NAHB: Court Strikes Down NLRB “Poster Rule”

In a victory for NAHB, the U.S. Court of Appeals for the District of Columbia on May 7 struck down a National Labor Relations Board (NLRB) rule that would have required millions of employers across the nation to place 11-inch by 17-inch posters in a prominent area in their workplace that informs employees of their right to form a union.

The court ruled that the NLRB overstepped its authority when it issued the poster rule, which deemed failure to display the required notice an unfair labor practice. The decision stated that the NLRB lacked authority to promulgate such a rule because Section 8(c) of the National Labor Relations Act provides that the dissemination (or non-dissemination) of non-threatening speech shall not be considered an unfair labor practice.

NAHB is a member of the Coalition for a Democratic Workplace, which was a party to the case. NAHB and other business organizations maintain that the poster rule violated free speech rights and amounted to little more than advertisements for union membership.

NAHB: List of Improving Markets is a healthy 258

The number of U.S. housing markets showing sustained improvement in three key measures fell slightly to 258 in May from 273 in April, according to the NAHB/First American Improving Markets Index (IMI), released this week. This total includes entrants from all 50 states and the District of Columbia.

Greenville has been listed since June 2011 and continues to improve in all three categories measured by the index.  Other Upstate markets on the list include Anderson, which joined the list in January 2012, and Spartanburg, which joined the list in July 2012.

The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Four new markets were added to the list and 19 were dropped from it this month. Newcomers included the geographically diverse metros of Dothan, Ala.; Elizabethtown, Ky.; Salisbury, Md.; and Salem, Ore.

“The fact that over 70 percent of all U.S. metros are holding onto their spots on the improving list is definitely good news, and representative of the generally brightening outlook for housing markets nationwide,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “That said, our industry’s progress on the road to recovery is being slowed by rising challenges related to the availability of credit, building materials, labor and lots for development.”

“While seasonal trends in home prices resulted in an overall decline in the IMI this month, the index remains at a very strong level and continues to represent markets in every state,” noted NAHB Chief Economist David Crowe. “Some metropolitan areas that had previously charted marginal home-price gains dropped off the list this time as a result of typically softer prices seen in the winter months, which is similar to what the index showed in this same period last year.”

“Today’s report shows that the majority of U.S. metros are experiencing strengthening house prices, employment and permitting activity, which is a much more positive picture than the one we were seeing a year ago,” observed Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. “That’s the big picture on which consumers need to focus.”

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metro area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.

A complete list of all 258 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in May, is available at www.nahb.org/imi.

Building Code: New Design Values for Southern Yellow Pine Postponed

You may be aware that the American Lumber Standards Committee approved new design values for Southern Yellow Pine in all applications except #2 2x4.  Their rationale is that the rapid-growth rate for modern southern yellow pine has reduced its load-carrying capacity.

The new standards reduce the distance spanned by the various lumber dimensions by as much as 15 percent and were set to take effect June 1.  Click here to view the update conversion chart for Southern Yellow Pine.

However, your Home Builders Association learned today that the International Code Council has elected not to implement the new design values in the current code and will instead consider them for the 2015 building code.  In addition, NAHB has continued its efforts to have the new design values reversed and is currently challenging the validity of the American Lumber Standards Committee's findings.

Note however that the 2012 International Residential Code is scheduled to take effect in South Carolina on July 1.  You may be aware that a provision of the new code includes an increase in the dimension of floor trusses, when a gas appliance is placed in the basement or crawl space, in order to avoid fire-proofing the floor above the gas appliance.  Your Home Builders Association is working with the South Carolina Building Officials Association to develop a solution to this expensive new requirement.  Stay tuned.

Construction employment has not kept pace with construction growth

Part of the reason employment growth is so weak is that despite sizable increases in residential construction spending, increases in construction employment have been MIA. From April 2012 to April 2013, residential construction put-in-place increased from $249 billion to $295 billion, an 18% rise. However, during the same period, the number of residential building employees and residential specialty trade contractors rose from 2,048,100 to 2,131,800 or by just 4%!

Elliot F. Eisenberg, Ph.D.
GraphsandLaughs, LLC
elliot@graphsandlaughs.net

FHFA: Refinance Volume Continues Strong Pace Through February

Low Mortgage Rates Contribute to HARP Success

The Federal Housing Finance Agency (FHFA) today released its February 2013 Refinance Report, which shows that refinance volumes remained high as mortgage rates hovered near historic low levels. More than 463,000 refinances took place in February, with 97,738 completed through the Home Affordable Refinance Program (HARP). This brings the number of total HARP refinances to more than 2.3 million since the program’s inception in April 2009.

FHFA recently announced it has extended HARP for two more years and will soon launch a nationwide campaign to educate and encourage homeowners to learn about HARP eligibility requirements. HARP was set to expire Dec. 31 of this year.

Also in the February 2013 report:

• Borrowers with loan-to-value (LTV) ratios greater than 105 percent accounted for 45percent of the volume of HARP loans.
• The number of completed HARP refinances for deeply underwater borrowers continued to represent a significant portion of total HARP volume. In February, 22 percent of the loans refinanced through HARP had a LTV ratio greater than 125 percent.
• Through February, underwater borrowers represented 65 percent or more of total HARP volume in Nevada, Arizona and Florida.
• Also in February, 18 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages.
• The total number of HARP loans by state include: California (329,707), Florida (200,332), Illinois (158,822), Michigan (158,462), and Arizona (117,149).

Link to Refinance Report
Link to FHFA announcement: HARP Extended to 2015

NAHB Legislative Conference Bus Trip June 4th-6th, 2013

 Join fellow members of the HBA of Greater Columbia and NAHB members from around the state
and nation as we travel to Washington, DC for the NAHB Legislative Conference. We will meet with our elected officials in their Washington offices to talk about the issues that are important to our industry. This is quite possibly the most important meeting you will attend all year. We have made arrangements for transportation and lodging for our members.
The cost ranges from $399-$549 depending on occupancy of the hotel room (single or double)
For more information please contact the HBA of Greater Columbia, 625 Taylor St., Columbia, SC 29201 FAX: (803) 779-0635
OR – Register on-line at www.columbiabuilders.com.
Questions? Call (803) 256-6238.
Registration and payment is requested by May 13, 2013.

Rising Costs Impacting Builder Confidence This Month

Facing increasing costs for building materials and rising concerns about the supply of developed lots and labor, builders registered less confidence in the market for newly built, single-family homes in April, with a two-point drop to 42 on the NAHB/Wells Fargo Housing Market Index (HMI), released last Monday.

Commenting on the latest data, NAHB Chief Economist David Crowe explained that “Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues." However, he also noted that builders’ outlook for the next six months has improved "due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence."

While the HMI component gauging current sales conditions declined two points to 45 and the component gauging buyer traffic declined four points to 30 in April, the component gauging sales expectations in the next six months posted a three-point gain to 53 – its highest level since February of 2007.

Looking at three-month moving averages for regional HMI scores, the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42 and the West posted a three-point decline to 55. 

Multifamily Boosts Housing Starts Beyond Million Mark

Soaring production of multifamily apartments pushed nationwide housing starts beyond the million-unit mark for the first time since 2008 in March, according to government data released April 16.

While single-family production slipped 4.8% to a seasonally adjusted annual rate of 619,000 units, a 31.1% gain to 417,000 units on the multifamily side provided the boost needed to raise the overall production pace by 7% to 1.036 million units. Importantly, the decline on the single-family side was entirely due to a substantial upward revision to the previous month’s data, without which virtually no change would have been recorded this time around.

Meanwhile, the pace of multifamily production was the best seen since January of 2006. Three out of four regions posted gains in combined single- and multifamily housing production in March, with the Midwest registering a 9.6% increase, the South posting a 10.9% gain and the West noting a 2.7% rise. The Northeast was the lone exception to the rule, with a 5.8% decline. Meanwhile, permit issuance for all new housing units fell 3.9% to a 902,000-unit rate in March after recording a big gain in the previous month. That decline reflected a 0.5% reduction to 595,000 units on the single-family side and a 10% reduction to 307,000 units on the multifamily side.

In contrast to the regional starts report, the Northeast was the only part of the country to post a gain in permitting activity in March, with a 24.7% increase. The Midwest, South and West posted declines of 2.1%, 6.2% and 10.4%, respectively.

Calling the latest data a “mixed bag” due to the opposite direction of single- and multifamily starts and the somewhat weaker permit issuance, NAHB Chief Economist David Crowe said the numbers still indicate “a continuation of the slow, methodical march forward” that characterizes the housing recovery. He also noted that “The three-month moving average for single-family starts remained unchanged at 628,000 units in March – which is right on pace with NAHB’s forecast for a 25% gain in new-home production in 2013.”

FHFA House Price Index Up 0.7 Percent in February

U.S. house prices rose 0.7 percent on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). For the 12 months ending in February, U.S. house prices rose 7.1 percent. The U.S. index is 13.6 percent below its April 2007 peak and is roughly the same as the October 2004 index level. U.S. house prices have not declined on a monthly basis since January 2012.

For the nine census divisions, seasonally adjusted monthly price changes from January to February ranged from -0.6 percent in the Middle Atlantic division to +1.7 percent in the South Atlantic division, while the 12-month changes ranged from +1.9 percent in the Middle Atlantic division to +15.3 percent in the Pacific division.

FHFA uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index. Monthly index values and appreciation rate estimates for recent periods are provided in the table and graphs on the following pages. To see the complete historical data at FHFA.gov, click here.

Federal Housing Finance Agency Reports Mortgage Interest Rates

The Federal Housing Finance Agency (FHFA) today reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some adjustable-rate mortgage (ARM) contracts, was 3.54 percent based on loans closed in March. There was an increase of 0.11 from the previous month. The complete contract rate series can be found at FHFA.gov by clicking here.

The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 12 basis points to 3.74 in March. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages (see technical note). These results reflect loans closed during the March 25 - 31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-February.

The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 3.53 percent in March, up 11 basis points from 3.42 percent in February. The effective interest rate, which reflects the amortization of initial fees and charges, was 3.65 percent in March, up 10 basis points from 3.55 percent in February.

This report contains no data on adjustable-rate mortgages due to insufficient sample size. Initial fees and charges were 0.93 percent of the loan balance in March, down 6 basis points from February. Twenty-three percent of the purchase-money mortgage loans originated in March were “no-point” mortgages, up from twenty percent in February. The average term was 27.4 years in March, up 0.3 years from February. The average loan-toprice ratio in March was 77.3 percent, up 0.1 percent from 77.2 percent in February. The average loan amount was $263,400 in March up $4,700 from $258,700 in February.

FHFA Releases Fannie and Freddie Reports on Viability of Their Multifamily Businesses Without Government Guarantees

The Federal Housing Finance Agency (FHFA) today released reports prepared by Fannie Mae and Freddie Mac (the Enterprises) on their multifamily businesses. The reports were conducted at the direction of FHFA pursuant to its goal of contracting Fannie Mae and Freddie Mac’s overall market footprint and generating potential value for taxpayers. As part of the 2012 Conservatorship Scorecard, the Enterprises were directed to analyze the viability of their multifamily businesses absent a government guarantee and review the likelihood of these models operating on a stand-alone basis after attracting private capital and making any adjustments for pricing if needed.

The reports conclude that without government guarantees, the multifamily businesses of Fannie Mae and Freddie Mac have little inherent value. The reports further conclude that the sale of these businesses would return little or no value to the U.S. Treasury and to taxpayers. The reports also highlight the fundamental tensions inherent in the government sponsored enterprise model that policymakers will have to consider as part of housing finance reform.

2012 Conservatorship Scorecard:
The Enterprises’ Reports on a Multifamily Future StateWithout a U.S. Government Guarantee

One of the goals in the Federal Housing Finance Agency’s (FHFA) 2012 Strategic Plan for Enterprise Conservatorshipsis to gradually contract the overall market footprint of Fannie Mae and Freddie Mac (the “Enterprises”). The basic premise is that with an uncertain future and a general desire for more private capital to re-enter the market, the presence of Fannie Mae and Freddie Mac in both the multifamily and single-family housing markets should be reduced gradually over time.

The multifamily lending businesses of Fannie Mae and Freddie Mac are fundamentally different from their single-family businesslines. Multifamily loans are generally much larger than singlefamily loans, they are collateralized by income-producing properties of five or more units, and multifamily lending occupies a much smaller segment of the overall housing market. Moreover, unlike in the single-family market where Fannie Mae and Freddie Mac share risk only on certain loan types, most of the multifamily loans that the Enterprises buy involve some type of risksharing with private capital. Fannie Mae and Freddie Mac’s multifamily businesses are also much less dominant in the marketplace than their single-family businesses and they generally weathered the housing crisis better, generating positive cash flow. New multifamily originations at the Enterprises increased during the financial crisis but have since returned to more normal levels.

Given these differences, FHFA determined that the goal of contracting Fannie Mae and Freddie Mac’s overall market footprint should be approached differently with respect to their multifamily businesses, and it may be accomplished using a much different and more direct method. To evaluate how to accomplish this goal and generate potential value for taxpayers, in the 2012 Conservatorship Scorecard FHFA directed the Enterprises to undertake a market analysis of the viability of their multifamily operations without the government guarantee. Fannie Mae and Freddie Mac were asked to include in their reviews the likely viability of their multifamily business models operating on a stand-alone basis after attracting private capital and adjusting pricing if needed.

The reports from Fannie Mae and Freddie Mac (see attached) conclude that there is little inherent value in their current multifamily businesses without the government guarantee, and that the sale of these businesses without the guarantee would return little or no value to the U.S. Treasury and to taxpayers. In the early years after the sale, the new “stand-alone” businesses would primarily depend on the portfolio asset management fees as a primary source of revenue until their loan production activities were established. Without a government guarantee backing the securities they issue, Fannie Mae and Freddie Mac project that their multi-family businesses would likely occupy a much smaller footprint in the multifamily finance market, with reduced production volume. The businesses would likely be monoline niche specialty finance companies with a focus on non-prime lending and secondary and tertiary market transactions. Their cost of funds and lending rates would be higher and the businesses would rely on the private securitization market or the participation of equity investors to be viable.

While the magnitude of the market impacts cited in the reports deserve further study, the reports highlight a fundamental tension that policymakers will have to consider as part of housing finance reform. Without a government guarantee a fully private company may not provide the same level and scope of services in the marketplace, at least at current prices. For example, Fannie Mae and Freddie Mac conclude that lending on affordable multifamily housing properties, in particular those that satisfy the housing goals, or providing loans to small multifamily properties, may not be practical due to the high cost, relatively low profitability and difficulties with securitization. In addition, without a government guarantee, there may be additional volatility in funding availability under certain economic conditions,similar to other commercial real estate markets.

The reports themselves represent the analysis and views of the Enterprises’ current management teams as reported to FHFA as conservator. FHFA is releasing the reports to enhance public policy discussion of the role of the government in multifamily housing finance, not as an endorsement of the reports’ conclusions.

Without a clear policy path on the future of housing finance reform, including Fannie Mae and Freddie Mac’srole in the multifamily market, and given the limited availability of economically viable disposition options highlighted in the reports, FHFA must still provide direction as conservator and overseer of the Enterprises’ multifamily businesses.Consistent with the goal of contracting Fannie Mae and Freddie Mac’s dominant market presence, FHFA’s 2013 Conservatorship Scorecard put in place a 10 percent volume reduction for the Enterprises’ new multifamily business in 2013. Going forward, FHFA will evaluate how this process worked in 2013, and intends to consider options to continue a path of gradual contraction while awaiting a legislative resolution of the conservatorships.

Links to Reports:
Fannie Mae Report
Freddie Mac Report

FHFA Limiting Fannie Mae and Freddie Mac Loan Purchases to "Qualified Mortgages"

The Federal Housing Finance Agency (FHFA) announced today that it is directing Fannie Mae and Freddie Mac to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the “ability to repay” requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank). In January, the Consumer Financial Protection Bureau (CFPB) issued a final rule implementing the “ability to repay” provisions of Dodd-Frank, including certain protections from liability for loans that meet the criteria of a qualified mortgage as outlined in the rule.

Beginning January 10, 2014, Fannie Mae and Freddie Mac will no longer purchase a loan that is subject to the “ability to repay” rule if the loan:

• is not fully amortizing,
• has a term of longer than 30 years, or
• includes points and fees in excess of three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.

Effectively, this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding the thresholds established by the rule.

Fannie Mae and Freddie Mac will continue to purchase loans that meet the underwriting and delivery eligibility requirements stated in their respective selling guides. This includes loans that are processed through their automated underwriting systems and loans with a debt-toincome ratio of greater than 43 percent. Loans with a debt-to-income ratio of more than 43 percent are not eligible for protection as qualified mortgages under the CFPB’s final rule unless they are eligible for purchase by Fannie Mae and Freddie Mac under the special or temporary qualified mortgage definition.

Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.

Link to Fannie Mae’s Lender Letter
Link to Freddie Mac’s Lender Letter

NAHB survey highlights key home buyer preferences

NAHB provides the most current and accurate information on home buyer preferences to help our members deliver the kind of homes and communities that are most desired by today's consumers.

In a newly published special study on NAHB's HousingEconomics.com website, our economists take a close look at key findings from a recently completed, comprehensive association survey called "What Home Buyers Really Want." Below are some important highlights of what they found.

• Just over half of all home buyers surveyed said they would like to buy a brand new home --28% directly from a builder and 27% custom built on their own land -- while 45% say an existing home is their first preference.
• Buyers expect to pay about $203,900 for their next home.
• Buyers want a home with a median of 2,226 square feet, which is about 17% larger than what they have now.
• Approximately 25% of buyers say the size of the lot is not important when choosing a home.
• Almost half (47%) want three bedrooms, while 32% want four bedrooms. Most (65%) prefer either 2 or 2.5 bathrooms.
• Most (57%) prefer a single-story home; 31% prefer two stories.
• A full or partial basement is something that 66% of buyers say they want.
• About half (48%) of buyers who want a 2-story home want the master bedroom on the second floor, while 70% prefer to have the washer and dryer on the first floor.
• Most buyers want a 2-car garage (53%), while 1 out of 5 buyers wants a 3+ car garage.
• For 65% of buyers, the most influential characteristic when buying a home is "living space and number of rooms that meet their needs."

When looking at most home components (including flooring, doors, kitchen countertops, cabinets and carpeting), buyers focus most on "quality" and "appearance." However, when looking for appliances, the focus is primarily on "quality" and "brand name."

To read the entire report on the study at HousingEconomics.com, click here.

2013 Golf Classic CANCELLED! Will reschedule

The 2013 Golf Classic scheduled for Monday, May 6th and sponsored by Stock Building Supply has been postponed due to the weather making the course unplayable at this time especially with more rain expected tonight.
The HBA of Greenville will reschedule this event and will let every one know this week of the newly scheduled date.

Please contact Crystal Yanes at the HBA office with questions or concerns. cyanes@hbaofgreenville.com