Monday Morning Briefing Letter - 08/27/2007 (Plain Text Version)

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

View Graphical Version | Subscribe to NAHB Publications | E-mail Our Editor
NAHB Home Page | Browse Other NAHB e-Newsletters |Search Back Issues

Responding to recent deterioration in the nation's financial markets

leading to the current credit freeze, NAHB has been meeting with key government officials and leaders in the investment community to pursue a course of action that will add liquidity to the mortgage markets, stabilize housing and reduce downside risks that could push a fundamentally healthy economy into recession.

A complete rundown of NAHB actions to date was chronicled in a special edition of NBN Online that was published on Aug. 21. As NBN reported, when disorder in the financial markets came to a head last week, the Federal Reserve moved to calm things down by temporarily reducing its primary discount rate by 50 basis points, to 5.75%. In an official statement, NAHB applauded that action and also strongly encouraged the Fed to continue monitoring market conditions closely "to determine whether further action is necessary," including a possible cut in the target federal funds rate before the next scheduled meeting of the Federal Open Market Committee on Sept. 18.

Following up on this action, NAHB President Brian Catalde and CEOs from our High Production Builders Council will meet with Federal Reserve Board Chairman Ben Bernanke on Sept. 5 to discuss the state of the nation's housing industry and the possibility of a rate cut. NAHB has also been meeting with the rating agencies that downgraded mortgage-backed instruments and precipitated the turmoil on Wall Street, and will be meeting with investment banks that direct funds to the market to learn their views on ways to resolve the ongoing problems. We've also scheduled meetings with the CEOs of Fannie Mae and Freddie Mac for the week of Sept. 3.

Previously, NAHB teamed with the Mortgage Bankers Association and National Association of Realtors to formally ask the director of the Office of Federal Housing Enterprise Oversight to temporarily increase the caps on the investment portfolios of Fannie Mae and Freddie Mac to help inject needed liquidity and stability into the mortgage market. NAHB also recently conducted a teleconference with NAHB Mortgage Roundtable co-chair (and father of mortgage securities) Lew Ranieri to discuss ways to help restore the mortgage markets. Further, NAHB representatives met on Aug. 21 with Robert Steel, Undersecretary of the U.S. Treasury's Office of Domestic Finance, to discuss the current situation.

Meanwhile, on the legislative front, NAHB is closely watching congressional efforts to implement reform of the Federal Housing Administration's single-family mortgage insurance programs to provide a viable alternative to the subprime market for working families who want to buy homes. We are urging Congress to take a variety of actions to give the agency the tools it needs to fulfill its mission more effectively – read more about this specific effort here.

Members of the NAHB leadership can expect a complete update on our efforts at the Fall Board of Directors Meeting in Seattle.

NAHB Member Benefit: NAHB's ability to meet and work with key government officials in pursuit of a resolution to the mortgage credit freeze ensures that your concerns are being heard and understood by the nation's policymakers. Beyond our efforts to restore the health of mortgage lending, NAHB is also in the process of gathering information geared to helping our members overcome some of the difficult challenges of selling homes in today's marketplace.

The EPA Administrator visited the NAHB Research Center

on Aug. 16 for an up-close look at NAHB's ongoing efforts on the green building front. Escorted by NAHB Vice President/Secretary Bob Jones, who is the Senior Officer with oversight for green building, Administrator Stephen Johnson and several key aides took a tour of the brand new facility, seeing how researchers test and perfect new products for the home building industry. At the end of the tour, the Administrator commented on the challenges that are posed by a myriad of disincentives (typically local regulations), which make implementing green building efforts difficult or even impossible. He noted that he has directed his staff to work with the agency's commission on intergovernmental affairs to look into how to eliminate or minimize these difficulties, and promised to keep NAHB in the loop regarding the progress that's made. NAHB and the EPA each have representatives on the committee that is working to develop a new ANSI standard for green building. For more on the Administrator's tour of the NAHB Research Center, contact Susan Asmus (x8538). [return to top]

Builder confidence took another hit this month

as highly visible problems in the housing finance system kept many prospective home buyers on the fence, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released Aug. 15. The HMI fell two more points this month to 22, which is its lowest level since January 1991. Explaining the latest results, NAHB Chief Economist David Seiders noted, "There is no question that problems in the subprime mortgage sector have spilled over to other components of housing finance, including the Alt-A and jumbo markets, delaying a revival of the single-family housing market. However, the government-related parts of the mortgage market still are functioning well and the underlying economic fundamentals promise to remain solid for some time – providing support to the longer-run housing outlook." All three components of the HMI declined in August, with the index gauging current single-family home sales down a single point to 23, the index gauging sales expectations for the next six months down two points to 32 and the index gauging traffic of prospective buyers down three points to 16. Read our press release and see the HMI tables online for details. Contacts: Gopal Ahluwalia (x8480) and Ashok Chaluvadi (x8482). [return to top]

Hear NAHB's views on the housing credit freeze

by dialing into our media teleconference on Tuesday, Aug. 28 at 2:00 p.m. ET. NAHB EVP & CEO Jerry Howard will join Chief Economist David Seiders to talk about what caused the problems in today's mortgage markets, how long the credit crunch might last, impacts to the home building industry and sales, and actions that can and should be taken by the Fed, regulators, Congress and the housing industry to improve liquidity in mortgage markets. Journalists will ask questions of Jerry and Dave at the end of the call.

To hear the proceedings as they unfold, dial 1-800-860-2442 and ask for the NAHB Credit Crunch Call at the appointed time. For your convenience, presentations and reference materials will be available for downloading at www.nahb.org/teleconference 10 minutes before the teleconference begins.

If you can't dial in while the teleconference is taking place, you can still catch a full replay after the call is concluded. To do so, dial 877-344-7529. When prompted for the account number, enter 409059 followed by the # sign. This replay will be available until Sept. 11. For more info, please contact Paul Lopez, x8409.

NAHB Member Benefit: NAHB's economic teleconferences help the media to achieve a better understanding of current market trends and where they are headed, and help 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 continued downward in July,

according to the latest data from the U.S. Commerce Department, released Aug. 16. The government report indicated that total housing starts declined 6.1% last month to a seasonally adjusted annual rate of 1.38 million units. Single-family starts were down 7.3% in July to a rate of 1.07 million units, which was their slowest pace since December of 1996. Multifamily starts fell 1.6% to a 311,000-unit rate. Meanwhile, building permits, which can be an indicator of future building activity, declined 2.8% to a seasonally adjusted annual rate of 1.37 million units – the lowest since September of 1996. Single-family permits were down 1.6% to a rate of just over one million units, and multifamily permits were down 6.1% to 370,000 units. "These numbers show that builders are doing exactly what they should be doing at this point to work down their inventories and help the market get back on track," said NAHB President Brian Catalde in NAHB's official press release. NAHB Chief Economist David Seiders added that, "While there is no immediate relief in sight, NAHB is currently expecting new-home sales to stabilize by the end of this year and housing starts to stabilize by the middle of 2008." Read our press release or contact Paul Lopez (x8409) for help with media inquiries. [return to top]

Indianapolis tops NAHB's affordability rankings again,

achieving the title of most affordable major housing market for an eighth consecutive time in this year's second quarter. According to the latest NAHB/Wells Fargo Housing Opportunity Index (HOI), approximately 87% of all new and existing homes that were sold in the metro area encompassing Indianapolis and Carmel, Ind., during the second quarter were affordable to families earning that area's median household income of $63,800. That compares with just 3% of homes sold in the second quarter that were affordable to median income-earners in the Los Angeles-Long Beach-Glendale, Calif. metro, which was named the country's least affordable housing market for an eleventh straight quarter.

On a nationwide basis, housing affordabilty remained well below the levels recorded prior to the price acceleration that accompanied the 2004-2005 housing boom, although there was at least some improvement from a year ago. The second quarter HOI indicated that 43.1% of new and existing homes sold throughout the U.S. between April and June of this year were affordable to families earning the national median income. That's down marginally from the 43.9% of homes sold that were affordable to such buyers in the first quarter, but up substantially from the 40.6% of homes that were affordable to median-income earners when higher home prices and mortgage rates were in effect during the second quarter of 2006. See the HOI press release and tables online, or contact Gopal Ahluwalia (x8480) or Rose Quint (x8527) for details. For help dealing with media inquiries, please contact Paul Lopez (x8409).

NAHB Member Benefit: NAHB's quarterly Housing Opportunity Index is a practical gauge of housing affordability that provides valuable perspective to builders and home buyers alike. Prior to the time that the HOI is released, NAHB contacts most HBA Executive Officers in an effort to help prepare them for the media attention that may be generated by the numbers being released in their market. This is one more way that NAHB works in tandem with its over 800 affiliated HBAs to get the right information about housing market conditions out to the local and national media. [return to top]

Resolutions in the pipeline for the Fall Board meeting

have been summarized in an online memo by Resolutions Committee Chairman Bob Nielsen that was sent to NAHB Directors on Aug. 14. These proposals are being placed for your viewing online as they are made available. To date, four resolutions and one recommendation have been submitted for consideration in Seattle. These include:

1. Easing Liquidity Problems in Credit Markets

2. Expansion of Federal Davis-Bacon Wage Requirements

3. Expansion of the National Flood Insurance Program (NFIP)

4. Evaluation of the Impact of Credit Scoring/Credit Modeling
on Self-Employed and Small Business Owners

5. Repeal of Withholding Tax Requirement

NAHB Member Benefit: Through the NAHB Resolutions process, any member or HBA may submit new policy proposals for the Board's consideration. This process ensures that NAHB's goals, strategies and official policies are the direct product of its members' concerns and views and allows individual NAHB members to have their voices heard on the national stage. Please direct any questions regarding the Resolutions process to Jay Shackford at x8406. [return to top]

Sign up for regular updates on our National Green Building Program

via a newly developed page on our Web site that's a great resource for NAHB members. Visit www.nahb.org/greenbuildingprogram to see what's new, check out ongoing educational opportunities, and fill out an online signup form to automatically be kept in the loop. Contact: Calli Schmidt (x8132). [return to top]

Farewell to NAHB Life Director Jirair S. Hovnanian,

founder of New Jersey-based J.S. Hovnanian and Sons and a well-known veteran of the home building industry who passed on last week. Jirair was inducted into the Builders League of South Jersey's Hall of Fame in 2006 and was a former president of that association. He also served as president of the New Jersey Builders Association in the mid-1970s, and was honored to receive the first Legends of Housing award given by the New Jersey BA in 1999. Last year, he was recognized with the presigious Ellis Island Medal of Honor for his noteworthy contribution to America and for his outstanding citizenship. To his great satisfaction, Jirair was able to watch his company build a home for a deserving family on ABC's popular reality show "Extreme Makeover: Home Edition" just before he died. Read his glowing obituary in the Courier Post Online. [return to top]