Letter to the Editor: Builders Are Not the Economy's Enemy
The following is a letter to the editor from NAHB Chairman Bob Jones in response to a column by Jim Cramer in The Street.com RealMoney on Feb. 14.
In his short article, Cramer said home builders helped finance and over-stimulate the housing market, often worked with banks hand-in-hand to offer easy credit or provided it themselves, and allowed people to buy multiple houses. And unlike in previous recessions, he said, they didn’t go under, but were bailed out by “the huge new-home-buyer credit” and “the outrageous tax rebate for these companies.”
Looking at a small increase in housing starts in January, Cramer wrote, “One can only hope that this time they [builders] are gauging demand successfully and aren’t overbuilding again. But don’t count on it. Not only do these guys get away with financial murder, they don’t even know their own businesses. They are their own — and our own — worst economic enemy.”
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Dear Mr. Cramer:
Your Feb. 17th diatribe in RealMoney against home builders is perhaps the most irresponsible and misleading piece of economic journalism I have ever read. In some of your fairly recent public discussions on housing you have cited the importance of stabilizing the housing market in order to restore the health of the U.S. economy and you have warned about the possibility of housing shortages as the result of the current housing downturn. But now you are fuming over a less than 3% increase in the pace of housing construction in January and suggesting it may be an indication that the industry is overbuilding again. Surely you do know that we are coming off the worst housing production levels since the 1940s and at this current rate of improvement the industry has a long road ahead before it regains its health.
The situation would be far worse without the home builder tax credit — something you have strongly advocated in your column in the past! What you now suggest is an undeserved reward for builders is actually the one thing that has sparked modest momentum in the housing marketplace, and provided some hope that housing will be able to move forward as the economy finds a surer footing. High levels of unemployment and the uncertain American consumer remain significant obstacles to a resurgence in housing demand, and by pointing a finger at all home builders I am not sure you are doing much to rally the confidence we need to get this country moving back in the right direction. If anything, you are undermining it.
While I am baffled about the point of your short article, I can say that you are totally erroneous about how builders have been affected by this housing downturn. I am not going to speak for the large publicly traded production builders who figure predominantly in the investment community it is your job to advise. I do feel, however, that I am qualified to speak on behalf of the small home builders who comprise the majority of the housing industry. Make no mistake, it would be difficult to imagine a worse period for home builders than the last couple of years. Many of us have lost our businesses entirely. Many more have been hanging on, hoping to see the market return. We have been forced to lay off workers who have been with us for years and who have helped establish our companies as mainstays in our communities. We have been doing whatever we can to sell off our inventories, even lowering the asking price to below the cost of building the home. We have been struggling with our lenders to keep lines of credit open so that we can finish projects that we started, and we are looking wherever we can to line up the new financing we will need to meet housing demand as it returns to more normal levels.
Honestly, I cannot say that most of the builders I know are celebrating the bailout you wildly imagine they have received. And they certainly do not deserve to be treated like villains. We are driven by the philosophy that you have to work for what you get, and we have never been advocates of selling homes to families that cannot afford to stay in them. We know our businesses much better than you think, and we stake everything on our reputation.
These times have been tough enough. The last thing we need is someone like you spouting off half-cocked accusations. You can try convincing people that builders are the enemy of the economy, but I suspect you are going to have a tough time getting them, the sane ones at least, to believe you.
National Association of Home Builders