|
Congress Urged to Act Soon to Shore Up Housing, Economy
With the negative drag of the housing downturn now spilling over into other sectors of the economy and threatening to immerse the nation in a full-fledged recession, in a March 4 teleconference, NAHB Executive Vice President and CEO Jerry Howard and David Seiders, the association’s chief economist, urged Congress to move quickly to enact legislation to shore up the housing market.
“It is obvious to everybody that we are in the midst of a dramatic housing downswing, the deepest and most rapid since the Great Depression,” said Seiders, with a 10-month inventory of unsold new and existing homes clogging the marketplace.
New-home sales and single-family housing starts already are down by more than 50% from their most recent cyclical peaks, Seiders said, and the decline is ongoing, with a 22% drop in sales and a 30% slump in single-family production projected for this year.
“The key is seeking out some bottoms for 2008,” he said. If Congress and the Administration do what needs to be done to alleviate the current mortgage credit crunch and the tightening of lending for housing, he said, sales should stabilize by mid-year and starts by year’s end, setting the stage for industry growth in 2009.
“It really is critical for the overall economy that housing forms this kind of a pattern,” Seiders said, because the income tax rebate going out to consumers in the next few months, while it may be enough to halt the current recessionary slide, will run out of steam by the end of this year.
“If housing is not showing some improvement, growth could be set up for another major setback in early 2009,” he said. The decline in housing production was responsible for subtracting 1.25 percentage points from the gross domestic product in the fourth quarter, he said, when the economy was barely growing at a sluggish 0.6%.
Do Something and Do It Soon
“It seems incumbent upon policymakers to take some steps to ensure that as the impact of the stimulus law declines, the housing markets are sufficiently shored up,” said Howard.
With the housing market continuing to decline, “it is incumbent upon them to do something and do something soon.”
Howard indicated that legislation to reform the regulation of Fannie Mae and Freddie Mac was long overdue, and that if this effort had not “languished as long as it has” in Congress, housing’s government-sponsored enterprises would be in a better position today to respond aggressively to the housing slump.
On another piece of vitally important legislation that has been bogged down on Capitol Hill — modernization of the Federal Housing Administration enabling it to provide further assistance to first-time and moderate-income home buyers — Howard cited the recent action of House Financial Services Committee Chairman Barney Frank (D-Mass.) to move the bill forward by dropping from it a provision to create an affordable housing trust fund. Frank indicated that he would look for other legislative vehicles to move the trust fund forward.
“We hope others on Capitol Hill will recognize Chairman Frank’s efforts,” Howard said, and work to get the FHA bill signed into law as soon as possible.
During a March 6 hearing on GSE reform, Senate Banking Committee Chairman Chris Dodd (D-Conn.) noted that significant progress had been made on achieving a final FHA modernization bill. With the bill in a House-Senate conference, Dodd said that only one issue remained to be resolved, and he expected the bill to emerge from conference as early as this week.
Howard voiced disappointment that a provision in the Senate economic stimulus package to allow businesses to carry back net operating losses for five years failed to make it into the final legislation. The provision, he said, “in times like this would greatly help small business people stay in business. The viability of these businesses is a very real and tangible question. Anything that can be done to keep these people in business should be done.”
Howard also called for a law to expand the use of mortgage revenue bonds by removing a provision that limits their use to first-time home buyers. Without that restriction, states could use them for refinancing. “The benefits are obvious,” he said. “It would keep people in their homes and not add to the oversupply of inventory.”
And he said that Congress should consider a temporary tax credit for buyers of newly built homes modeled after the Ford Administration program that worked effectively during the recession of 1975 to 1976. The quick enactment of a credit “for the duration of this calendar year would go far in releasing pent-up demand for housing, reestablishing consumer confidence in the value of homeownership and diminishing the amount of inventory on the market,” he said.
Several senators have introduced tax-credit legislation, including Sens. Johnny Isakson (R-Ga.) and Debbie Stabenow (D-Mich.).
Howard also said that NAHB would like to see Senate Majority Leader Harry Reid's (D-Nev.) housing bill brought back to the floor without the controversial bankruptcy provision that was its undoing when its consideration was blocked two weeks ago. “The rest of that bill would have been very pro-housing,” he said.
|
