| July 13, 2009 |
By Joe Robson
NAHB Chairman and
Jerry Howard
NAHB President and CEO |
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A powerful boost to long-term housing demand
will come from the echo-boom generation, whose impact will be much larger than that of the baby boomers, according to the 2009 State of the Nation's Housing Report from Harvard University's Joint Center for Housing Studies.
 Released on June 22, the report depicts the current housing downturn in sobering terms, with slightly less optimism about the immediate future as compared to NAHB's economic forecasts. However, it also shines a light on the generation born between 1981 and 2000 – the echo-boomers – and says they can be counted on to boost annual average household growth to more than 1.25 million during the decade of 2010-2020. According to the report, "The number of echo boomers aged 25 to 44 will eclipse the number of baby boomers when they were those same ages by more than 5.9 million." Harvard says that "With the number of households in this age group projected to increase between 2.0 million and 3.4 million, the demand for rentals and starter homes will surge." At the same time, "with their longer life spans and sheer numbers relative to the preceding generation, the baby boomers will add dramatically to the number of households over 65. This will lift demand for retirement communities as well as services and home improvements that help seniors age in place." Read more about The State of the Nation's Housing Report and its findings in NBN Online.
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Freddie Mac issued an important clarification on appraisals
this week, as NAHB had urged it to do. As part of concerted NAHB efforts led by Immediate Past Chairman Sandy Dunn to resolve issues with inappropriately low appraisals stemming from the use of distressed properties as comps, NAHB had communicated its concerns directly to Freddie Mac officials. We specifically requested that Freddie Mac provide more explicit guidance on the appropriate use of comparables in distressed markets, and on July 10, the agency did just that. In the excerpt below from Freddie's Guide Bulletin issued this Friday, the agency publicly asserts that it does not require appraisers to use Real Estate Owned (REO), foreclosures or short sales in selecting comparable sales to provide an accurate opinion on home values based on market data. Freddie Mac also stipulates that appraisers must certify that the comparable sales chosen are those most similar to the subject property. Here's what Freddie said:
"The appraiser's selection of comparable sales is crucial to providing an accurate opinion of value based on market data. With respect to comparable sales, the appraiser must choose appropriate comparable sales, and certify that the comparable sales chosen are those most similar to the subject property. In underwriting the appraisal, the underwriter must consider whether any adjustments are supported and are reasonable. The amount and number of adjustments must also be considered. Typically, the higher the amount of the adjustments or the number of adjustments, the more likely the comparable sales might not be representative of the subject property. Freddie Mac does not have requirements about what comparable sales the appraiser is to use. For example, we do not require appraisers to use Real Estate Owned (REO), foreclosure or short sales. However, if the appraiser determines that these are representative of the properties available to typical purchasers for the market in which the property is located, appraisers must consider their use."
NAHB regards this clarification of Freddie Mac's policy as a solid first step toward addressing the issues that our members have been confronting on the appraisal front. Going forward, we will continue to work with Freddie Mac, Fannie Mae, HUD, the banking regulators and other organizations that have oversight over the appraisal process to curb inappropriate appraisal practices. Contact: Dave Ledford, x8265.
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A concerning proposal to limit FHA-insured condo units
 within FHA-approved condominium projects to no more than 30% of the total has spurred NAHB to work with the agency toward altering or removing this requirement before it goes into effect on Oct. 1. The proposal was contained in FHA Mortgagee Letter 2009-19, which was released on June 12. A similar requirement has been in place for years for units in non-approved buildings, but applying the 30% limit to FHA-approved projects would have an extremely negative impact on housing affordability, especially in the condominium market.
On a positive note, the same Mortgagee Letter had some good news for "site-condo" builders, because it immediately eliminated the requirement for developers to seek approval for such projects. (In Michigan, it is very common for builders to develop single-family subdivisions as site condominiums.) Other changes within the Mortgagee Letter are also welcome news for condo developers. For example, beginning Oct. 1, a building permit and certificate of occupancy from a jurisdiction that performs at least three construction inspections will elminate the need for the condo units to be covered by a 10-year warranty. For other jurisdictions, the warranty requirements will be waived if a lender issues an "early start" letter and the property has been inspected by an FHA-approved inspector. FHA's announcement also confirmed that 50% of the units must be owner-occupied and that 50% of units in a project or phase of a project must be sold before loans can be closed. This at least is lower than the up-to-70% pre-sale requirements that Fannie Mae and Freddie Mac have instituted. Read more on this in NBN Online, or contact Bill Renner, x8597.
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A new member resource on the real estate appraisal system
 has been developed by NAHB's Housing Finance staff. Considering the critical role that appraisals have in current housing market conditions – particularly with regard to the increasing use of distressed properties as comps – NAHB staff thought it would be helpful to compile an overview of the structure of the real estate appraisal system for the reference of committee members and staff. The document, a primer entitled "Real Estate Appraisal Industry Overview," is available free of charge to NAHB members at: www.nahb.org/appraisalprimer. Contact: Bill Renner, x8597.
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Three consecutive months of slowing declines in home values
 have now been charted by the S&P/Case-Shiller home price index, another positive sign that the housing market may finally be nearing a bottom. The Case-Shiller report for April noted that "Every metro area, except for Charlotte, recorded an improvement in monthly returns over March," and said, "It seems that some stabilization may be appearing in some of the regions." NAHB routinely prepares talking points to help our members and HBAs respond to media interview requests upon release of the Case-Shiller data each month. The latest talking points are available for members-only viewing and downloading on our Web site. For further help with media inquiries, please contact Paul Lopez, x8409.
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Troubling legislation approved by the House on June 26
 would establish a "cap and trade" market for buying and selling pollution allowances and create mandatory national energy code requirements for all homes and buildings. The American Clean Energy and Security Act is problematic because it would preempt states' rights to determine energy codes and needlessly increase the cost of housing in America, NAHB told House members prior to their vote. "We are troubled that this legislation contains provisions that will establish a national energy efficiency code, impair housing affordability for lower-income families, undermine green building and sustainability programs for new construction and increase already onerous federal permitting requirements," said an NAHB letter to congressional representatives. NAHB also designated opposition to the legislation as a "key vote." By only targeting new homes and failing to pursue an integrated strategy that addresses existing homes, equipment efficiency and consumer behavior, the bill will fall far short of its goal for increasing energy efficiency in the residential sector, noted NAHB Chairman Joe Robson in a public statement.
The sweeping legislation would require new homes to be 30% more energy-efficient than mandated in the 2006 International Energy Conservation Code (IECC) upon enactment. By Jan. 1, 2014, the target would rise to 50% above the 2006 IECC; between the years 2017 and 2029, the code target would increase 5% every three years until it reaches 75% over the 2006 IECC by 2029. In terms of the outlook for further action on this concerning bill, the Senate is not expected to take up energy/climate change legislation until October at the earliest; however, the Senate's version of building efficiency language is already markedly different from the House bill. NAHB will continue to monitor the situation closely and work to derail the onerous provisions in H.R. 2998 as the legislative process advances. Contact: Elizabeth Odina, x8570.
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NAHB's Quick Issues Index document
was updated
 in preparation for the Summer Executive Board meeting that's taking place in Washington, DC this week. This document provides you with a quick summary of top NAHB Advocacy issues on which there have been significant developments in recent months. It also tells you where to go for more information on any topic, with links to online resources as well as contact information for staff experts. The Quick Issues Index is available at: www.nahb.org/issuesindex (Note: you must be logged into the NAHB Web site with your member ID and password to view this resource). Contact: Samantha Silver, x8450.
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Cash in on energy efficiency tax credits
by checking out NAHB's great member resources at www.nahb.org/efficiencytaxcredit. Here you'll find a "quick facts" sheet detailing how home improvements like replacement windows, additional insulation, and upgraded heating and air conditioning systems can earn back money for home owners in the form of tax credits and utility bill savings. You can also access a free NAHB teleconference on using the newly expanded federal tax credits from the above-noted page on NAHB.org. If you haven't checked out these great resources that are at your disposal as an NAHB member, now's the time! Contact: Kelly Mack, x8451.
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A close look at FHA financing in today's multifamily market
 will be provided in a special NAHB Multifamily Webinar event coming up on July 22. With more multifamily developers turning to the Federal Housing Administration for financing options, this second in a series of Webinars will explore FHA programs for new construction, rehabilitation and acquisition and financing that are relevant to the multifamily industry. The Webinar begins at 2:00 p.m. EST on July 22 and is free to NAHB Multifamily members, $100 for NAHB members and $125 for non-members. A panel of experts will discuss the FHA Section 221(d)(4) program for new construction/substantial rehabilitation as well as Section 223(f) programs for acquisition and refinancing. Get more information and register to participate here, or contact Lawrence McFadden at x8550.
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Calling all association leaders!
NAHB's 2010 Committee and Council appointment process is now well underway. If you are interested in serving on a Committee or Council Board of Trustees next year, review the criteria and complete the application at www.nahb.org/committeeform. The deadline for all applications is October 11, 2009. Please remember that all current committee and council members wishing to serve again next year must apply for re-appointment to their respective committees at this time. There are NO multi-year appointments! The NAHB Senior Officers strongly encourage you to participate in the leadership of this association. If you have any questions about the committee appointment process, please contact Cyndi McKinley at x8346.
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The Monday Morning Briefing will not appear on July 20
due to staff activities related to the Summer Executive Board Meeting that will be taking place at the National Housing Center this week. We will return promptly on July 27 with all the latest economic and housing news, so please check your e-mail for this report two weeks from today!
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