Monday Morning Briefing Letter - 10/29/2007 (Plain Text Version)

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

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Housing should begin to turn around in 2008,

said expert economists participating in NAHB's Construction Forecast Conference at the National Housing Center on Oct. 24.

Acknowledging that there is definitely downward momentum in the market at this time – with starts, sales, prices and permits all reflecting this movement – and that problems in the subprime and Alt-A mortgage markets make it especially challenging to forecast, NAHB Chief Economist David Seiders cited several reasons that the housing recovery should begin in the coming year. First, the overall economy and job growth continue to move ahead at a decent pace. Meanwhile, core inflation is under control and the late-summer credit crunch in mortgage markets is showing signs of easing since the Federal Reserve cut short-term interest rates on Sept. 18. Finally, the supply-demand equation should come into better balance as builders begin to whittle down their excess inventories.

"Home sales should bottom out by the end of the first quarter of 2008, and I have starts [moving] up in the third quarter of next year, assuming the inventory overhang stabilizes," Seiders said. He also anticipates that residential fixed investment (RFI), the housing component of GDP, will stop acting as a drag on the economy and turn positive in next year's fourth quarter after having shaved off as much as 0.8% from GDP growth in 2007. This short-term forecast is based on several assumptions, namely the skillful management of monetary policy by the Federal Reserve, maintenance of solid growth in personal income and employment, a manageable wave of home mortgage foreclosures and better performance of mortgage markets going forward. As for the long-term outlook for housing activity, he said, that remains very good. "By the end of 2009, we may be at a pace of 1.5 million units of new housing production" (including manufactured homes), he said. "Once we are out of the woods, we should see good growth in front of us – maybe 2 million units per year."

More than 20 media outlets tuned in for the conference in person or via our live Webcast, including the BBC, Associated Press, Nightly Business Report and USA Today, to name just a few. Please see the Oct. 29 edition of NBN Online for complete coverage of this very well-attended event. For more info about our live Webcast and related materials, contact Kate Carrigan at x8244.

NAHB Member Benefit: NAHB's twice-a-year Construction Forecast Conference brings the expert analysis of the country's foremost economists within reach of our builder members, the media and financial analysts, who attend the one-day seminar to get the most accurate and up-to-date information on housing and economic trends available. As such, the conference solidifies NAHB's reputation as a primary source of information and aims to help participants make sound business decisions that will positively impact their bottom line.

New-home sales regained a bit of ground in September

following a big decline in the previous month and major downward revisions to sales figures for June, July and August, according to the latest figures from the U.S. Commerce Department, released Oct. 25. Sales rose 4.8% to a seasonally adjusted annual rate of 770,000 units, although NAHB Chief Economist Dave Seiders characterized the report as still "fundamentally weak." Calling into question a big gain in sales that was registered in the West, Seiders said this was not in keeping with the results of NAHB's builder surveys or with the large downward movements in existing-home sales in that region. On a positive note, however, builders do seem to be making progress on reducing the substantial overhang of unsold units on the market, he said. The inventory of new homes for sale edged down for a sixth consecutive month in September to 523,000 units, which amounts to an 8.3-month supply at the current sales pace. This is still high on a historical basis, but down from the 9-month supply in August. Read our press release for details, or view the government's report online.

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]

An unwelcome OFHEO proposal on conforming loan limits

is generating substantial opposition from NAHB and other industry groups.The regulator's recently published notice in the Federal Register would allow it to establish new guidelines that could result in future declines in the conforming loan limit. NAHB strongly opposed this guidance when OFHEO first issued it this summer, and at that time called on OFHEO to issue its proposed changes for comment in the Federal Register rather than just posting the announcement to its website. While OFHEO acceded to this request for broad public input and has recently announced it will not lower the current conforming loan limit of $417,000 in 2008, NAHB continues to oppose the proposed procedures because of their potential effect on future loan limits. OFHEO's proposed guidance is not only bad public policy in the midst of the ongoing housing correction, but it is also not authorized under current law, which provides that the limit may only be adjusted based on increases in the statutory house price index. Read more in the next NBN Online, or contact Chellie Hamecs, x8425. [return to top]

NAHB assistance for our California members affected by wildfires

is being offered through various channels to our affiliated HBAs, which are well equipped to handle disaster situations such as this. At the national level, we are prepared to offer resources such as talking points, government assistance links and information from FEMA, the Red Cross and the Small Business Administration on disaster recovery. These resources are available free online at www.nahb.org/disasterresources and can help your HBA assist both local consumers and building industry members. For more information about community outreach or to discuss local public relations efforts, contact Gwyn Donohue at x8447. For other disaster response resources, contact Ken Ford at x8228.

NAHB Member Benefit: In the wake of disasters such as Hurricanes Katrina and Rita as well as the devastating wildfires in southern California, NAHB has endeavored to help our builder members and their communities to recover by offering a variety of resources and assistance. Such efforts, spearheaded by our locals, show beyond a shadow of a doubt that Home Builders Care for the communities in which they live and work. [return to top]

A free preview of NAHB's latest state and metro economic forecast

is now available at HousingEconomics.com. Not unlike what economists reported at Wednesday's Construction Forecast Conference, the report indicates that tighter lending standards and reduced availability of credit will complicate – but not derail – a national recovery in the housing market. According to NAHB Chief Economist David Seiders, the consequences of aggressive marketing of exotic mortgages (especially subprime ARMs) during the housing boom came back to roil credit markets over the summer. And, "With many of these mortgages scheduled to reset to higher rates in the remainder of 2007 through 2008, additional weakness in housing markets is likely."

Even so, national trends tend to be dominated by some of the larger and more troubled markets, so it's worth noting that many markets around the country have less subprime exposure, experienced modest and sustainable house price appreciation during the boom and have relatively strong local economies. These markets are positioned to out-perform the national trend. They are clustered mainly in the Southeast, Texas, Pacific Northwest and Mountain states, and are currently recording single-family permits at or above pre-boom levels. This contrast between the strongest and weakest markets points out substantial regional variation and suggests that steep nationwide house price declines and mortgage defaults are unlikely. A free preview of the report is available to all readers, while the full report is available to subscribers of NAHB's HousingEconomics.com. Subscribe here or contact: Karel Leon, x8476. [return to top]

Tune in for a members-only audio seminar on Dec. 12

that will focus on sales and marketing strategies in today's challenging housing market. Co-hosted by NAHB's National Sales and Marketing Council and Biztools, the one-hour, free seminar will focus on some of the important topics within NAHB's online Back to Basics Toolkit, including but not limited to:

-Understanding buyer needs, wants, abilities and fears
-Offering innovative incentives to buyers and employees
-Assessing your sales team
-Ways to reduce inventory and cut costs
-Mortgage credit options for buyers
-Financing tips
-Maximizing vendor, lender and supplier relationships

NAHB-affiliated HBAs and individual members are encouraged to sign up for the "Ramp Up Your Sales & Marketing in a Changing Market" seminar today at www.nahb.org/ac.

NAHB Member Benefit: NAHB provides free members-only educational opportunities that are focused on helping you build your business and safely navigate an increasingly challenging housing market. [return to top]