Monday Morning Briefing Letter - 07/27/2009 (Plain Text Version)

By Joe Robson, NAHB Chairman and
Jerry Howard, NAHB President and CEO

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Inappropriate appraisal practices and ongoing AD&C credit issues

threaten to prolong the current housing and economic downturn, NAHB Chairman Joe Robson told Congress on July 23.

Testifying before the House Small Business Subcommittee on Finance and Tax, Joe warned that these two issues "are placing enormous pressure on home builders' bottom lines and, for many, endangering their ability to survive the economic downturn." Additional credit resources could be extremely helpful to them and other small businesses to bridge the divide and survive to the eventual economic recovery, he noted.

Joe explained that, while there are several signs that the housing market may be at or near bottom, the appraisal and credit crunch problems are headwinds that continue to buffet any significant housing recovery. He said that NAHB is calling on housing and federal financial regulators to adopt clear, concise regulatory guidelines that will allow appraisers to develop realistic valuations based on sales that are truly comparable. In addition, he told Congress that, to maximize the ability of the Small Business Administration to help home builders and other small businesses gain access to credit, NAHB recommends increasing funding and the loan size for the America's Recovery Capital loan program. NAHB also supports proposed improvements to the SBA 7(a) program, which provides capital for a range of purposes, including construction and supplies, to increase the participation of non-traditional lenders in SBA programs. Finally, Joe commended the committee's proposal to establish a supplemental loan assistance program to complement the lending initiatives currently administered by the SBA. A primary objective of this program would be to target businesses with capital needs in excess of $10 million. Read NAHB's press release or contact Greg Brown (x8421) for more.

In related developments, on July 16, NAHB's Senior Officers met with Federal Reserve Chairman Ben Bernanke, two other Fed governors and key Fed staff members to discuss the state of the nation's housing industry. During this confidential discussion, the NAHB leadership discussed a long list of concerns and emphasized that our industry is struggling to survive. As always, Chairman Bernanke and the other members were interested to hear our perspectives. And, on July 23, Joe and NAHB Immediate Past Chairman Sandy Dunn met with representatives of the Appraisal Institute to further our joint efforts with that organization toward resolving appraisal issues. Contact: Bill Renner, x8597.

Low appraisals are nixing a quarter of new-home sales contracts,

according to a nationwide survey conducted by NAHB. With increasing reports from home builders that signed sales contracts have been falling through the cracks due to inappropriate appraisal practices, NAHB conducted the survey to find out just how prevalent the problem has become. The results were quite disturbing, with nearly 60% of builders reporting that inadequate appraisals are causing serious problems in their market. The biggest issue is the use of foreclosures and distressed sales as comparables for new single-family homes. Especially concerning is the fact that 54% of survey respondents reported instances of appraisal amounts coming in lower than the actual cost of building a home.

In a public statement calling attention to the survey's findings, NAHB Chairman Joe Robson pointed out that "Lost home sales are killing jobs, deepening the housing slump and hurting local economic activity." He also noted that foreclosure and distressed sales should not be used without appropriate adjustments to reflect the expenditure that would be required to bring them up to the condition and quality that represents a reasonable alternative for the home buyer. Unfortunately, the appraisal practices currently in use are taking a heavy toll on the housing market and are also further exacerbating economic distress by affecting the availability of acquisition, development and construction (AD&C) credit. Read more about this concerning issue in Nation's Building News Online, or contact Bill Renner (x8597) for more information. [return to top]

Results of recent NAHB surveys on the AD&C credit crunch

reveal that market conditions remained unfavorable throughout this year's first quarter, as discussed during a June 25 NAHB audio seminar. Concerning findings of those surveys included the fact that 71% of those polled saw the availability of credit for new single-family construction loans worsen during the first three months of this year compared to the fourth quarter of 2008. Meanwhile, 82% of those seeking land acquisition loans, or construction funds for multifamily housing, reported worse credit availability. Also, 40% of survey respondents reported tighter loan terms for outstanding single-family construction and land development loans. Of those reporting tighter terms on outstanding loans, 58% said lenders were requiring partial paydowns based on re-appraisals; 57% cited demands for increased collateral; 43% said lenders were refusing additional draws; 35% said lenders had terminated lender-funded interest reserves and were requiring out-of-pocket interest payments; and nearly 30% reported that their loans had been called. The most common reasons cited for tighter credit conditions for new or outstanding loans had to do with (1) regulators forcing lenders to restrict credit or (2) demands by lenders' boards of directors. Read more about the latest survey results in the July 13 edition of NBN Online. Also, information on the AD&C lending issue has been compiled for your convenience at www.nahb.org/adcresources. Contact: Chellie Hamecs, x8425. [return to top]

Senate confirmation of FHA Commissioner David Stevens

prompted applause from NAHB on July 13. Stevens previously served as President and Chief Operating Officer of the Washington, D.C.-based real estate firm Long & Foster. He joined that company in 2006 to lead its affiliated businesses, including its mortgage, title and insurance division. In an official statement regarding the confirmation of the new FHA Commissioner, NAHB Chairman Joe Robson said, "During this time of market uncertainty, NAHB believes that it is essential to have a strong and experienced leader at the FHA and David Stevens is the right man for the job. His strong background in the financial services, real estate and mortgage industries makes him uniquely qualified to take on the extensive challenges facing the FHA and housing industry. NAHB looks forward to working with Mr. Stevens and HUD in 2009 and beyond to put housing back on a growth path." Read NAHB's statement here. [return to top]

Builder confidence, housing starts and permits were all up

in the latest reports from NAHB and government sources last week.

The NAHB/Wells Fargo Housing Market Index, a key gauge of home builder sentiment, rose two points to 17 in July, its highest level since September 2008. This gain was attributed to slightly better sales conditions for the month, including low interest rates, the first-time buyer tax credit and attractive home prices, yet it was obvious that builders don't think they're out of the woods just yet. That's because this month's HMI gain was entirely contained in the component gauging current sale conditions, while the component gauging sales expectations in the next six months remained virtually flat for a fourth consecutive month. "Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces," among them the ongoing AD&C credit crunch and inappropriately low appraisals, said NAHB Chief Economist David Crowe. Read about the HMI in our press release, get the HMI tables online, or for more information, contact Gopal Ahluwalia (x8480) or Ashok Chaluvadi (x8482).

More good news came on July 17 with the government's release of data regarding housing starts and permit issuance for June. That report indicated that overall housing starts gained 3.6% in June to a seasonally adjusted annual rate of 582,000 units, while permit issuance rose 8.7% to 563,000 units. Single-family starts rose for a fourth consecutive month, with a 14.4% gain to 470,000 units while single-family permits rose for a third consecutive month with a 5.9% gain to 430,000 units. Meanwhile, the multifamily side, which characteristically displays greater month-to-month volatility, posted a 25.8% decline in starts to 112,000 units and an 18.8% gain in permits to 133,000 units. Read our press release or the government's report online. Contact Paul Lopez (x8409) for help with media inquiries. [return to top]

NAHB members can get FREE passes to IBS exhibits

at the 2010 International Builders' Show in Las Vegas this coming January 19-22. Yes, you read it right. In fact, a series of new registration options for the IBS should make it more affordable for you to attend the show than it has been in years! The date to remember is August 3 – that's when online registration and housing for the 2010 Builders' Show officially opens.

Here are some great deals you need to know about:

Hotel Rooms Less Than $200 a Night — Register and Request Housing by Aug. 31

Rooms at all the Las Vegas Hotels in the NAHB convention hotel block are available for under $200 a night once registration and housing open on Aug. 3. These rates are only guaranteed to attendees who register for IBS during August. Room deposits for registrations made in August will not be charged until December.
Free Exhibit Passes for NAHB Members — Register by Dec. 11

NAHB members will be able to walk the show floor for free all four days of the show, if they register by Dec. 11. The exhibits will feature the industry’s leading suppliers displaying their latest innovations.
First-Time Member Attendee Registration — Reduced

Members who plan to attend IBS for the first time are eligible for the first-time attendee registration rate of $100, which enables them to attend any of more than 175 educational seminars and tour the exhibit floor all four days.
One- and Two-Day Education Passes

New at IBS, attendees can purchase one- or two-day passes for IBS education seminars. Passes will be available for education sessions held from Tuesday through Thursday, Jan. 20-22. All seminars on Friday, Jan. 23, are free. To take advantage of these passes, attendees must choose the day(s) they will purchase when registering for the show.

Get more information and register to attend at www.BuildersShow.com. And remember, August 3 is the day to go online for your early registration and choice housing assignments! [return to top]

Helping home owners avoid foreclosure scams

can be a valuable community service and source of goodwill for HBAs and home builders in communities across the country. A new collection of government resources makes it easy to do just that, by explaining to consumers how to recognize scammers and telling people where to go to obtain free help. The Federal Trade Commission's "Money Matters" Web site has everything that troubled home owners need to know at www.ftc.gov/YourHome. It's also available in Spanish at www.ftc.gov/SuCasa. Here, consumers can learn about foreclosure scams, debt, credit cards and other financial management concerns. They can also access a free flyer from the FTC entitled "A Note to Homeowners." This flyer and any of the FTC's other consumer education materials can be ordered at www.ftc.gov/bulkorder, in either English or Spanish. Another great place to point homeowners for free foreclosure help is www.hopenow.com/ or 888-995-HOPE (4673). You should also know that NAHB provides consumers with information on building, buying and financing a home online at www.nahb.org/forconsumers. [return to top]

NAHB's official comments on EPA's WaterSense and Energy Star

certification programs, submitted to the agency in separate communications, are aimed at making both of these worthy programs more user-friendly and workable for home builders.

EPA's final version of its WaterSense new home certification system was recently released as part of the agency's planned WaterSense New Homes Program for homes built to use 20% less water than conventional new construction. This system outlines the procedures builders must follow to apply for the WaterSense label using the specifications for appliances, fixtures, storm water management and irrigation now under review by federal officials. NAHB's comments call for the EPA to simplify the administrative process and align the program with the requirements of existing green building programs, thereby removing more barriers to its use. At this time, NAHB looks forward to working with the EPA to refine the certification program and encourage builders to participate. Read more in NBN Online or contact Calli Schmidt, x8132.

Meanwhile, NAHB told EPA that its proposed changes to the Energy Star certification program for new homes go far beyond that voluntary program's charge of promoting energy efficiency, and duplicate green building rating systems. Our comments on the next iteration of the Energy Star Qualified New Homes program urge program leaders to stick with what has made Energy Star a household name among new home buyers. We specifically took issue with five new checklists that would be required should the new program be finalized as written. These checklists cover new requirements in indoor air quality, advanced framing techniques and water management that are important goals, but beyond the scope of an energy-efficiency program, said NAHB. Read more on NAHB.org or contact Calli Schmidt, x8132. [return to top]

DHS is rescinding its controversial "no-match" rule

that was opposed by NAHB and other business groups. The rule, which was scheduled to go into effect in September 2007, had been touted as a means of uncovering illegal immigrants. It would have required employers to fire workers whose names and Social Security numbers didn't match up with the Social Security Administration's database. But a coalition of businesses and organizations, spearheaded by the U.S. Chamber of Commerce and backed by NAHB, filed suit in the U.S. District Court of Northern California challenging the rule. Our coalition convinced the court that the Department of Homeland Security (DHS) had bypassed the procedures required to adopt regulations, including the necessity of considering the cost of the rule's complicated procedures on businesses. A subsequent analysis revealed that the annual cost of the rule was between $3,000 and $33,000 per business, depending on the number of employees.

The coalition was also able to demonstrate to the court that Social Security Administration records were riddled with errors, and that the vast majority of the no-matches resulted from clerical errors and marital name changes, not illegal immigration status. The court subsequently issued a nationwide preliminary injunction pending a hearing, halting implementation of the rule and barring the government from issuing "no-match" letters. This month's DHS announcement that it will rescind the rule signals an effective end to the litigation and is a significant victory for the NAHB-backed coalition and all our members. For more info, contact David Crump at x8491. [return to top]

The positive impact of building new multifamily communities

is clearly outlined in a new NAHB report that shows just how many jobs local communities stand to gain by encouraging this kind of development. The report explains how a typical development of 100 rental apartments or 100 condominiums affects income and employment figures for 16 sample industries and local government, and also provides detailed information on the new construction's effect on taxes and government revenues. For example, a typical 100-unit apartment community will generate $7.9 million in local business owners' income, wages and salaries in its first year of construction, along with $827,000 in taxes and other revenue and 122 jobs. A similarly-sized condo community would generate $20.9 million in owners' income and local wages and salaries, $2.2 milion in public revenues and 319 jobs. And both types of development continue to deliver benefits to the local area for years to come. Specifically, construction of 100 multifamily units could generate $2.3 million to $2.9 million in business income; $395,000 to $705,000 in taxes and other revenue; and between 32 and 49 local jobs each year. NAHB members can access the report on NAHB.org. Contact: Ann Marie Moriarty, x8350. [return to top]

A top-priority event for HBA leaders and staff

is right around the corner, and it's called the NAHB Summit on Association Excellence. Combining the agendas and key topics formerly addressed during the National Conference on Membership, Leadership Training Conference and State and Local Government Affairs Conference, this comprehensive gathering should be more convenient and cost-effective for participants to attend. Registrants can look forward to intensive, half-day sessions on membership, leadership and government affairs as well as roundtables and sessions featuring nationally recognized speakers. Discounted registration is available for additional HBA staff and volunteers who register with a full-price registrant from the same HBA. For more information and to register, please visit www.nahb.org/summit. [return to top]

Online registration for the Fall Board of Directors meeting,

coming up in Chicago this Sept. 30 – Oct. 4, is now open. For member registration and other meeting related information, visit www.nahb.org/FallBoard. Also posted on this site you will find links to the headquarters hotel's Web page; attendee housing info; a meetings schedule; and airline discounts. New this year is the opportunity to register for "Train the Trainer" and Gold Key/Platinum Club and Capitol Club events while registering online for the Fall Board meeting. If you have questions related to housing at the meeting, please refer them to Renee Thomas, x8189. If you have questions about Fall Board registration, please refer them to Chris Klosterman, x8610, or Leslie Shimer, x8181. [return to top]

NAHB bids farewell to three of our most prominent members

who passed away in recent weeks. Each of these men have earned the respect and gratitude of their colleagues for their devoted advocacy of the home building industry throughout their careers:

Raymond A. Watt, a member of NAHB's Housing Hall of Fame, was a well-known real estate developer who was among the first in California to develop condominiums and timeshares. Raymond was founder and chairman of Watt Companies, one of the largest owners, developers and managers of commercial real estate in the western United States. He passed away of natural causes in Rancho Mirage on July 7, at the age of 90. Read more here.

Karl Bergheer, a highly engaged member of NAHB from the 1970s through the 1990s who served as chairman of the Resolutions Committee and as a member of the Executive, Budget and Federal Government Affairs Committees, died of lung cancer in Morro Bay, Calif., on July 5. He was 83. Karl served as a lieutenant in the U.S. Navy and proudly served his country in World War II, Korea and Vietnam. In 1997, he received the Lifetime Achievement Award from the BIA of Southern California. Read more here.

Roger Duhamel, a member of the New Hampshire Housing Hall of Fame with more than 40 years of experience in the home building industry, passed away on July 8 after a short illness. He was 73 years old. In 1966, Roger co-founded the Nashua Area Home Builders and Remodelers Association and served as its first president. He remained on its board until 2003, and was voted the local association's Builder of the Year in 1980 and again in 1992. He served on several NAHB committees throughout his career and became a Life Director in 1980. Read more here. [return to top]