Monday Morning Briefing Letter - 07/23/2007 (Plain Text Version)

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

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Urging Congress to support market-driven green building,

NAHB Vice President and Secretary Bob Jones testified before the House Small Business Committee on July 11 to put a spotlight on home builders' very successful efforts in this area.

Explaining that more than 100,000 homes have so far been built and certified through voluntary, builder-supported green building programs nationwide since the mid-1990s, Bob extolled the benefits of such market-driven, flexible approaches over rigid and costly mandates. "The green movement in residential construction derives much of its strength from its voluntary nature, which provides builders and developers the flexibility that is essential for incorporating the principles of sustainable design," he said. Bob also explained that, while media interest in the issues of climate change and global warming is a relatively recent occurrence, NAHB has been consistently ahead of the curve in working to develop affordable, energy-efficient and environmentally friendly construction techniques. In addition to hosting our 10th annual National Green Building Conference in 2008, NAHB is collaborating with the International Code Council to bring uniformity to sustainable building through development of the first and only national consensus-based residential green building standard that will be certified and accredited by the American National Standards Institute (ANSI) and based on the two-year-old NAHB Model Green Home Building Guidelines. This National Green Building Standard, which will encompass both single- and multifamily construction as well as remodeling and land development, is slated for completion in early 2008.

Bob told lawmakers that they can help foster private sector innovation in green construction for the millions of homes that are yet to be built by keeping the market free of mandates, allocating funds for education and training in this area and extending and expanding federal tax credits that passed as part of the Energy Policy Act of 2005. Read more about Bob's testimony in NBN Online or in our press release. Contact: Calli Schmidt, x8132.

NAHB Member Benefit: Making sure Congress is aware of the substantial efforts that home builders continue to make on the green building front, and the progress that has been made without resorting to rigid mandates, is key to ensuring sound national policy on sustainable building practices in the future. NAHB's Model Green Home Building Guidelines are among our greatest member benefits, because they allow builders to make decisions that positively impact energy efficiency, resource conservation and indoor environmental quality throughout the entire design and construction process.

A significant dip in NAHB's Housing Market Index this month

indicates that the surplus of unsold homes on the market, combined with ongoing concerns in the subprime mortgage arena and affordability issues tied to more stringent lending standards and higher interest rates, is taking an increased toll on builder confidence. The NAHB/Wells Fargo HMI, released July 17, was down four points from June to a level of 24 – its lowest reading since January of 1991. The bottom line, according to NAHB Chief Economist David Seiders, is that the single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003-2005 period. The light on the horizon is that NAHB forecasts predict that home sales will return to an upward path late this year, with housing starts beginning a gradual recovery process by early next year.

All three component indexes of the HMI declined in July, with five-point dips registered for both the index gauging current single-family home sales and the index gauging sales expectations for the next six months, and a three-point decline registered for the index gauging traffic of prospective buyers. See our press release or the HMI tables online, or contact Gopal Ahluwalia (x8480) or Ashok Chaluvadi (x8482) for more.

NAHB Member Benefit: NAHB's economic surveys and analysis help our members achieve a better understanding of current market trends and where they are headed, while our media outreach in this regard helps to firmly establish NAHB as the credible source of information on the housing industry nationwide. This credibility with the media ensures that accurate data on the housing market is transmitted to potential home buyers and the public at large, thereby discounting sensationalized accounts of market conditions that may affect your client's decision to purchase a new home. [return to top]

Housing starts were up while permits were down in June,

the latest indication that the housing market correction isn't over yet. According to the U.S. Commerce Department, starts rose 2.3% in June to a seasonally adjusted annual rate of 1.47 million units – with all of that gain occurring on the multifamily side. Meanwhile, building permits, which generally indicate the direction of future building activity, were down sharply for both single- and multifamily construction. In fact, permit authorizations for single-family homes fell to their lowest level since December of 1996 and now stand 43% below the recent peak in the fall of 2005. According to NAHB Chief Economist David Seiders, "In view of current market challenges, we expect to see further erosion in housing starts during the second half of this year. However, we expect to see signs of stabilization by the end of this year and we're projecting a gradual recovery process in 2008." Single-family starts slipped 0.2% in June to a seasonally adjusted annual rate of 1.15 million units, while multifamily starts – which tend to show greater volatility from month to month – rose 12.5% to a 316,000-unit rate. Total building permits fell 7.5% in the month to 1.41 million units, with single-family permit issuance down 4.1% to 1.02 million units and multifamily permit issuance down 15.3% to 387,000 units. See our press release or the government report that was released on July 18 for more information.

Contact Paul Lopez (x8409) for help dealing with media inquiries. [return to top]

A new NAHB study looks at the impact of government regulation

on housing affordability and helps explain how even modest impact fees can take a big toll on home buyers. Based on national mortgage underwriting standards and incorporating the latest data from the U.S. Census Bureau, it contains detailed results for more than 300 metro areas. One crucial finding: Every $819 rise in fees paid at the beginning of the construction process (such as an increase in the price of a construction permit, a tap fee, a proffer or an impact fee) adds another $1,000 to the final price of the home. Meanwhile, the study shows, each $1,000 increase in the cost of a new median-priced home forces 217,000 prospective buyers out of the marketplace. Clearly, local governments need to understand that higher regulatory costs can push the price of housing beyond the means of moderate-income workers, including teachers, firefighters, police officers and others who make their community function – and this study helps illuminate the issue. Of course, the degree of the impact can vary significantly in each market and is largely a function of local income distribution, house prices and population. To view a detailed breakdown of how a $1,000 increase on a median-priced home affects households in individual metro markets, visit www.nahb.org/pricedoutcities. The full study is also available online at www.nahb.org/pricedout. Contact: Paul Lopez, x8409.

NAHB Member Benefit: NAHB's analysis of the impacts of local regulations on housing affordability help our members demonstrate to their communities the real effects of taxes and fees that are increasingly placed on home building activities, and help explain why more equitable means of financing community infrastructure can and should be considered. [return to top]

The deadline to apply for FHLBank director positions

is looming, and interested NAHB members should contact our staff no later than August 15. NAHB has established a process for assisting our members who wish to apply to serve as public interest directors on FHLBank boards, which you can view here. Under Finance Board rules, public interest director candidates are required to complete and submit a standard eligibility form, which can be found in the last portion of the document displayed at this link. Candidates may also attach a resume to the form to provide information on additional business, professional or educational achievements that are not otherwise reflected on the application. Each FHLBank board is responsible for conducting a preliminary assessment of candidates in its district and forwarding the most qualified candidates to the Finance Board for consideration. The deadline for these recommendations is Oct. 1. Interested parties such as NAHB are allowed to make recommendations to the FHLBank boards on behalf of individuals they believe are well-qualified for the position. However, candidates are still required to complete and submit their eligibility forms before those recommendations can be considered. The person to contact – no later than August 15 – for NAHB assistance with your application is Donna Ely (800-368-5242, x8529).

NAHB Member Benefit: NAHB is committed to keeping our members informed about opportunities to become more involved in establishing and evaluating the housing-related policies that affect all of our businesses. With regard to the FHLBank directorships, as an interested party and respected institution within the housing industry, NAHB is enabled to make recommendations to the boards of the Federal Home Loan Banks on behalf of our well-qualified members. [return to top]

Federal Reserve Chairman Ben Bernanke's report to Congress

in connection with the Fed's Semiannual Monetary Policy Report this past week included significant commentary on the housing market and the ongoing situation in the subprime mortgage sector. As NAHB Chief Economist David Seiders wrote in his latest Eye on the Economy report, his overall statement "reinforces our expectations regarding our central bank's preoccupation with upside risks to inflation and the prospects for monetary policy management over the short term."

Below is an excerpt from the Chairman's remarks as posted on the Federal Reserve Board Web site:

"To a considerable degree, the slower pace of economic growth in recent quarters reflects the ongoing adjustment in the housing sector....The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening in lending standards and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment as well as by mortgage rates that – despite the recent increase – remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further as builders work down stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time."

Read Chairman Bernanke's full statement to Congress online. [return to top]

NAHB's Quick Issues Index

documenting the latest advances on our top Advocacy issues was updated in conjunction with the Summer Executive Board Meeting that took place this past week in San Francisco. It's now available to all logged-in NAHB members on our Web site. Readers of this report will recall that this particular resource was first developed last year as an efficient means of updating our leadership and providing contact information and Web addresses telling you where to go for more data on a given subject. The Quick Issues Index can be found at www.nahb.org/issuesindex. Contact: Samantha Ehrhart (x8450)

NAHB Member Benefit: The Quick Issues Index is a handy member benefit that's aimed at updating you quickly and efficiently about the latest developments on housing-related issues and NAHB actions. It is also meant to facilitate communication of NAHB's actions and accomplishments at the HBA level and across our membership. Most importantly, this document, which is updated prior to every meeting of the NAHB Executive Board, provides you essential links and contacts for more information on any given topic, thereby helping connect our members to NAHB's substantial expert resources. [return to top]

Farewell to Irvin Yackness,

whose contributions to the home building industry over the past 55 years will not soon be forgotten. Irv passed away on Sunday, July 15 at the age of 90. He had the distinction of being the first local Executive Officer in the nation to have been inducted into the National Housing Hall of Fame, and he was the only EO to be named a Senior Life Director on both NAHB's Board of Directors and that of the Michigan Association of Home Builders. Retained as an attorney for the BIA of Southeastern Michigan back in 1951, he never looked back. That same year he was appointed Executive Vice President and General Counsel of the association, and subsequently, of the Apartment Association of Michigan. Over the ensuing five decades, he worked to broaden home building opportunities by contesting excessive zoning and code regulations, land use impediments and discriminatory taxes. A highlight of his career was the Supreme Court case in which he successfully brought the reversal of an illegal charge for connecting to municipal sewer systems, resulting in a refund of more than $6 million to area builders. Another accomplishment of which he was extremely proud was the development of Victoria Park, which was the first new housing community in Detroit in more than 35 years when it opened in 1992. Irv also served his country with distinction as a Navy lieutenant during World War II. If ever anyone could be called a hero to home builders, Irv Yackness certainly fit the bill. Read his glowing obituary in the Detroit Free Press, or contact Connie Douglas (x8408) for more information. [return to top]