and duration," University of Maryland Professor Peter Morici said.

Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000 and manufacturing, where job losses hit 52,000. Retailers cut 34,000 jobs, while business and professional services cut 20,000 jobs.

Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back, and hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.

Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.

Despite the loss, the unemployment rate improved to 4.8% from the 4.9% reading in January. Economists had forecast the unemployment rate would rise to 5%. The rate fell because of a big jump in the number of people that the government counted as no longer in the labor force.

" Businesses have become too pessimistic about the outlook for the economy, and the capacity of the Bush Administration and Federal Reserve to manage it, to be adding new employees or replacing those that leave," Morici said.

The labor market has weakened significantly in recent months, fueling fears of recession and a series of interest rate cuts from the Federal Reserve.

The Fed is set to meet March 18 to decide what to do with interest rates. Friday's report would seem to suggest more rate cuts are on the way, despite the improved unemployment rate.

" Even the silver lining of a falling unemployment rate has a little rust," said Rich Yamarone, director of economic research at Argus Research. He predicted that the central bank will cut rates by a half percentage point at both its March meeting and again on April 30.

Source: CNN/Money

back to top

Inclusionary Zoning Acts as a Tax on Housing

Thursday, March 6, 2008

Mandatory inclusionary zoning requiring builders to sell a certain number of homes at below-market prices is a complex market intervention that can act like a tax on housing and worsen the affordable housing problem it is meant to solve. But many alternatives to inclusionary zoning can help meet the housing needs of low- and moderate-income families. These are the findings of three studies commissioned by the National Association of Home Builders (NAHB).

NAHB funded the research projects as part of its ongoing efforts to address the nation's growing housing affordability problem. The three research projects are:

- Abt Associates, of Cambridge, Mass., studied innovative state and local programs designed to address the housing affordability challenge and produced a 350-page report that explains how these strategies work, how they're funded, where they've been used, and the advantages and disadvantages of each.

- The University of Maryland (UMD) Center for Smart Growth conducted research on inclusionary zoning based on data from a large number of jurisdictions in California between 1988 and 2005. Having data for multiple jurisdictions over an extended period of time allowed UMD to investigate the impact of inclusionary zoning on housing production and prices while controlling for differences in market conditions.

- Timothy Hollister, an attorney at Shipman and Goodwin in Hartford, Conn., provides a national survey and perspective on the enabling authority and implementation details that underlie inclusionary zoning ordinances across the country. Hollister found that inclusionary zoning has more variables and potential consequences than drafters realize and must be considered carefully before adoption.

"The reality is that inclusionary zoning may not work at all in many markets, and may actually worsen the shortage of affordable housing in some markets," said Jerry Howard, NAHB's executive vice president and CEO. "The research by Abt Associates demonstrates that there are many alternatives to inclusionary zoning that can have a far greater impact in meeting the housing needs of low- and moderate-income families."

All three reports can be found at www.nahb.org/housingaffordability.

Source: NAHB

Housing Finance System Reform Vital for Housing and Economy, Builder Tell Congress

Thursday, March 6, 2008

To help bolster a faltering housing market, the National Association of Home Builders (NAHB) today called on Congress to move quickly to enact comprehensive regulatory reform for housing government sponsored enterprises (GSEs) Fannie Mae, Freddie Mac, and the Federal Home Loan Banks that will ensure their financial safety and soundness and allow them to vigorously pursue their housing mission.

"At a time when the housing market needs them more than ever, Fannie Mae and Freddie Mac have failed to adequately respond to the mortgage crisis," Jerry Howard, executive vice president and CEO of NAHB, told members of the Senate Banking Committee. "Rather than aggressively pursue market solutions, they are hunkering down to shore up financial results and shareholder returns - and are even taking steps that will further burden struggling mortgage borrowers."

Because their regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), continues to impose a 30 percent capital surcharge on both companies, Fannie and Freddie are attempting to build their capital reserves by imposing higher fees that will raise mortgage borrowing costs at the worst possible time, Howard said.

"OFHEO is constraining the ability of Fannie and Freddie to do all they can to promote affordable housing and to help strapped borrowers. At the same time, HUD's mission oversight over the two GSEs is lacking. HUD should be requiring them to do more, not less, in the present dire mortgage market circumstances," said Howard. "This just underscores why major reform of this flawed, bifurcated regulatory framework is long overdue and urgently needed."

NAHB believes that H.R. 1427, the Federal Housing Finance Reform Act of 2007, which passed the House last May, makes significant progress in allowing the GSEs to operate in a safe and sound manner while preserving the vitality of their government-sponsored status for the fulfillment of their vital housing mission.

In crafting a Senate bill to strengthen the regulatory framework of the GSEs, Howard urged lawmakers to:

- Balance the GSEs' housing mission with safety and soundness concerns.

- Provide Fannie Mae and Freddie Mac the flexibility to respond promptly, within their charters, to meet market needs.

- Extend the increase of conforming loan limits in high-cost areas.

- Focus and enhance GSE benefits to expand affordable housing opportunities.

- Employ capital as a precise instrument of risk management

- Preserve GSE portfolios as tools for achieving liquidity and their affordable housing mission.

"With the U.S. housing market now in the contraction phase of the most pronounced housing cycle since the Great Depression, passage of a GSE regulatory reform bill has the ability to greatly relieve liquidity and inventory pressures in the nation's mortgage markets, help stabilize housing prices and bolster consumer confidence. This would bring immediate benefit to the overall economy," said Howard.

Source: NAHB

back to top

Rental Apartments Not Immune to Housing Market's Woes

Wednesday, March 5, 2008

Builder confidence in the rental apartment market sagged in the fourth quarter of 2007, according to the latest results of the Multifamily Rental Market Index (MRMI) released today by the National Association of Home Builders (NAHB).

"The housing market is undergoing a significant correction and that is affecting all segments of the industry, both multifamily and single family, for rent and for sale," said NAHB Chief Economist David Seiders. "The excess inventory has to be absorbed in order to restore balance to the housing markets."

The MRMI is derived from a quarterly survey of multifamily builders and developers, in which their responses are rated on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses. For the fourth quarter of 2007, the measures that track builder confidence in the current supply and demand conditions for all classes of multifamily housing--except the most affordable apartments--fell to or below 50.

Multifamily builders apparently are trying to rein in new supply as much as possible. The components of the index that track current supply conditions for market-rate and lower rent apartments stood at 40.0 and 45.3, respectively, in the fourth quarter of 2007, down from 59.8 and 48.7 the same time a year ago. Asked about their expectations for the next six months, builder confidence remained weak, with the component of the index for market rate apartments standing at 50.0, and for lower-rent apartments at 48.9 in the fourth quarter of last year, down from 69.5 and 59.5 at the same time the year before.

Home Buyer Tax Credits Needed to Jump Start Housing and the Economy

Thursday, February 28, 2008

With the housing industry facing its greatest crisis since the Great Depression and the economy teetering near recession, the National Association of Home Builders (NAHB) today called on Congress to move quickly to enact a second round of economic stimulus directed squarely at the housing sector. Specifically, NAHB believes the best policy is to create a tax credit for the purchase of a home.

"The biggest bang for the buck most likely would be provided by a temporary home buyer tax credit," NAHB Chief Economist David Seiders told the Senate Finance Committee. "Tax credits for the purchase of a home are a means of eliminating excess inventory, relieving some of the pressure on falling housing prices and ending the waiting-on-the-sideline strategy some potential buyers have adopted in response to overly negative media stories concerning the future of the housing market."

The recently enacted Economic Stimulus Act of 2008 could fall short of achieving its intended results because it does not address the problems posed by the housing contraction that are at the root of today's economic and financial market problems, he said.

"The U.S. housing market now is in the contraction phase of the most pronounced housing cycle since the Great Depression," said Seiders. "Single-family housing starts are already down by 60 percent from their peak at the beginning of 2006 and the bottom is not yet in sight. Congress can, and should, do more."

There are many models that Congress can look to when designing home buyer tax credits. The District of Columbia, for example, offers a $5,000 tax credit to first-time home buyers for the purchase of a new or existing home. A national first-time home buyer tax credit would stimulate buyer demand for households who do not have a home to sell, who are waiting on the sidelines until prices stabilize and who now face greater housing affordability than a year ago. Furthermore, those who sell their existing home to a first-time home buyer will in turn purchase another home and spur additional economic activity.

A similar version of a home buyer tax credit was used successfully in the mid-1970s when Congress established a temporary tax credit for the purchase of a newly-constructed home to help clear off a then-record number of unsold homes on the market.

NAHB applauds the efforts of several senators who are seeking similar solutions. For example, Sen. Debbie Stabenow (D-Mich.) has introduced S. 1988, legislation that provides for a temporary, one-time refundable tax credit for first-time home buyers of 10 percent of the purchase price of a principal residence.

Additionally, Sen. Johnny Isakson (R-Ga.) introduced S. 2566, a bill creating a one-time $15,000 tax credit for purchasers of a single-family principal residence that is a newly constructed home or a home in default or foreclosure purchased within a one-year time period.

"What is common among these tax credits for the purchase of a home is that they represent policies that increase housing demand, thereby enabling home purchases for families and fight falling housing prices, which threatens the economy as a whole," said Seiders. "We recommend a targeted home buyer tax incentive in order to maximize induced purchases."

Seiders also urged the Senate Finance Committee to consider the following changes to tax policy in order to get housing moving again:

- Expand the mortgage revenue bond program to be used for either home purchases or refinancing of existing mortgages to help strapped borrowers. This would be especially helpful for communities experiencing the possibility of a wave of foreclosures or an extreme excess of inventory, he said.

- Allow businesses to carry back net operating losses for five years. For home builders large and small, the importance of the ability to claim and carry back net operating losses deductions to years when significant taxes were paid cannot be overstated, said Seiders. "The inability to do so will result in the need to either increase high-cost borrowing or further liquidate land and homes, which will only compound the existing inventory problem." Expanding the carryback of net operating losses to five years would help the home building sector, as well as all businesses, to weather the economic downturn.

- Designate housing as an eligible investment for tax-preferred retirement accounts. A downpayment remains the single largest hurdle for most first-time home buyers. Congress could increase capital available for a downpayment for the purchase of a home by allowing a downpayment to qualify as an eligible investment from tax-favored retirement accounts. This would enable buyers to use IRAs or 401(k) accounts to purchase a home without suffering tax penalties.

Source: NAHB

back to top

OFHEO Move to Lift Fannie, Freddie Caps a Good First Step But Capital Surchare Dimishes Mortgage Market Benefits

Wednesday, February 27, 2007

WASHINGTON, Feb. 27 - The Office of Federal Housing Enterprise Oversight (OFHEO) today took a step forward to help ease the mortgage credit crunch by allowing Fannie Mae and Freddie Mac to purchase and hold more home loans in their portfolios, but more needs to be done, according to the National Association of Home Builders (NAHB).

"We applaud OFHEO for taking this step to help inject more liquidity into the mortgage markets by giving Fannie Mae and Freddie Mac added flexibility to invest in the housing market," said Jerry Howard, executive vice president and CEO of NAHB. "However, OFHEO, the two housing government enterprises (GSEs) and Congress all need to take further action to help struggling home buyers and the ailing housing market."

Specifically, Howard said that OFHEO needs to go a step further by removing the current capital surcharge on the GSEs to allow them to truly become more active in buying mortgages.

Currently, OFHEO is requiring Fannie Mae and Freddie Mac to hold 30 percent more capital in addition to the minimum legal requirement. OFHEO said today that it will consider gradually decreasing the capital surcharge, with reductions dependent on company financial health, market conditions and breadth of mission obligations (which have temporarily been expanded).

The higher capital requirements have constrained Fannie Mae and Freddie Mac from responding more aggressively to address the liquidity problems in the mortgage markets and will also impede their ability to utilize the new freedom on portfolio investments.

Furthermore, the capital penalty raises costs for the GSEs, and both Fannie Mae and Freddie Mac have taken several steps in recent weeks to raise lending fees, which result in higher costs for home buyers at a time when the housing market is struggling to stay afloat. Just last week, Freddie Mac announced it would impose additional lending fees and stricter downpayment requirements on borrowers in order to boost its capital reserves.

"Now that Fannie and Freddie have their books in order and have addressed operational concerns, OFHEO should move immediately to rescind their 30 percent capital surcharge. In turn, the two GSEs need to repeal their recent fee hikes to lower borrowing costs for struggling consumers," said Howard.

Congress also needs to act quickly, Howard said, by passing full GSE reform for Fannie Mae and Freddie Mac that would strengthen regulatory oversight over these financial institutions while also preserving their vital housing mission.

Source: NAHB

Bernanke: Growth, Inflation Concerns

Wednesday, February 27, 2008

The economy faces the prospect of slower growth, but increasing concerns over inflation could complicate the Federal Reserve's efforts to stimulate the economy, Fed Chairman Ben Bernanke told lawmakers Wednesday.

The central bank chief, in testimony before the House Financial Services Committee, said that the housing sector and jobs market could deteriorate further and warned of tighter credit conditions.

But Bernanke added that the recent increases in energy prices and key commodities, as well as a weaker dollar, remain an inflationary risk and could further erode consumer spending.

" Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," he said.

The Fed may have to pull back on its efforts to stimulate the economy, Bernanke warned. "In the months ahead, the Federal Reserve will continue to monitor closely inflation and inflation expectations," he said.

Bernanke, while issuing a warning about inflation, made clear that the economy faces significant drags on its growth - saying that the "housing market is expected to continue to weigh on economic activity" in coming months.

To help keep the economy from tipping into a recession, the Fed has steadily cut the federal funds rate, which affects a variety of consumer loans, since September. It slashed interest rates twice by 1.25 percentage points in just under a week last month.

Bernanke's remarks come amid recent warning signs about the economy.

A survey on residential real estate released Tuesday revealed that the decline in home prices picked up at the end of 2007. And consumer confidence fell to its lowest level in five years, the New York-based Conference Board reported, on fears about the job market and slowing business activity.
Right now, the growing consensus is that the Fed will cut interest rates by another half a percentage point when policymakers meet again on March 18.

Less than two weeks ago, Bernanke and Treasury Secretary Henry Paulson warned lawmakers of slower economic growth in the coming year but said they believed the U.S. economy would avoid tipping into a recession, helped in part by the $170 billion economic stimulus package signed by President Bush on Feb. 13 and the most recent interest rate cuts by the Federal Reserve.

Source: CNN/Money

back to top

New home sales near a 13-year low

Wednesday, February 27, 2008

New home sales slipped to a nearly 13-year low in January, according to a key government report on the battered housing market.

January sales came in at a seasonally adjusted annual rate of 588,000, the Census Bureau report showed, down 2.8% from 605,000 in December. Sales fell 33.9% from the same month last year and hit their lowest levels since February 1995.

The reading was below the consensus forecast of 600,000, according to economists surveyed by Briefing.com, and was the lowest reading since the 559,000 rate reported in February 1995.

The median price of a new home sold in January was $216,000, down 4.3% from $225,600 in December and 15.1% from $254,400 a year earlier.

This decline probably doesn't accurately capture the weakness in prices for new homes, as about three out of four builders have reported having to pay buyers' closing costs or offer other incentives such as expensive features for free in order to maintain sales.

" Buyers are having confidence problems," said Michael Larson, analyst at Weiss Research. "People don't want an instant loss of equity, and more people are having trouble qualifying for loans."

Source: CNN/Money

January Foreclosures Up 57%

Tuesday, February 26, 2008

Foreclosure filings nationwide soared 57% in January over the same month last year - another indication that the nation's housing woes are deepening.

A study released Tuesday by RealtyTrac, an online marketer of foreclosure properties, showed that 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions.

The only good news was the comparatively modest month-to-month increase in total filings.

" It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," said James Saccacio, RealtyTrac's chief executive.

" The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term, or if they are just forestalling the inevitable for many beleaguered borrowers," he said.

Many mortgage-assistance efforts simply give borrowers a chance to pay off missed payments, rather than lowering monthly payments, which effectively just delays foreclosures. But now lenders claim they are restructuring more mortgages by lowering or freezing interest rates and reducing balances. These solutions are much more likely to help people save their homes.

Nevada, California and Florida had the highest foreclosure rates in the nation. During the housing boom, all three states recorded big price run-ups, and saw a large proportion of homes sold to investors. In Nevada, one of every 167 homes was in some foreclosure stage last month.

California had the largest total number of foreclosures among the states. There were more than 57,000 foreclosure filings there in January, one for every 227 homes. Florida trailed well back in total foreclosures with 30,000, but its rate of one for every 273 households was only slightly behind its West Coast rival.

Several states recorded massive jumps in foreclosure activity in the last twelve months. In Rhode Island filings rose 279%; in Maryland they spiked 430%; and in Virginia they leapt 634%.

Source: CNN/Money

back to top

More Signs of Home Sales Weakness

Monday, February 25, 2008

The new year picked up where 2007 left off, as sales of existing homes fell in January to the lowest level in nearly a decade, according to a reading by an industry trade group released Monday.

The National Association of Realtors reported that sales by homeowners fell 0.4% in January to an annual pace of 4.89 million, down from the revised December reading of 4.91 million. Home sales were down.

The reading was the lowest since the group began reporting annual sales pace in 1999, down 23.4% from a year earlier. Nevertheless, sales narrowly beat expectations. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.8 million.

Despite beating forecasts, analysts remained skeptical.

" This is more doom and gloom," said Northern Trust chief economist, Paul Kasriel. "The mind set for buyers now is, 'if prices are falling, why do I want to buy an asset that's going down in price?'"

The median price of a home sold during the month fell 4.6% to $201,100 from $210,900 a year earlier. Before the start of the current housing slump, it had been 11 years since prices fell compared to a year earlier.

The median price of a single-family home dropped to the lowest point since February 2005, falling 5.1% to $198,700. The trade group has tracked those sales prices going back to 1989.

The excess supply of homes on the market rose in January. Realtors estimated that there are now 4.2 million homes available for sale, which represents more than a 10-month supply. That is up from the 9.7-month supply in December.

" Homebuilders are doing their part to reduce inventory by slashing production, but demand is still weak," said Kasriel. "Everyone wants to get what the neighbor's house sold for three years ago, but that's just not going to happen."

But the Realtors said that measures to correct the housing crisis have started to show an effect in sales.

" Subprime loans and other risky mortgage products have virtually disappeared form the marketplace," said Lawrence Yun, NAR chief economist. "Over the past five months, this has been reflected in soft but fairly stable home sales."

Yun believes that prices will begin to increase by the end of the year, but Kasriel believed that time frame was a bit optimistic.

" We just have a lot of inventory to work off," he said.

Source: CNN/Money

Fee Hike on Home Borrowers Highlights Need for GSE Reform

Monday, February 25, 2008

In response to Freddie Mac's announced plan to impose higher lending fees and stricter downpayment requirements on home buyers, Jerry Howard, executive vice president and CEO of the National Association of Home Builders (NAHB), today issued the following statement:

"With the housing sector in the midst of its worst downturn since World War II, Freddie Mac's decision last week to raise the fees it charges on higher loan-to-value mortgages and on borrowers with lower credit scores could not come at a more inopportune time.

Forcing buyers to pay more money for a home when the market is struggling to regain its footing is counterproductive and goes against Freddie's housing mission to help more borrowers to become home owners.

"Both Freddie Mac and Fannie Mae have taken previous steps to boost their fees at the expense of consumers. Part of the reason they are tacking on added fees that result in higher housing costs is because their regulator, the Office of Federal Housing Enterprise Oversight, has ordered them to maintain higher capital reserves.

"In this economic climate, Fannie and Freddie should be taking steps to help borrowers, not to burden them. This just underscores the need for Congress to act quickly to enact comprehensive reform of the housing government sponsored enterprises so that their mission responsibility can take precedence over their business interests."

Source: NAHB

back to top

Older Buyers Seeking to Downsize--But Not By Much

Wednesday, February 20, 2008

With the 55-plus population expected to exceed 85 million by 2014, the nation's home builders have been increasingly catering to the unique needs and interests of mature homebuyers, according to a new study that was released last week by the National Association of Home Builders (NAHB) in conjunction with their International Builders' Show ® (IBS) in Orlando, Fla..

According to the data compiled by NAHB's 50+ Housing Council, more than a quarter of a million people will opt to buy new housing in communities specifically built for those ages 55 or better, and more than 100,000 units constructed in 2008 will be targeted to this growing niche market. The report, Profile of the 50+ Housing Market, also dispels some common perceptions about the older home buyer: first, "downsizing" is a relative term and, second, the vast majority of these buyers won't be relocating to the Sun Belt.

"Our data shows that 55+ home buyers may be 'downsizing,' but not by much," said Paul Emrath, NAHB's lead researcher on the study. "The average home in an active adult community still includes more than two bedrooms and more than 2,000 square feet of living space."

The report found that homes in age-restricted active adult communities were only slightly smaller than other homes purchased by 55+ home buyers in both square footage and the total number of rooms, including bedrooms and bathrooms, but were less likely to have a specialty room such as a den or library. In addition, the majority of age-restricted housing buyers (59 percent) indicated they felt they were moving into a better home than their previous one, although fewer than half (41 percent) said their new home cost more than the old one.

"These boomer buyers may be scaling back in their home size, but they aren't willing to sacrifice quality," said Robert Tippets, immediate past chairman of the NAHB 50+ Housing Council and an active adult builder from Utah. "They're still looking for new homes that are well-designed and have many of the latest bells and whistles," he says. "What they are 'downsizing' is the maintenance that comes with owning the typical home with the big yard."

Builders Remain Cautious as Buyer Traffic Improves in February

Tuesday, February 19, 2008

Builder confidence in the market for new single-family homes edged marginally higher in February as traffic of prospective buyers through model homes improved considerably, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI rose a single point to 20 this month, still close to its recent historic low reading of 18 (the series began in January of 1985).

"While builders remain very cautious about the outlook for new-home sales given today's economic environment, the fact that more consumers appear to be checking out their options is a good sign," said Sandy Dunn, a home builder from Point Pleasant, W.Va. and the newly elected 2008 president of the National Association of Home Builders (NAHB).

"Housing has always been a major engine of economic growth, and despite the ongoing market correction, it will once again be that engine in the future. But in order for that to happen, Congress must follow up on its recently enacted economic stimulus program by passing legislation that will jump-start the housing market and keep the economy moving forward," Dunn noted.

"Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase given improving affordability factors and the large selection of units on the market," said NAHB Chief Economist David Seiders. "That said, builders know there's a difference between people looking and people buying, and their current outlook remains quite subdued. Additional stimulative measures on the legislative and policy side are definitely needed to bolster consumer confidence and help bring about a housing and economic recovery."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

In February, the index gauging current sales conditions for single-family homes rose one point to 20, while the index gauging sales expectations for the next six months declined one point to 27. Meanwhile, the index gauging traffic of prospective buyers rose five points to 19, its highest level since July of 2007.

Three out of four regions posted HMI gains for the month, including a three-point gain to 24 in the Northeast, a two-point gain to 24 in the South and a 2-point gain to 15 in the West. The Midwest registered no change for the month at 16.

Source: NAHB

back to top

Home Prices in Steepest Quarterly Drop

Thursday, February 14, 2008

Home prices continued their plunge during the last three months of 2007, setting a real estate trade group's record for the biggest-ever quarterly drop.

The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has