by Rob Dietz, Chief Economist, National Association of Home Builders
The most serious headwind facing housing markets today is the escalation of framing lumber prices—up 59% since the start of 2017. Recent NAHB surveys suggest the price for lumber has overtaken the availability of labor as the primary business challenge for home builders. Since the beginning of last year, rising lumber prices have added more than $7,000 to the price of a typical new home and more than $2,000 to the price of a typical apartment.
There are a number of reasons why lumber prices have jumped, including a rail car shortage in Canada, but the primary factor is the 21% effective tariff rate placed on Canadian softwood lumber. The ongoing concerns over trade wars represent a macroeconomic risk to the gains resulting from the recent tax legislation, and lumber is a prime example.
Nonetheless, builder confidence remains strong, despite total housing starts falling 3.7% in April. Though multifamily starts declined 11% last month, that market is up 10% year-to-date, outperforming our forecast. And single-family starts are 8% above their year-to-date totals from a year ago. However, recent data show a gain in average new-home size, which is an early indicator of weakness in the entry-level market due to rising input costs.
The Home Builders Association of Greenville are your neighbors and community leaders providing education and support for building industry professionals. We create jobs, encourage homeownership, and promote responsible growth throughout the upstate of South Carolina.
Showing posts with label Housing Affordability. Show all posts
Showing posts with label Housing Affordability. Show all posts
Wednesday, June 13, 2018
Wednesday, August 2, 2017
NAHB Chairman Granger MacDonald speaks on housing affordability to U.S. Senate Finance Committee
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| Granger MacDonald greets Vice President Pence at the White House recently |
The focus of the hearing was tax credits for low income housing, but also touched on labor shortages, regulatory burdens, and other issues which impact housing affordability. South Carolina's Senator Tim Scott questioned MacDonald on the labor shortage issue as it impacts housing affordability.
"We are fortunate that our national chairman, Granger MacDonald, is well versed on the subject of housing affordability," Bob Barreto, President of the HBA of Greenville, said. "His company has built and manages nearly 5,000 affordable rental housing units in his home state of Texas," Barreto said. "We also were proud to have Granger MacDonald as keynote speaker at our 2016 Annual Meeting."
Click here to view the hearing. MacDonald's testimony begins at 1:00.30. Senator Scott's questions of Chairman MacDonald begin at 1:48.00 and continue at 1:51.00.
Thursday, July 27, 2017
South State Bank annouces $100 million low-income mortgage initiative
HBA member South State Bank announced this week a $100 million initiative to offer mortgages to consumers in low- to moderate-income and minority areas.
The $100 commitment, which is planned over a five-year period, will target the bank's combined markets following its merger with Park Sterling Bank, another HBA member. The combined bank will serve South Carolina, Georgia, North Carolina, and Virginia, with a strong presence in the Greater Greenville area.
Thursday, July 20, 2017
Compliance with regulations account for nearly 25 percent of the cost of a new home
By Bob Barreto, President, Home Builders Association of
Greenville
President, GBS Building Supply
On average, regulations imposed by
all levels of government account for 24.3 percent of the sales price of a new
single-family home, according to a 2016 study by the National Association of
Home Builders (NAHB).
Breaking down the total regulatory
costs further, the study revealed that three fifths of compliance costs, or 14.6
percent of the final house price, is due to a higher price for a finished lot
resulting from regulations imposed during the lot's development. The other two
fifths, or 9.7 percent of the house price, is the result of costs incurred by
the builder when building the home after purchasing the finished lot.
In the Greater Greenville area, the
study indicates that a new home is $67,424 more expensive as a result of the
cost of complying with regulations.
These regulations come from many sources. They include new land-use controls that reduce the potential density yield of a parcel of land, which increases the cost of the finished lot. Other regulations include significant changes to the building code that has added thousands of dollars to the price of a new home. Labor-law changes also have had an impact. As well as significant increases in building permit fees, development compliance fees, and new sewer account fees. But the greatest increase in the cost of compliance has come in the form of new and increased environmental regulations to control erosion and stormwater runoff during development and construction.
When the 2016 study is compared to
a previous study prepared in 2011, NAHB found that the cost of compliance with
regulations increased by 29.8 percent in the five years between the two
studies. That means the cost of
constructing a new home in the Greater Greenville area increased by more than
$20,000, in just five years, to comply with new rules imposed by
government. Meanwhile, personal disposable
income in the U.S. increased by just 14.4 percent during that same time period,
meaning that the average cost of regulation embodied in a new home is rising
more than twice as fast as the average American's ability to pay for it.
According to another study by the
National Association of Home Builders, 521 families in the Greater Greenville
are priced out of Homeownership by a $1,000 increase in the cost of purchasing
a new home. If you do the math, and I
have, that means the increase in the last five years in the cost of compliance
with regulations has priced out of homeownership more than 10,000 families in
our community.
There has been considerable
discussion and debate about affordable housing in our community. Studies by the City of Greenville and
Greenville County are providing evidence of the problem. Many want to blame home builders and land developers
for the problem. But a reading of the
studies by the National Association of Home Builders demonstrates that at least
part of the problem lies with well-meaning regulations that fail to take into
account the impact on a family’s ability to afford a home.
Clearly, a portion of the solution
to our community’s housing affordability problem lies in a thorough review of
the cost of complying with our own regulations.
Friday, September 9, 2016
Seeking New Lumber Sources in Chile
The National Association of Home Builders today completed four days of productive talks with more than 100 Chilean government, trade and industry officials that focused on increasing exports of softwood lumber and other wood products to America.
“We support opening up competition in the U.S. lumber market because we know that it will benefit American families who want to buy homes and U.S. builders who are seeking a steady supply of affordably priced lumber,” said National Association of Home Builders CEO Jerry Howard.”
The talks covered several areas, including establishing contacts among Chilean producers and American buyers and identifying and dealing with any policy barriers to increasing the volume of Chilean exports from their current level.
National Association of Home Builders made contacts with two of the three largest Chilean lumber producers and a number of other smaller producers who all indicated they will work together with their government to help increase exports. In addition, National Association of Home Builders was able to meet in Chile with Swedish lumber producers who expressed an interest in continuing conversations about increasing lumber exports to the U.S. and building a stronger relationship.
The meetings in Chile come at a time when the U.S. and Canada are in discussions over a new softwood lumber trade agreement. Though U.S. home builders would ideally prefer to purchase all of their softwood lumber and wood products from domestic producers, America today does not have the domestic capacity to meet its demand for lumber. Canada is by far the largest exporter of softwood lumber into the U.S. The latest three-year average share of Canadian imported lumber in the U.S. market is 28%.
A nine-year softwood lumber agreement between the U.S. and Canada that established a system of fees and quotas on Canadian imports to the United States that were triggered in response to changes in the market price of softwood lumber expired last October. The two nations are now engaged in a one-year “cooling off” period – meaning no trade disputes can be filed by either country regarding softwood lumber imports – until October 12.
Since the 1980s, numerous disputes have disrupted trade patterns, leading to unnecessary cost increases for industries such as home building that rely on softwood lumber, and straining U.S. relations with its neighbor to the north. This short-sighted political stalemate has left the American housing sector in the lurch.
As U.S. and Canadian negotiators discuss the parameters of a new agreement, National Association of Home Builders believes that it must be mindful of the U.S. housing market to ensure American consumers have access to a stable, dependable and affordable lumber supply.
Though Chile currently holds just 1.22% of the U.S. lumber market, National Association of Home Builders sees great potential for growth because the two nations have a free trade agreement.
“As the U.S. housing recovery continues to pick up steam, the demand for softwood lumber will grow,” said Howard. “This is why expanding lumber trade with Chile can benefit both nations. Chile would have the opportunity to increase its exports and market share to the United States, while U.S. industries such as housing that depend on a reliable supply of softwood lumber would be able to meet the housing needs of American consumers and to keep lumber and housing affordable.”
“We support opening up competition in the U.S. lumber market because we know that it will benefit American families who want to buy homes and U.S. builders who are seeking a steady supply of affordably priced lumber,” said National Association of Home Builders CEO Jerry Howard.”
The talks covered several areas, including establishing contacts among Chilean producers and American buyers and identifying and dealing with any policy barriers to increasing the volume of Chilean exports from their current level.
National Association of Home Builders made contacts with two of the three largest Chilean lumber producers and a number of other smaller producers who all indicated they will work together with their government to help increase exports. In addition, National Association of Home Builders was able to meet in Chile with Swedish lumber producers who expressed an interest in continuing conversations about increasing lumber exports to the U.S. and building a stronger relationship.
The meetings in Chile come at a time when the U.S. and Canada are in discussions over a new softwood lumber trade agreement. Though U.S. home builders would ideally prefer to purchase all of their softwood lumber and wood products from domestic producers, America today does not have the domestic capacity to meet its demand for lumber. Canada is by far the largest exporter of softwood lumber into the U.S. The latest three-year average share of Canadian imported lumber in the U.S. market is 28%.
A nine-year softwood lumber agreement between the U.S. and Canada that established a system of fees and quotas on Canadian imports to the United States that were triggered in response to changes in the market price of softwood lumber expired last October. The two nations are now engaged in a one-year “cooling off” period – meaning no trade disputes can be filed by either country regarding softwood lumber imports – until October 12.
Since the 1980s, numerous disputes have disrupted trade patterns, leading to unnecessary cost increases for industries such as home building that rely on softwood lumber, and straining U.S. relations with its neighbor to the north. This short-sighted political stalemate has left the American housing sector in the lurch.
As U.S. and Canadian negotiators discuss the parameters of a new agreement, National Association of Home Builders believes that it must be mindful of the U.S. housing market to ensure American consumers have access to a stable, dependable and affordable lumber supply.
Though Chile currently holds just 1.22% of the U.S. lumber market, National Association of Home Builders sees great potential for growth because the two nations have a free trade agreement.
“As the U.S. housing recovery continues to pick up steam, the demand for softwood lumber will grow,” said Howard. “This is why expanding lumber trade with Chile can benefit both nations. Chile would have the opportunity to increase its exports and market share to the United States, while U.S. industries such as housing that depend on a reliable supply of softwood lumber would be able to meet the housing needs of American consumers and to keep lumber and housing affordable.”
Wednesday, June 15, 2016
Thursday, February 19, 2015
NAHB: Housing Affordability Improves Slightly in the Fourth Quarter
Slightly lower interest rates and home prices contributed to a slight increase in nationwide housing affordability in the fourth quarter of 2014, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) released today.
In all, 62.8% of new and existing homes sold between the beginning of October and end of December were affordable to families earning the median income of $63,900. This is up from the 61.8% of homes sold in the third quarter.
The national median home price declined from $220,800 in the third quarter to $215,000 in the fourth quarter. Meanwhile, average mortgage interest rates decreased from 4.35% to 4.29%.
In Greater Greenville, the index rose from 78% during the third quarter of 2014 to 80.4% in the fourth quarter. Like the nation, house prices dropped slightly to $161,000 from $163,000, while income remained at $58,200. As a result, Greater Greenville's national rank as most affordable among all housing markets improved to 64th nationally, and 13th in the Southeast.
Meanwhile, Charleston's affordability fell slightly as housing prices continued to rise in that market. But Charlotte's affordability improved, also the result of falling home prices. Atlanta's affordability also improved.
“This upturn in affordability is a positive development, and in line with what we are hearing from builders in the field: More prospective buyers are starting to move forward in the marketplace,” said Tom Woods, Chairman of the National Association of Home Builders (NAHB).
“Affordable home prices, historically low mortgage rates and an improving job market will release pent-up demand and help keep the housing market moving forward in the year ahead,” said NAHB Chief Economist David Crowe.
Syracuse, N.Y. claimed the title of the nation’s most affordable major housing market, as 92.8% of all homes sold in the fourth quarter of 2014 were affordable to families earning the area’s median income of $67,700.
Also ranking among the most affordable major housing markets: Akron and Dayton, Ohio and Harrisburg-Carlisle and Scranton-Wilkes-Barre, Pa, with the latter two tied for fourth place.
Cumberland, Md.-W.Va. topped the affordability chart among smaller markets: 96.2 percent of homes sold during the fourth quarter were affordable to families earning the area’s median income of $54,100. Other smaller housing markets at the top of the index include Kokomo, Ind.; Wheeling, W.Va.-Ohio; Binghamton, N.Y.; and Salisbury, Md.
For a ninth consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major housing market. There, just 11.1% of homes sold were affordable to families earning the area’s median income of $100,400.
Other major metros at the bottom of the affordability chart were Los Angeles-Long Beach-Glendale, Santa Ana-Anaheim-Irvine, and San Jose-Sunnyvale-Santa Clara — all in California — and New York-White Plains-Wayne, N.Y.
All five least affordable small housing markets were in California. At the very bottom was Napa, where 12% of homes sold were affordable to families earning the area’s median income of $70,300. Other markets on the list included Santa Cruz-Watsonville, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles; in descending order.
In all, 62.8% of new and existing homes sold between the beginning of October and end of December were affordable to families earning the median income of $63,900. This is up from the 61.8% of homes sold in the third quarter.
The national median home price declined from $220,800 in the third quarter to $215,000 in the fourth quarter. Meanwhile, average mortgage interest rates decreased from 4.35% to 4.29%.
In Greater Greenville, the index rose from 78% during the third quarter of 2014 to 80.4% in the fourth quarter. Like the nation, house prices dropped slightly to $161,000 from $163,000, while income remained at $58,200. As a result, Greater Greenville's national rank as most affordable among all housing markets improved to 64th nationally, and 13th in the Southeast.
Meanwhile, Charleston's affordability fell slightly as housing prices continued to rise in that market. But Charlotte's affordability improved, also the result of falling home prices. Atlanta's affordability also improved.
“This upturn in affordability is a positive development, and in line with what we are hearing from builders in the field: More prospective buyers are starting to move forward in the marketplace,” said Tom Woods, Chairman of the National Association of Home Builders (NAHB).
“Affordable home prices, historically low mortgage rates and an improving job market will release pent-up demand and help keep the housing market moving forward in the year ahead,” said NAHB Chief Economist David Crowe.
Syracuse, N.Y. claimed the title of the nation’s most affordable major housing market, as 92.8% of all homes sold in the fourth quarter of 2014 were affordable to families earning the area’s median income of $67,700.
Also ranking among the most affordable major housing markets: Akron and Dayton, Ohio and Harrisburg-Carlisle and Scranton-Wilkes-Barre, Pa, with the latter two tied for fourth place.
Cumberland, Md.-W.Va. topped the affordability chart among smaller markets: 96.2 percent of homes sold during the fourth quarter were affordable to families earning the area’s median income of $54,100. Other smaller housing markets at the top of the index include Kokomo, Ind.; Wheeling, W.Va.-Ohio; Binghamton, N.Y.; and Salisbury, Md.
For a ninth consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major housing market. There, just 11.1% of homes sold were affordable to families earning the area’s median income of $100,400.
Other major metros at the bottom of the affordability chart were Los Angeles-Long Beach-Glendale, Santa Ana-Anaheim-Irvine, and San Jose-Sunnyvale-Santa Clara — all in California — and New York-White Plains-Wayne, N.Y.
All five least affordable small housing markets were in California. At the very bottom was Napa, where 12% of homes sold were affordable to families earning the area’s median income of $70,300. Other markets on the list included Santa Cruz-Watsonville, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles; in descending order.
Thursday, May 31, 2012
NAHB: Nationwide Housing Affordability Reaches New Record High
Nationwide housing affordability hit a new record high for a second consecutive quarter in the first three months of this year, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today. Yet tight lending conditions continue to pose a major obstacle to many prospective home buyers.
The latest HOI data reveal that 77.5 percent of all new and existing homes that were sold in this year’s first quarter were affordable to families earning the national median income of $65,000. This beats the previous record set in the final quarter of 2011, when 75.9 percent of homes sold were affordable to median-income earners.
The latest HOI data reveal that 77.5 percent of all new and existing homes that were sold in this year’s first quarter were affordable to families earning the national median income of $65,000. This beats the previous record set in the final quarter of 2011, when 75.9 percent of homes sold were affordable to median-income earners.
For the Upstate, the affordability index is 84.4, down slightly from 84.7 in the fourth quarter of 2011. Median household income rose from $58,300 to $59,000 from quarter-to-quarter. Median home prices also rose to $1,000 to $140,000. The Greenville region ranks 106 nationally in affordability.
“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening because of overly tight lending conditions that are keeping hardworking families from obtaining a suitable mortgage,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace.”
The most affordable major housing market in this year’s first quarter was Indianapolis-Carmel, Ind., where 95.8 percent of homes sold during the period were affordable to households earning the area’s median family income of $66,900.
Also ranking among the most affordable major housing markets in respective order were Dayton, Ohio; Lakeland-Winter Haven, Fla.; Modesto, Calif.; Grand Rapids-Wyoming, Mich.; and Buffalo-Niagara Falls, N.Y.; the latter two of which tied for fifth place.
Among smaller housing markets, Cumberland, Md.-W.Va. topped the affordability chart for the first time in this year’s first quarter. There, 99 percent of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000. Other smaller housing markets at the top of the index include Fairbanks, Alaska; Wheeling, W.Va.; Kokomo, Ind.; and Davenport-Moline-Rock Island, Iowa-Ill., respectively.
In New York-White Plains-Wayne, N.Y.-N.J., which retained the title of the least affordable major housing market for a 16th consecutive quarter, just 31.5 percent of homes sold in the first three months of this year were affordable to those earning the area’s median income of $68,200.
Other major metros at the bottom of the affordability chart included San Francisco-San Mateo-Redwood City, Calif.; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif., respectively.
Ocean City, N.J., was the least affordable smaller housing market on the list, with 45.9 percent of homes sold in the first quarter affordable to families earning the median income of $71,100. Other small metros at the bottom of the list included Santa Cruz-Watsonville, Calif.; San Luis Obispo-Paso Robles, Calif.; Santa Barbara-Santa Maria-Goleta, Calif.; and Laredo, Texas.
Please visit www.nahb.org/hoi for tables, historic data and details.
EDITOR’S NOTE: The NAHB/Wells Fargo Housing Opportunity Index is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board.
The NAHB/Wells Fargo HOI is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public.
“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening because of overly tight lending conditions that are keeping hardworking families from obtaining a suitable mortgage,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace.”
The most affordable major housing market in this year’s first quarter was Indianapolis-Carmel, Ind., where 95.8 percent of homes sold during the period were affordable to households earning the area’s median family income of $66,900.
Also ranking among the most affordable major housing markets in respective order were Dayton, Ohio; Lakeland-Winter Haven, Fla.; Modesto, Calif.; Grand Rapids-Wyoming, Mich.; and Buffalo-Niagara Falls, N.Y.; the latter two of which tied for fifth place.
Among smaller housing markets, Cumberland, Md.-W.Va. topped the affordability chart for the first time in this year’s first quarter. There, 99 percent of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000. Other smaller housing markets at the top of the index include Fairbanks, Alaska; Wheeling, W.Va.; Kokomo, Ind.; and Davenport-Moline-Rock Island, Iowa-Ill., respectively.
In New York-White Plains-Wayne, N.Y.-N.J., which retained the title of the least affordable major housing market for a 16th consecutive quarter, just 31.5 percent of homes sold in the first three months of this year were affordable to those earning the area’s median income of $68,200.
Other major metros at the bottom of the affordability chart included San Francisco-San Mateo-Redwood City, Calif.; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif., respectively.
Ocean City, N.J., was the least affordable smaller housing market on the list, with 45.9 percent of homes sold in the first quarter affordable to families earning the median income of $71,100. Other small metros at the bottom of the list included Santa Cruz-Watsonville, Calif.; San Luis Obispo-Paso Robles, Calif.; Santa Barbara-Santa Maria-Goleta, Calif.; and Laredo, Texas.
Please visit www.nahb.org/hoi for tables, historic data and details.
EDITOR’S NOTE: The NAHB/Wells Fargo Housing Opportunity Index is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board.
The NAHB/Wells Fargo HOI is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public.
Thursday, April 26, 2012
The case against Case-Shiller
by Michael Dey, Executive Vice President, Home Builders Association of Greenville
While the FHFA House Price Index was reported up .3 percent in February, the Case-Shiller Index, which measures just the top 10 and top 20 housing markets in the country, was down. According to Forbes, the Case-Shiller Index fell .8 percent from January to February.
The difference between the two indexes is considerable. The FHFA House Price Index is a measure of all housing markets in the country based on mortgage activity backed by Fannie Mae and Freddie Mac. The Case-Shiller Index measures just the top 10 and top 20 housing markets in the country. Case-Shiller tracks repeat home sales over time. FHFA is indexed to the contract mortgage amounts.
And therein lies the problem with the Case-Shiller Index; it measures just the largest housing markets, which is not a reflection of the whole country. Most markets in the country don't come anywhere close to the 50,000 housing starts each year that were commonplace in markets like Atlanta. And most housing markets did not experience the massive over building that occurred in many of the top housing markets, primarily because the smaller markets did not have the capacity to build on the scale that is possible in the largest markets.
Even more interesting is the fact that Robert Shiller, one of the founders of the Case-Shiller Index, was quoted by Reuters this week that the housing market will remain weak for a generation because suburban areas have lost their appeal to "walkable cities," the result of high gas prices. Gas prices may be a factor if you live 30 miles from work in suburban Atlanta, but compact markets like Greenville will not be impacted by gas prices in the same way that a sprawling top 20 market is impacted.
Also consider that many of the top housing markets are in states that have been shedding population and jobs since long before the recession. Much of that population and jobs have relocated to smaller markets in Southern and coastal states.
The continued reliance on data from the top 10 or 20 markets in the country as a barometer for the whole housing market provides a false sense of what is happening in the rest of the country. For example, in Greenville building activity is up 60 percent in the last year. And bear this in mind: just like the Case-Shiller Index provides an incomplete measure of housing today, it also provided an incomplete measure of housing seven years ago when those top 20 markets were red hot. Could reliance on incomplete data have contributed to the overheated housing market of the recent past. Is incomplete data contributing to the current overbearing regulation of housing activity today, particularly in smaller prospering markets like Greenville?
Federal regulators, banks, Congress, the White House, and the media would be better served to evaluate housing market-by-market, rather than rely on an index that is limited to just 20 out of the 270 markets in the nation. Even though Case-Shiller says it measures 75 percent of the housing activity in the country, it still only measures 7 percent of the individual housing markets.
While the FHFA House Price Index was reported up .3 percent in February, the Case-Shiller Index, which measures just the top 10 and top 20 housing markets in the country, was down. According to Forbes, the Case-Shiller Index fell .8 percent from January to February.
The difference between the two indexes is considerable. The FHFA House Price Index is a measure of all housing markets in the country based on mortgage activity backed by Fannie Mae and Freddie Mac. The Case-Shiller Index measures just the top 10 and top 20 housing markets in the country. Case-Shiller tracks repeat home sales over time. FHFA is indexed to the contract mortgage amounts.
And therein lies the problem with the Case-Shiller Index; it measures just the largest housing markets, which is not a reflection of the whole country. Most markets in the country don't come anywhere close to the 50,000 housing starts each year that were commonplace in markets like Atlanta. And most housing markets did not experience the massive over building that occurred in many of the top housing markets, primarily because the smaller markets did not have the capacity to build on the scale that is possible in the largest markets.
Even more interesting is the fact that Robert Shiller, one of the founders of the Case-Shiller Index, was quoted by Reuters this week that the housing market will remain weak for a generation because suburban areas have lost their appeal to "walkable cities," the result of high gas prices. Gas prices may be a factor if you live 30 miles from work in suburban Atlanta, but compact markets like Greenville will not be impacted by gas prices in the same way that a sprawling top 20 market is impacted.
Also consider that many of the top housing markets are in states that have been shedding population and jobs since long before the recession. Much of that population and jobs have relocated to smaller markets in Southern and coastal states.
The continued reliance on data from the top 10 or 20 markets in the country as a barometer for the whole housing market provides a false sense of what is happening in the rest of the country. For example, in Greenville building activity is up 60 percent in the last year. And bear this in mind: just like the Case-Shiller Index provides an incomplete measure of housing today, it also provided an incomplete measure of housing seven years ago when those top 20 markets were red hot. Could reliance on incomplete data have contributed to the overheated housing market of the recent past. Is incomplete data contributing to the current overbearing regulation of housing activity today, particularly in smaller prospering markets like Greenville?
Federal regulators, banks, Congress, the White House, and the media would be better served to evaluate housing market-by-market, rather than rely on an index that is limited to just 20 out of the 270 markets in the nation. Even though Case-Shiller says it measures 75 percent of the housing activity in the country, it still only measures 7 percent of the individual housing markets.
Tuesday, January 10, 2012
NAHB: Federal Legislative Priorities for 2012
You are a member of your Home Builders Association. Do you wonder what your association is doing for you in the Federal arena. 2012 is a critical year on the government scene for home builders. Your National Association of Home Builders has published is priorities for the year and they are listed and detailed below.
Summary
1. End the Housing Production Credit Crisis
It is absolutely vital to get credit flowing to the housing sector again. In the current regulatory climate, lenders have basically stopped making acquisition, development and construction (AD&C) loans that are necessary to allow builders to construct new homes. Credit is the lifeblood of housing. Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. And when lenders call in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and banks take possession of unfinished property.
Federal bank regulators maintain that they are not encouraging institutions to stop making loans or to indiscriminately liquidate outstanding loans. However, NAHB members who are dealing with banks all across the country suggest that bank examiners in the field are adopting a significantly more aggressive stance on AD&C loans out of fear of the regulators coming into the banks and targeting them.
With inventories of new homes nearly depleted in many markets, builders should be gearing up to meet demand, create new jobs and keep the economic expansion moving forward. The only thing holding builders back in these locations are traditional lenders, who still aren’t providing the credit needed to renew the production process.
NAHB is urging Congress to support legislation introduced on May 5 by Reps. Gary Miller (R-Calif.) and Brad Miller (D-Calif.) that would help restore the flow of credit to the housing sector. H.R. 1755, the Home Construction Lending Regulatory Improvement Act of 2011, offers a legislative solution aimed at ending the freeze in housing production credit that has forced countless home building firms across the nation to shutter their doors, resulting in grave repercussions for job growth and the overall economy.
For more information, see the text of the legislation or read NAHB’s press release.
2. Resolve the Faulty Appraisal Process
Appraisals remain a major problem for the housing industry. The process has gone seriously wrong because some appraisers are using distressed properties – many of which have been neglected and are in poor physical condition – as comparables in assessing the value of brand new homes without accounting for major differences in condition and quality. Without such adjustments, the two are not comparable. Appraisers don’t typically enter these fixer-up homes; if they did, they would likely recognize the substantial differences between a foreclosure that lacks working appliances and a new home fitted with state-of-the-art appliances.
Too often, due to faulty appraisal practices, the builder’s house winds up getting appraised at less than the cost of construction. This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, negatively affects housing demand and acts as an obstacle to the recovery of the housing market. Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility.
For more information on the appraisal issue, see the Nov. 7 special edition of Nation's Building News.
3. Protect the Mortgage Interest Deduction
Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, but it could be eliminated or scaled back as federal lawmakers and the Administration are looking at tax increases in light of deficit concerns.
The consequences would be devastating for home owners, the housing market and the nation’s economy. Any attempts to tamper with the mortgage interest deduction would raise taxes on millions of home buyers and home owners and further depress home values, leaving more home owners with mortgages larger than the value of their property (“underwater”) and fueling even more foreclosures.
This cornerstone of American housing policy has been in place since the inception of the tax code nearly 100 years ago and supports the aspirations of families at all income levels to become home buyers. Nearly 37 million home owners directly benefit from the mortgage interest deduction and 70 percent of the benefit goes to middle-class home owners who make less than $200,000.
Many in Congress agree that tampering with the mortgage interest deduction would harm consumers and the economy. House resolution H. Res. 25 expresses a "sense of Congress that the current federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted.” The resolution, which has more than 180 cosponsors, shows that lawmakers are aware of the critical role that the MID plays in supporting homeownership in this country. NAHB is encouraging supporters to call the Capitol Switchboard at 202-224-3121 and urge their representatives to co-sponsor H. Res. 25.
To educate the public on the importance of preserving the mortgage interest deduction as a cornerstone of American housing policy, NAHB has created a consumer-oriented website, SaveMyMortgageInterestDeduction.com. The website contains fact sheets, frequently asked questions, statistics, and other important information to allow consumers to stay informed as debate on the mortgage interest deduction moves forward.
Most importantly, SaveMyMortgageInterestDeduction.com tells visitors how to remain engaged and make sure their opinions are heard on this important issue by connecting through NAHB’s Facebook and Twitter mortgage interest deduction communities and Eye on Housing blog.
4. Maintain Federal Support for Housing Finance System
Some members of Congress are actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing. Absent a federal role to help reassure mortgage market investors, the 30-year, fixed rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace. Similarly, the availability of financing for multifamily housing would fall woefully short of the growing need.
In the wake of the financial crisis, the Federal Housing Administration, Fannie Mae and Freddie Mac have become the primary sources of financing for residential housing.
Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms. As the private market assumes a greater role in the mortgage marketplace, maintaining an appropriate level of government support is essential to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration’s participation in the market, which would further limit the availability of low downpayment mortgages.
- End the Housing Production Credit Crisis
- Resolve the Faulty Appraisal Process
- Protect the Mortgage Interest Deduction
- Maintain Federal Support for Housing Finance System
- Preserve Affordable Downpayments and Mortgages
- Recognize Housing’s Important Role to the Economy
- Defend the Low Income Housing Tax Credit
Read details about each issue below.
1. End the Housing Production Credit Crisis
It is absolutely vital to get credit flowing to the housing sector again. In the current regulatory climate, lenders have basically stopped making acquisition, development and construction (AD&C) loans that are necessary to allow builders to construct new homes. Credit is the lifeblood of housing. Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. And when lenders call in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and banks take possession of unfinished property.
Federal bank regulators maintain that they are not encouraging institutions to stop making loans or to indiscriminately liquidate outstanding loans. However, NAHB members who are dealing with banks all across the country suggest that bank examiners in the field are adopting a significantly more aggressive stance on AD&C loans out of fear of the regulators coming into the banks and targeting them.
With inventories of new homes nearly depleted in many markets, builders should be gearing up to meet demand, create new jobs and keep the economic expansion moving forward. The only thing holding builders back in these locations are traditional lenders, who still aren’t providing the credit needed to renew the production process.
NAHB is urging Congress to support legislation introduced on May 5 by Reps. Gary Miller (R-Calif.) and Brad Miller (D-Calif.) that would help restore the flow of credit to the housing sector. H.R. 1755, the Home Construction Lending Regulatory Improvement Act of 2011, offers a legislative solution aimed at ending the freeze in housing production credit that has forced countless home building firms across the nation to shutter their doors, resulting in grave repercussions for job growth and the overall economy.
For more information, see the text of the legislation or read NAHB’s press release.
2. Resolve the Faulty Appraisal Process
Appraisals remain a major problem for the housing industry. The process has gone seriously wrong because some appraisers are using distressed properties – many of which have been neglected and are in poor physical condition – as comparables in assessing the value of brand new homes without accounting for major differences in condition and quality. Without such adjustments, the two are not comparable. Appraisers don’t typically enter these fixer-up homes; if they did, they would likely recognize the substantial differences between a foreclosure that lacks working appliances and a new home fitted with state-of-the-art appliances.
Too often, due to faulty appraisal practices, the builder’s house winds up getting appraised at less than the cost of construction. This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, negatively affects housing demand and acts as an obstacle to the recovery of the housing market. Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility.
For more information on the appraisal issue, see the Nov. 7 special edition of Nation's Building News.
3. Protect the Mortgage Interest Deduction
Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, but it could be eliminated or scaled back as federal lawmakers and the Administration are looking at tax increases in light of deficit concerns.
The consequences would be devastating for home owners, the housing market and the nation’s economy. Any attempts to tamper with the mortgage interest deduction would raise taxes on millions of home buyers and home owners and further depress home values, leaving more home owners with mortgages larger than the value of their property (“underwater”) and fueling even more foreclosures.
This cornerstone of American housing policy has been in place since the inception of the tax code nearly 100 years ago and supports the aspirations of families at all income levels to become home buyers. Nearly 37 million home owners directly benefit from the mortgage interest deduction and 70 percent of the benefit goes to middle-class home owners who make less than $200,000.
Many in Congress agree that tampering with the mortgage interest deduction would harm consumers and the economy. House resolution H. Res. 25 expresses a "sense of Congress that the current federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted.” The resolution, which has more than 180 cosponsors, shows that lawmakers are aware of the critical role that the MID plays in supporting homeownership in this country. NAHB is encouraging supporters to call the Capitol Switchboard at 202-224-3121 and urge their representatives to co-sponsor H. Res. 25.
To educate the public on the importance of preserving the mortgage interest deduction as a cornerstone of American housing policy, NAHB has created a consumer-oriented website, SaveMyMortgageInterestDeduction.com. The website contains fact sheets, frequently asked questions, statistics, and other important information to allow consumers to stay informed as debate on the mortgage interest deduction moves forward.
Most importantly, SaveMyMortgageInterestDeduction.com tells visitors how to remain engaged and make sure their opinions are heard on this important issue by connecting through NAHB’s Facebook and Twitter mortgage interest deduction communities and Eye on Housing blog.
4. Maintain Federal Support for Housing Finance System
Some members of Congress are actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing. Absent a federal role to help reassure mortgage market investors, the 30-year, fixed rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace. Similarly, the availability of financing for multifamily housing would fall woefully short of the growing need.
In the wake of the financial crisis, the Federal Housing Administration, Fannie Mae and Freddie Mac have become the primary sources of financing for residential housing.
Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms. As the private market assumes a greater role in the mortgage marketplace, maintaining an appropriate level of government support is essential to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration’s participation in the market, which would further limit the availability of low downpayment mortgages.
Reps. Gary Miller (R-Calif.) and Carolyn McCarthy (D-N.Y.) on July 7 introduced H.R. 2413, the Secondary Market Facility for Residential Mortgages Act of 2011. The bill would stabilize housing and ensure liquidity in the mortgage market by maintaining a federal role in the U.S. housing finance system.
Similar bipartisan legislation (H.R. 1859) introduced this spring by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.) would replace Fannie Mae and Freddie Mac with five private companies that would issue mortgage-backed securities and have government backing.
Similar bipartisan legislation (H.R. 1859) introduced this spring by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.) would replace Fannie Mae and Freddie Mac with five private companies that would issue mortgage-backed securities and have government backing.
NAHB has presented lawmakers with a detailed proposal on restructuring the housing finance system to provide a consistent supply of mortgage liquidity and retain a federal backstop while limiting taxpayer exposure. Actively involved in this issue, the association continues to encourage all congressional efforts that seek an appropriate federal role to ensure a reliable and adequate flow of affordable housing credit.
Meanwhile, in an important victory for consumers, President Obama on Nov. 18 signed into law legislation passed by Congress to restore higher loan limits through 2013 for mortgages backed by the Federal Housing Administration. Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and downpayment requirements.
For more information, click on the links below:
Six federal agencies are proposing a national Qualified Residential Mortgage (QRM) standard that would require a minimum 20 percent downpayment, which would keep homeownership out of reach of most first-time home buyers and middle-class households.
In addition, the QRM plan includes several other bad ideas that would seriously impact the average family’s ability to affordably obtain a home of their own. It would mandate restrictive debt-to-income ratios to qualify for a home loan and prevent 25 million current home owners from refinancing to lower mortgage rates because they lack the required 25 percent equity in their homes.
High downpayment and equity rules along with excessive underwriting requirements will not have a meaningful impact on default rates but it will tighten lending rules to the point where millions of creditworthy home buyers won’t be able to qualify for a mortgage. Responsible consumers who maintain good credit and seek safe loan products will be forced into more expensive mortgages under the terms of the proposed rule simply because they do not have 20 percent or more in downpayment or equity. In other words, the proposal unfortunately penalizes qualified, low-risk borrowers.
About 62 percent of first mortgages taken out to purchase a home last year would not have qualified under the proposed QRM standard because they had downpayments of less than 20 percent, according to LPS Applied Analytics, a mortgage data firm.
NAHB estimates that it would take 12 years for a typical family to save enough money for a 20 percent downpayment on a median-priced single-family home and other research has found it would take even longer. Borrowers unable to make a 20 percentdownpayment or to obtain FHA financing would be expected to pay a premium of up to two percentage points for a loan in the private market to offset the increased risk to lenders, according to NAHB economists. This would annually disqualify about 5 million potential home buyers, resulting in 250,000 fewer home purchases each year.
If buyers are denied access to affordable housing credit, the shadow inventory of foreclosed homes will not be drawn down, a housing recovery will not take hold and economic growth will stall.
Low-downpayment home loans have been originated safely for decades and did not cause the housing lending crisis. Subprime, no-documentation loans and other alternative mortgage products crashed the economy. The Administration and regulators must acknowledge this fact and offer a new plan that ensures a safe and healthy mortgage market and keeps homeownership affordable for working American families.
For more information on this topic, click on the links below:
As policymakers begin debate on housing finance and budget issues that will impact job creation and future growth, they must understand the important role that housing plays in the U.S. economy. Considering the enormity of the total number of jobs attached to housing, a sector that accounts for 15 percent of the nation’s Gross Domestic Product, now is hardly the time to step back from the nation’s long-standing commitment to homeownership.
Building 100 average single-family homes generates more than 300 jobs and nearly $9 million in taxes and revenue for state, local and federal governments. Perhaps more than any other consumer product, housing is “Made in America.” New homes and apartments don’t arrive in this country on container ships from Europe or Asia, and most of the products used in home construction and remodeling are manufactured here in the United States.
More than 1.4 million residential construction jobs have been lost since April 2006. The pace of recovery is debatable, but based purely on population growth and demographics, the U.S. will need to build 17 million additional homes over the next decade.
The gap between current production and potential housing production is more than 1 million homes. That represents more than 3 million untapped American jobs. This gap is a result of multiple factors, including deferred household formations, a lack of construction financing and flawed appraisal practices under which new homes get compared to distressed and foreclosed properties, thereby distorting true market values.
There can be no economic recovery without a housing recovery. The path forward is perfectly clear: Congress needs to take actions to restore the health of the housing industry to put America back to work.
This is a sentiment shared by American voters as well. A recent NAHB survey of likely 2012 voters conducted by Public Opinion Strategies and Lake Research Partners found that despite the ups and downs of the housing market, home owners and non-owners alike consider owning a home essential to the American Dream and support politicians who embrace pro-housing policies and the mortgage interest deduction.
For more information, click on the links below:
- Restoring higher FHA loan limits provides a much-needed boost to the mortgage market
- Bipartisan House bill maintains a federal role in restructured housing finance system
- NAHB testimony before the Senate Banking Committee on the future of the housing finance system
- NAHB press release on Senate Banking Committee hearing
- Principles for restoring stability to the nation’s housing finance system
- NAHB press statement on House hearing examining housing finance issues
- Statement from NAHB on proposals to eliminate the role of Fannie Mae and Freddie Mac in the U.S. mortgage market
- Fannie Mae, Freddie Mac and FHA Loan Limit Changes for 2011: Scope of Impact
Six federal agencies are proposing a national Qualified Residential Mortgage (QRM) standard that would require a minimum 20 percent downpayment, which would keep homeownership out of reach of most first-time home buyers and middle-class households.
In addition, the QRM plan includes several other bad ideas that would seriously impact the average family’s ability to affordably obtain a home of their own. It would mandate restrictive debt-to-income ratios to qualify for a home loan and prevent 25 million current home owners from refinancing to lower mortgage rates because they lack the required 25 percent equity in their homes.
High downpayment and equity rules along with excessive underwriting requirements will not have a meaningful impact on default rates but it will tighten lending rules to the point where millions of creditworthy home buyers won’t be able to qualify for a mortgage. Responsible consumers who maintain good credit and seek safe loan products will be forced into more expensive mortgages under the terms of the proposed rule simply because they do not have 20 percent or more in downpayment or equity. In other words, the proposal unfortunately penalizes qualified, low-risk borrowers.
About 62 percent of first mortgages taken out to purchase a home last year would not have qualified under the proposed QRM standard because they had downpayments of less than 20 percent, according to LPS Applied Analytics, a mortgage data firm.
NAHB estimates that it would take 12 years for a typical family to save enough money for a 20 percent downpayment on a median-priced single-family home and other research has found it would take even longer. Borrowers unable to make a 20 percentdownpayment or to obtain FHA financing would be expected to pay a premium of up to two percentage points for a loan in the private market to offset the increased risk to lenders, according to NAHB economists. This would annually disqualify about 5 million potential home buyers, resulting in 250,000 fewer home purchases each year.
If buyers are denied access to affordable housing credit, the shadow inventory of foreclosed homes will not be drawn down, a housing recovery will not take hold and economic growth will stall.
Low-downpayment home loans have been originated safely for decades and did not cause the housing lending crisis. Subprime, no-documentation loans and other alternative mortgage products crashed the economy. The Administration and regulators must acknowledge this fact and offer a new plan that ensures a safe and healthy mortgage market and keeps homeownership affordable for working American families.
For more information on this topic, click on the links below:
- Lawmakers join industry groups to urge revising minimum 20 percent down requirement
- Industry White Paper on QRMs
- Consumer, banking and housing groups issue joint statement on proposed QRM rules
- Diverse groups respond to proposed rule for QRMs
- NAHB press release on how 20 percent downpayment rule would disrupt housing market
As policymakers begin debate on housing finance and budget issues that will impact job creation and future growth, they must understand the important role that housing plays in the U.S. economy. Considering the enormity of the total number of jobs attached to housing, a sector that accounts for 15 percent of the nation’s Gross Domestic Product, now is hardly the time to step back from the nation’s long-standing commitment to homeownership.
Building 100 average single-family homes generates more than 300 jobs and nearly $9 million in taxes and revenue for state, local and federal governments. Perhaps more than any other consumer product, housing is “Made in America.” New homes and apartments don’t arrive in this country on container ships from Europe or Asia, and most of the products used in home construction and remodeling are manufactured here in the United States.
More than 1.4 million residential construction jobs have been lost since April 2006. The pace of recovery is debatable, but based purely on population growth and demographics, the U.S. will need to build 17 million additional homes over the next decade.
The gap between current production and potential housing production is more than 1 million homes. That represents more than 3 million untapped American jobs. This gap is a result of multiple factors, including deferred household formations, a lack of construction financing and flawed appraisal practices under which new homes get compared to distressed and foreclosed properties, thereby distorting true market values.
There can be no economic recovery without a housing recovery. The path forward is perfectly clear: Congress needs to take actions to restore the health of the housing industry to put America back to work.
This is a sentiment shared by American voters as well. A recent NAHB survey of likely 2012 voters conducted by Public Opinion Strategies and Lake Research Partners found that despite the ups and downs of the housing market, home owners and non-owners alike consider owning a home essential to the American Dream and support politicians who embrace pro-housing policies and the mortgage interest deduction.
An overwhelming 75 percent of the respondents said that owning a home is worth the risk of the fluctuations in the market and 73 percent of those who do not own a home say it is a goal of theirs to eventually buy one. Equally telling, more than 70 percent of voters believe the federal government should provide tax incentives to promote homeownership and oppose proposals to eliminate the mortgage interest deduction -- a sentiment that cuts across party lines.
For more information on this topic, click on the following links:
- Poll finds big disconnect between Washington policymakers and voters on value of housing
- Direct impact of home building and remodeling on U.S. economy
- Economic benefits of new home construction
- Housing’s contribution to Gross Domestic Product
As Congress looks at tax expenditures and all programs come under review, it is important to protect the Low Income Housing Tax Credit (LIHTC), the most successful affordable rental housing production program in U.S. history. Eliminating the LIHTC would bring production and rehabilitation of affordable rental housing to a standstill.
Since its inception, the program has made possible the production of more than 2 million affordable apartments. It creates approximately 95,000 new full-time jobs, adds $7.1 billion in income to the economy and generates approximately $2.8 billion in federal, state and local taxes each year. In recent years, the LIHTC has produced about 75,000 new apartment homes annually.
The demand for affordable housing is acute and far exceeds the ability of LIHTC projects to keep pace. The program is essential to address the shortage of affordable housing options in our cities and towns.
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