NAHB Chairman Barry Rutenberg on the importance of Home Building to the economy

The following editorial appeared Wednesday, February 22, 2012, in the Washington Times

A plan to end government support for homeownership ("Get the Fed out of the housing market," Commentary, Friday) is a recipe for economic disaster that would surely throw the economy back into recession.

Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) currently guarantee or insure more than 90 percent of all home mortgage activity. Even those arguing to abolish Fannie Mae and Freddie Mac admit this would need to be a years-long transition because the private market is not operating today. Private lenders have shown little inclination to step up to the plate and fill the void that would result if the government backstop essential to ensuring liquidity and stability for homeownership were abruptly halted.

Housing is the key to long-term prosperity. Residential construction usually accounts for 5 to 6 percent of total economic output, yet it stands at a meager 2.5 percent today. We don't have an excess supply of housing; we have record-low new home inventories and a dearth of housing demand resulting from high unemployment, stagnant income growth and a drop in household formations.

The Federal Reserve is offering ideas to stimulate demand because Fed policymakers understand that there can be no sustainable economic recovery without a housing recovery. Building 100 homes generates more than 300 full-time jobs and $8.9 million in federal, state and local tax revenues that sustain local schools and communities across the land. New homes are needed in scores of markets that are experiencing renewed growth and confidence, but this demand is going unmet because of a lack of credit for homebuyers and homebuilders alike.

Maintaining a federal role for housing and providing credit for qualified homebuyers and builders with viable homebuilding projects is a necessary first step to restore the health of the housing market, create jobs and to keep the economic expansion moving ahead.

BARRY RUTENBERG
Chairman
National Association of Home Builders
Washington

EPA set to impose new rules for termite pretreatments

By Jon Statom, Palmetto Exterminators

Did you know that the Federal Environmental Protection Agency (EPA) is finalizing new use direction changes for pyrethroid-class insecticides, the chemical commonly used in termite treatment applications in homes? These proposed guidelines have been commonly followed by the industry, but now the EPA is planning to require that they be followed.

Below are the new EPA regulations that will be imposed when a pyrethroid-class insecticide is used in a new construction pretreatment:

• The treatment site must be covered prior to a rain event in order to prevent run-off of the pesticide into non-target areas. 
• The applicator must either cover the soil him/herself or provide written notification of the above requirement to the contractor on site and to the person commissioning the application (if different than the contractor). If notice is provided to the contractor or the person commissioning the application, then they are responsible under FIFRA (the law that governs pesticide use) to insure that: 

1. if the concrete slab cannot be poured over the treated soil within 24 hours of application 
2. the treated soil must be covered with a waterproof covering (such as polyethylene sheeting) 
3. the treated soil must be covered if precipitation is predicted to occur before the concrete slab is scheduled to be poured. 

• Do not treat soil that is water-saturated or frozen. 
• Do not treat when rain is falling. 
• Do not allow treatment to run off from the target area. 
• Do not apply within 10 feet of storm drains. 
• Do not apply within 25 feet of aquatic habitats (such as, but not limited to, lakes, reservoirs, rivers, permanent streams, marshes or ponds, estuaries, and commercial fish farm ponds). 
• Do not make on-grade applications when sustained wind speeds are above 10 mph (at application site) at nozzle end height. 

Home Builders, if you currently use the soil treatment method for termite control, your pest control operator should be advising you of these rule changes.

NAHB: Families "Priced Out" Report Updated

Did you know that in Greenville, South Carolina, 431 families are priced out of home ownership for each $1,000 increase in the price of a home?  Nationally, 232,447 families are priced out when home prices rise $1,000.

This may seem academic, but according to NAHB's model, 1.1 million households in the U.S. will be priced out of home ownership by the recent increase in mortgage fees imposed by Congress to pay for the payroll tax holiday.

Read more on the Priced Out analysis at NAHB.org by clicking here.

Upstate Housing Market Forecast Luncheon set for March 15

• What: Fifth Annual Upstate Housing Market Forecast Luncheon
• When: Thursday, March 15, 11:30 a.m.
• Where: TD Convention Center
• Speaker: Joseph Von Nessen, PhD., Moore School of Business, University of South Carolina
• Sponsor: South Carolina Bank and Trust

Dr. Von Nessen

Each year your Home Builders Association of Greenville hosts the Upstate Housing Market Forecast Luncheon. This is one of our most popular and well-attended meetings. We invite an economics professional to brief the housing industry about expectations in the housing market for the coming year. Since 2008 HBA members have relied on this meeting to help them plan their businesses for the coming year, and the information presented has been especially valuable in the recent down economy.

This year we have invited Dr. Joseph Von Nessen, Director of the Real Estate Center at the Moore School of Business, University of South Carolina, to be our speaker. Dr. Von Nesson produces the association's quarterly economic video sponsored by Clark's Services.

Don't miss this great and informative meeting that will help you plan your business in 2012.  To Register for the Upstate Housing Market Forecast, click here. 

HBA of Greenville Announces New Education Forum Series

Your HBA of Greenville announces a new service for members: The Education Forum Series.

We have partnered with GBS Building Supply and Progress Lighting to offer a series of education seminars during the lunch hour this year.  The Education Forum Series will be held on the first Monday of each month from 11:30 a.m. until 1 p.m. at Hubbell Lighting's Headquarters in Greenville.  GBS Building Supply and Gallivan, White & Boyd also are sponsoring the series and supporting the program with topics and speakers.

The first edition of the Education Forum Series is on the topic of Succession Planning and is being led by Jason Freeman of J. Freeman and Associates.  Details are below:

• Topic: Succession Planning
• Speaker: J. Freeman and Associates
• Wednesday, March 7, 11:30 a.m.
• Hubbell Lighting, 701 Millennium Blvd., Greenville

Sponsors: GBS Building Supply and Progress Lighting

Click here to register for this Education Forum.  There is no cost to members for participating in this event.

High-end home features lose their appeal with home buyers

According to The Wall Street Journal, these 10 once-popular features in homes are losing their appeal as home buyers become more cost and energy conscious:

1. Outdoor kitchen
2. Outdoor fireplace
3. Sun Room
4. Two-story Family Room
5. Media Room
6. Two-story Foyer
7. Master-planned developments
8. Luxury Master Bathrooms
9. Formal Living Room
10. Whirlpool Bathtubs

Read the entire report at Market Watch by clicking here.

Professional Remodeler: 6 regulations for remodelers to watch in 2012

Professional Remodeler listed 6 rules and regulations for remodelers to watch in 2012:

• Lead Paint
• OSHA Fall Protection standard
• Collective bargaining rights
• Subcontractor vs. employees
• Restricted background checks and credit reports
• No increased 1099s

Click here to read the complete report at Professional Remodeler.

Tight Credit Conditions Impeding Housing and Economic Recovery, Fed Chairman Tells Home Builders

Restraints on credit for home buyers and home builders alike continue to impede the housing and economic recovery, Federal Reserve Chairman Ben Bernanke said in an address to the National Association of Home Builders (NAHB) Board of Directors in Orlando.

"Banks remain reluctant to make loans, both to mortgage borrowers and home builders,” said Bernanke, who noted that current credit conditions are too tight for the financial system, for the construction industry and the economy.

The Fed chairman said that his message to regulators is for them to take a balanced approach and to approve loans for those who meet sound underwriting standards.

“Do not turn away creditworthy borrowers, and that includes home builders,” he said.

“Chairman Bernanke understands that today’s tight credit conditions are preventing qualified buyers from obtaining home loans and builders from getting financing for the construction of viable new home building projects – and that this is harming the housing market as well as the overall economy,” said Barry Rutenberg, the newly elected chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.

Noting that many local markets have an overhang of empty and foreclosed homes, the current harsh lending environment, and that the weak housing market is impairing the financial health of home owners, Bernanke said that the “state of the housing market has been a key impediment to a faster recovery.”

“For these reasons, and because the troubled housing market depresses construction activity and employment, we need to continue to develop and implement policies that will help the housing sector get back on its feet,” the Fed chairman said. “No single solution will be sufficient. But sustained efforts to address the many interlocking factors holding back the housing market will pay dividends in the long run.”

He also added that the Fannie Mae and Freddie Mac limits on investor loans are counterproductive in the current economic climate and that policy should be to encourage more loans to help ease the inventory of distressed properties.

Bernanke’s remarks on the need to take more aggressive action to support a housing recovery confirms what the nation’s home builders have been saying for some time and reiterates similar themes in a Jan. 4 white paper provided to Congress, in which the Federal Reserve noted that “restoring the health of the housing market is a necessary part of a broader strategy for economic recovery.”

Fixing the nation’s housing woes is taking on a sense of increasing urgency in Washington. In unveiling a new plan last week, President Obama cited the important role that housing plays in the economy.

“A lack of building demand has kept hundreds of thousands of construction workers idle,” said Obama. “Everybody involved in the home building business – folks who make windows, folks who make carpets – they’ve all been impacted. The challenge is massive in size and scope, because we’ve got a multi-trillion dollar housing industry.”

Yesterday, the President reiterated the high value that Americans place on homeownership and the need to help home owners while commenting on the mortgage settlement agreement reached between the states and five major banks.

“We can’t wait to get things done and to provide relief to America’s home owners,” Obama said. “We need to keep doing everything we can to help home owners and our economy.”

“You work and you save your entire life to buy a home,” Obama added. “That’s where you raise your family, that’s where your kids’ memories are formed. That’s your stake, your claim on the American Dream.”

With the proper policies in place, housing can serve as an engine of job growth, said Rutenberg, who noted that building 100 homes creates more than 300 full-time jobs and generates $8.9 million in federal, state and local revenues to fund local schools and strengthen communities across the nation.

“In this key election year, the voters are calling on the Administration and Congress to take actions to restore the health of the housing industry in order to create jobs, increase household wealth and keep the economy on an upward trajectory,” he added.

Click here to watch a replay of Bernanke's address.

NAHB: Builder Confidence Increases for Fifth Consecutive Month in February

Home builder confidence in the market for new single-family homes increased for the fifth consecutive month in February, rising from 25 to 29 on the NAHB/Wells Fargo Housing Market Index (HMI) released today. It is the highest level the index has reached in more than four years.

“Builder confidence has doubled since September as measured by the HMI,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth.”

Rutenberg cautioned that the housing sector remains very fragile with significant differences between individual markets, and said policymakers must guard against actions that could impede or even reverse the gains of recent months.

“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB Chief Economist David Crowe. “However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Each of the HMI’s three components also improved for a fifth consecutive month in February. The component measuring traffic of prospective buyers rose from 21 to 22, and the component measuring sales expectations for the next six months increased from 29 to 34. The component measuring current sales rose from 25 to 30.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at www.nahb.org/hmi. More information on housing statistics is also available at http://www.housingeconomics.com/.

NAHB: Housing Starts Rise 1.5 Percent from Upwardly Revised Numbers in January

Building on significant upward revisions to numbers for the previous two months, nationwide production of new single-family homes and apartments increased 1.5 percent to a seasonally adjusted annual rate of nearly 700,000 units in January, according to newly released figures from the U.S. Commerce Department. This marks the second-best pace of overall housing production since October of 2008.

“Today’s solid housing starts report indicates that builders are putting more of their crews back to work, and adds to the growing field of evidence that the overall housing market is gradually but consistently moving in the right direction,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. In addition to today’s numbers, recent builder surveys have indicated steadily increasing optimism regarding market conditions while the number of improving housing markets nationwide has grown substantially over the past six months, he noted.

“The fact that the three-month moving average for housing starts has now increased for nine consecutive months and is approaching the 700,000 mark for the first time since October of 2008 is indicative of a solid recovery in housing activity stemming from recent firming in employment and consumer confidence measures,” agreed NAHB Chief Economist David Crowe. “That said, housing production is still far from what would be considered normal in a healthy market, and many challenges remain for home builders in terms of tight credit conditions, difficult appraisals and the continued flow of foreclosed properties on the market – all of which are certainly slowing the pace of improvement in both housing and the overall economy.”

Following significant upward revisions reported for both November and December, single-family starts held virtually flat in January with a 1.0 percent decline to a 508,000-unit rate. Together with the revised December number, this is the best pace of single-family starts since April of 2010, when the home buyer tax credit was active. Meanwhile, single-family building permits, which can be an indicator of future construction activity, also held virtually unchanged, with a 0.9 percent increase in January to 445,000 units – again, the best pace since April of 2010.

The multifamily segment also continued to display greater strength in January following a 55 percent increase in starts activity in 2011 that was attributed to rising demand for rental apartments. While multifamily starts rose 8.5 percent to a seasonally adjusted annual rate of 191,000 units for the month, permits edged up 0.4 percent to 231,000 units.

The South, which is the nation’s largest regional housing market, posted the biggest gain in housing starts in January with an 18.3 percent increase, while the West and Northeast also posted significant gains of 11.9 percent and 7.9 percent, respectively. The Midwest was the exception to the rule, posting a 40.7 percent decline that partially offset a dramatic gain in the previous month.

The South also posted the largest gain in permit issuance in January, with a 10.1 percent increase. Permits also rose by 4.2 percent in the Northeast, but declined 3.7 percent in the Midwest and 18.2 percent in the West.

FHFA: House prices fell slightly in Greenville in 2011

U.S. house prices fell modestly in the fourth quarter of 2011 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The HPI, calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages, was 0.1 percent lower on a seasonally adjusted basis in the fourth quarter than in the third quarter. On an unadjusted basis, prices fell 1.1 percent during the quarter. Over the past year, seasonally adjusted prices fell 2.4 percent from the fourth quarter of 2010 to the fourth quarter of 2011.

In the Greenville area, houses prices fell 1.83 percent during the last year, and 0.68 percent in the fourth quarter of 2011.  Over the last 5 years, house prices are down 0.61 percent.

FHFA’s seasonally adjusted monthly index for December was up 0.7 percent from its November value. On a not-seasonally adjusted basis, prices were flat over the November-to-December period.

“While FHFA’s national index shows a 2 percentage point price decline over the latest four quarters, 12 states and the District of Columbia posted price increases,” said FHFA Principal Economist Andrew Leventis. “When coupled with the fact that about half of all U.S. states saw price increases in the latest quarter, this growth adds to mounting evidence that real estate markets are seeing at least some signs of life.”

FHFA’s expanded-data house price index, a metric introduced in August that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, fell 0.8 percent over the latest quarter. Over the latest four quarters, the index is down 2.9 percent. For individual states, price changes reflected in the expanded data measure and the traditional purchase-only HPI are compared on pages 22-24.

While the national, purchase-only house price index fell 2.4 percent from the fourth quarter of 2010 to the fourth quarter of 2011, prices of other goods and services rose 4.0 percent over the same period. Accordingly, the inflation-adjusted price of homes fell approximately 6.2 percent over the latest year.

Significant Findings:

• The seasonally adjusted purchase-only HPI rose in the fourth quarter in 27 states and the District of Columbia.
• Of the nine Census Divisions, the West South Central Division experienced the strongest prices in the latest quarter, posting a 1.1 percent price increase. Prices were weakest in the Middle Atlantic Division, where prices fell 1.2 percent.
• As measured with purchase-only indexes for the 25 most populated metropolitan areas in the U.S., four-quarter price declines were greatest in the Chicago-Joliet- Napervile, IL area. That area saw price declines of 9.8 percent between the fourth quarters of 2010 and 2011. Prices held up best in Warren-Troy-Farmington Hills, MI, where prices rose 3.5 percent over that period.

The complete list of state appreciation rates is on pages 19-20. The list of metropolitan area appreciation rates computed in a purchase-only series is on page 33. Appreciation rates for the all-transactions metropolitan area indexes are on pages 34-50.

Highlights
This quarter’s Highlights article discusses recent revision patterns in the monthly HPI. Noting that first-time revisions in the estimated monthly rate of change have been persistently negative, the analysis evaluates whether the phenomenon may be related to distressed sales.

Some evidence suggests that distressed sales, which usually occur at discounted prices relative to other transactions, may be entering the HPI estimation data sample with a greater lag than other transactions. Though not determinative, the analysis indicates the lag could at least partially account for the negative revisions.

Background
FHFA’s purchase-only and all-transactions HPI track average house price changes in repeat sales or refinancings on the same single-family properties. The purchase-only index is based on more than 6 million repeat sales transactions, while the all-transactions index includes more than 44 million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over the past 37 years.

FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased since the beginning of 2006 has been $417,000. Pursuant to the terms of various short-term Congressional initiatives, loan limits for mortgages originated between July 1, 2007 and September 30, 2011 were as high as $729,750 in certain high-cost areas in the contiguous United States. Mortgages originated after September 30, 2011 were no longer subject to the terms of those initiatives and, under the formula established under the Housing and Economic Recovery Act of 2008, the “ceiling” limit for one-unit properties in the contiguous United States fell to $625,500.

NAHB accomplishments result in $5.7 billion in revenue and savings for members

NAHB 2011 Advocacy Value

Ever wonder about the value of your membership in your Home Builders Association?  According to NAHB, the number you are looking for is $5.7 billion.

NAHB Advocacy identified 14 accomplishments that could be evaluated in terms of additions to members’ revenues or reductions in members’ costs.  These accomplishments include Congressional enactment of higher FHA loan limits, defeat of proposed EPA stormwater regulations, and federation victories connected to building code requirements. Many other actions that deferred, deterred or eliminated negative actions on members’ business were reviewed but only those with specific and identifiable outcomes were evaluated. 

NAHB Economics and Housing Policy estimated the impact of the individual accomplishments using data supplied by federal agencies, from NAHB past research or from estimates of impact originally used to support NAHB policy. For actions that affected future production, NAHB’s forecasts for single-family and multifamily production and single-family new home sales were used as a base. For actions affecting workers, NANB’s estimate of 1.5 construction workers per single-family home and 0.5 construction workers per multifamily home were used.