Monday Morning Briefing Letter - 04/02/2007 (Plain Text Version)

By Brian Catalde, NAHB President and
Jerry Howard, NAHB Executive VP and CEO

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The Fed Chairman focused on housing

this week when he testified before the Joint Economic Committee of Congress, saying that problems in the subprime mortgage sector are relatively contained and do not appear to be spreading to the overall economy. At the same time, he noted that the near-term prospects for the housing market remain uncertain and indicated that -- contrary to previous estimates -- stabilization is not yet taking hold in our sector.

Acknowledging that housing is the key downside risk to the Fed’s forecast of moderate economic growth over coming quarters, Federal Reserve Chairman Ben Bernanke nevertheless assured Congress that no recession is on the horizon. "At this juncture... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," he noted.

Yet, importantly, he cautioned that "developments in subprime mortgage markets raise some additional questions about the housing sector," and warned that "the correction in the housing market could turn out to be more severe than we currently expect."

The net impacts of mortgage market developments on the overall housing market are definitely negative, agreed NAHB Chief Economist David Seiders. As a result, NAHB’s forecasts for both home sales and housing production have been trimmed recently, and we now expect single-family housing starts for 2007 to be the lowest since 1997. We’re still looking for some recovery in 2008, although our current forecast for housing starts is well below our estimate of the sustainable trend level of production. In these terms, the major “correction” process that began in the fall of 2005 will extend at least through 2008. Read Seiders' complete analysis in Eye on the Economy, or contact Elliott Finkelstein (x8055) to find out how you can receive this publication in your e-mail free of charge every other week. Bernanke's full report to Congress is also available online.

A troubling decline in new-home sales this February

reveals fundamental weakness that can apparently be traced to the embattled mortgage market. The latest government figures, released by the Census Department on March 26, showed a 3.9% decline in sales of new single-family homes in February, bringing the seasonally adjusted annual rate of sales down to 848,000 units – the lowest level since August of 2000. According to NAHB Chief Economist David Seiders, "Lending standards apparently are tightening not only in the subprime market but in other components of mortgage lending as well, and this is creating tremendous uncertainties regarding the near-term outlook for home sales and housing production." He added, "The Federal Reserve's recent statement that there is an ongoing adjustment in the housing sector appears right on target." Read the government's report and NAHB's press release online, or contact Paul Lopez (x8409) for help dealing with media inquiries.

NAHB Member Benefit: NAHB conducts regular and extensive media outreach when government housing figures are released each month to educate reporters about the historical context in which numbers should be viewed, discourage sensationalized accounts and ensure that home builders' views are represented. NAHB also assists our members in dealing with media inquiries regarding the latest government data. [return to top]

The Federal Housing Finance Reform Act of 2007

was marked up and approved by the House Financial Services Committee with bipartisan support on March 28-29. Also known as H.R. 1427, the bill creates a strong independent regulator with oversight for the housing Government Sponsored Enterprises (GSEs) – Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It also establishes an Affordable Housing Fund (AHF) that will, in its first year, disburse grants for the construction of affordable housing in areas affected by Hurricane Katrina. Prior to the mark-up, NAHB worked with the House Financial Services Committee to address needed improvements to the legislation, specifically those related to GSE portfolio limits, minimum capital requirements and potential non-profit bias in the allocation of funds from the AHF. The result is a bill that contains significant portions of the NAHB-supported and House-passed GSE legislation from the 109th Congress, with additional improvements.

While House Financial Services Committee Chairman Barney Frank (D-MA) has indicated that he would like to move the bill to a vote on the House floor prior to Memorial Day, no hearings have yet been scheduled and no companion reform bill has yet been introduced in the Senate. However, Senate Banking Committee Chairman Chris Dodd (D-CT) continues to insist that GSE reform is a priority for his committee, and has said he would like to move legislation by the August recess. Contact: Scott Meyer, x8144.

NAHB Member Benefit: NAHB's actions on GSE oversight reform are aimed at safeguarding a reliable and affordable flow of capital to the nation's housing markets. This is beneficial to our members because affordable credit is the lifeblood of the housing industry, allowing both for the development of much-needed affordable rental housing and for a large portion of the American public to obtain mortgages in the pursuit of homeownership. [return to top]

An incredibly successful NAHB National Green Building Conference

in St. Louis last week attracted well over 1,000 attendees, easily breaking all previous records. While upcoming editions of NBN Online will have complete coverage of this event, here are just a few of the highlights:

1. NAHB/McGraw-Hill Construction survey

2. National Green Building Award winners

3. Building With Trees Award winners

4. NAHB survey on green remodeling trends

NAHB Member Benefit: NAHB is committed to helping our members promote, implement, market and sell green building products and services. This event brings a vast array of green building resources and experts together in order to provide you with the best possible advice and instruction. For more information on the NAHB National Green Building Conference, see the April 2 edition of NBN Online, or contact Calli Schmidt at x8132. [return to top]

Touching base with a top news source on Capitol Hill,

NAHB Executive Vice President/CEO Jerry Howard met with senior editorial and reporting staff at the National Journal on March 28. As the leading weekly magazine on politics and the federal policy-making process, National Journal is widely read by members of Congress and many in the Washington political zone. Editorial board meetings like this one provide NAHB with a good opportunity to acquaint the nation's top political reporters with what NAHB stands for, including our legislative priorities and interests, as they cover the business of Congress, the regulatory agencies and executive branch. Topics discussed during the wide-ranging meeting included the outlook for housing and the economy, barriers to housing affordability, immigration reform, housing trends, green building and housing as a national priority in the next election cycle. Contact Donna Reichle for more information at x8473.

NAHB Member Benefit: NAHB's continual outreach efforts to influential media outlets such as National Journal not only help to establish your national association as the authority for housing information on Capitol Hill, but also help ensure that your views and concerns are covered by reporters on the housing beat. In turn, this exposure helps assure us a place at the table when lawmakers are debating important legislation that will affect our industry and members. [return to top]

Legislative update: Post-Katrina recovery, flood insurance reform

Passed by the House of Representatives on March 26: The Katrina Housing Tax Relief Act of 2007, H.R. 1562, is bipartisan legislation introduced by House Ways and Means Committee Chairman Charlie Rangel (D-NY) and ranking member Jim McCrery (R-LA). It is meant to help spur the redevelopment of affordable rental housing along the Gulf Coast by broadening the eligibility requirements for low-income housing tax credits and tax-exempt mortgages. NAHB supplied testimony in support of this bill. Read more about it in the April 2nd NBN Online. Contact: Greg Brown, x8421.

Introduced in the House on March 26: The Flood Insurance Reform and Modernization Act of 2007 (FIRM), H.R. 1682, would allow the National Flood Insurance Program (NFIP) to borrow up to $21.5 billion from the U.S. Treasury to pay insurance claims from the devastating 2005 hurricane season. More than 20,000 communities nationwide participate in the NFIP, and the program currently covers approximately 4.8 million policyholders. Read more in the April 2nd NBN Online. Contact: Scott Meyer, x8144.

NAHB's Spring Legislative Conference: This annual event provides an ideal opportunity for association members to share their concerns on housing-related issues with lawmakers on Capitol Hill and to urge their representatives and senators to support policies that will keep the economy moving forward and get the housing industry back on track. In these challenging times – when other interest groups are clamoring to push their agenda in Washington – a strong builder turnout will send a powerful message to members of Congress: Housing must remain a national priority! The Legislative Conference kicks off NAHB's Spring Board of Directors meeting on June 6. Read more about it here, or contact Jessica Boyce, x8334. [return to top]

A landmark log-home building standard

has recently gained approval by key code-establishing bodies and should begin having an impact on the log home industry almost right away. The ICC400 Standard for Design and Construction of Log Structures is the first standard of its kind. It was developed by log-homes industry experts, including members of NAHB's Log Homes Council, through a consensus committee formed by the International Code Council. The new standard has been approved by the American National Standards Institute (ANSI). Its purpose is to provide a recognized stamp of approval along with guidelines that builders can use for constructing a log home or other building that will coordinate with the building codes in place in every jurisdiction that has adopted the International Building Code. The ICC standards book with the new ICC400 log building standard will be available through the ICC Web site at www.iccsafe.org/ in May, or by calling 800-786-4452. Contact: Cortney Klein, x8357. [return to top]

Highlighting NAHB's presence in Washington

and emphasizing the importance of our legislative priorities to the welfare of the nation's economy and housing consumers are the goals of an ongoing ad campaign that NAHB is conducting in National Journal magazine. The latest ad in our series, (pictured at right) will be published in the first week of April. Contact Jay Shackford (x8406) for details, or check out the full-size ad on our Web site.

NAHB Member Benefit: Increasing recognition of NAHB as a resource and authority on housing issues for members of Congress and their staffs can greatly benefit our members because it increases our access to federal lawmakers and helps ensure that your national association has a seat at the table when negotiations are underway regarding legislation and policies affecting your business. [return to top]

Nearly $1 million worth of ad assistance

has been granted to HBAs as part of NAHB's popular "Buy Now" program that you've read about in previous issues of this report. Together with matching contributions from the HBAs themselves, this has amounted to approximately $3.5 million worth of advertising aimed at encouraging home buyers within markets that have been signicantly affected by the ongoing slowdown. Even though the first million dollars' worth of assistance has essentially been doled out at this point, another $2 million has been approved for the program by the NAHB Board of Directors, pending an evaluation period to confirm the results of the first third of assistance. HBA applications will be reviewed in the order in which a completed application is received, so don't hesitate! Get more information and details on application requirements online, or contact Niki Clark, x8061.

NAHB Member Benefit: The "Buy Now" assistance campaign for HBAs is a prime example of how your NAHB membership dues dollars are being put to work for you. NAHB routinely devotes resources and expertise to support our local HBAs and their members, and this most recent program is one of the largest such efforts yet. The idea is to help home buyers see the positives of today's housing market and drive more business to your door using tried and true advertising techniques and messages tailored to each specific market. Also, please see NAHB's Web site for a variety of "It's a Great Time to Buy" materials that you can use right now -- from press releases to sample op-eds, ads and public relations tips. All of these helpful resources are available free of charge to NAHB members. [return to top]