NAHB Talking Points of 3/28/11

Media Talking Points

Editor’s Note: These talking points are intended for EOs and HBA members and for internal use only. Use this document to help with member presentations and in interview situations with the media. Please do not distribute to anyone other than NAHB members and HBA staff. If you require additional assistance, contact NAHB Communications at 800-368-5242, ext. 8409.

Prepared by NAHB Communications

For the Week of March 28, 2011

Key Messages

1. Short-term outlook: A number of factors should help the housing market move forward in the near term. Pent-up demand has accumulated during the recession, as household formations (e.g., older children leaving parents’ households, young adults giving up roommates, etc.) have fallen to very low levels. NAHB estimates more than

2 million households have postponed moving out on their own and bolstering housing demand, waiting for a stronger recovery.

An improving economy, stronger job growth, historically low mortgage rates and stable house prices will help turn this potential demand into actual demand

Long-term outlook:  While household formation can be postponed temporarily, the underlying demographic forces are undeniable. NAHB economists project that the industry will need to deliver 16 million homes over the next decade just to keep pace with demand from a growing population.

2.       Main industry challenges: NAHB’s top priority is opening up the lines of credit for new housing production; and

3.       Resolving problems with the appraisal process.

Builder Confidence Edges Up, Sales Fall

• NAHB’s Housing Market Index (HMI), which measures builder confidence in the single-family market, rose slightly in March.

• Meanwhile, the government reported last week that new-home sales hit a record low in February.

• While our latest member surveys showed a slight uptick in expectations for the future, concerns about energy costs, tight credit conditions for buyers and builders, and other factors are contributing to an atmosphere in which many have adopted a very cautious stance.

• Still, there are signs that conditions in the housing market should show modest improvement in the coming months:
         1.      An improving economy means continued job growth.

2.       Low mortgage interest rates keep housing affordable.

3.       Three years of sub-normal household formation rates have created pent-up demand that will help reduce some of the excess housing inventory. 

Top Priority is Restoring Flow of Credit to Builders

• However, most builders still have no access to acquisition, development and construction (AD&C) loans for building homes -- a problem that threatens to severely slow the housing and economic recovery.

• With the lack of AD&C financing acting as a major drag on the housing recovery, the NAHB Board of Directors recently reaffirmed that this issue is the association’s top priority.

·         NAHB continues to reach out to regulators, banks, Washington policymakers, other industry groups and the media to pursue intensive efforts to improve the availability of credit for home builders.

Builders Call on Congress to Improve Access to Credit

·         Earlier this month, 500 builders marched on Capitol Hill as part of NAHB’s annual Legislative Conference and called on Congress to take tangible steps to improve access to credit for small builders.

• Builders urged their members of Congress to become an original cosponsor of legislation that will soon be introduced by Rep. Gary Miller (R-Calif.) designed to end the lending crisis

• Regarding the future of Fannie Mae and Freddie Mac, builders also called on Congress to ensure the federal government continues to provide a backstop for a reliable and adequate flow of affordably priced housing credit under all economic and financial conditions.
   

·         This week, congressional leaders put forth legislative proposals to effectively limit the role of Fannie and Freddie in the U.S. marketplace.

·         Responding to this action, NAHB Chairman Bob Nielsen issued a press statement calling these proposals a “piecemeal approach to reform that would disrupt the housing market and could push the nation back into a deep recession.”

NAHB Soliciting AD&C Case Studies

·         NAHB is also seeking practical stories from its members who have run into problems with their lenders.

·         These first-hand accounts enable NAHB to provide concrete data to regulators and other key policy makers and to also make a strong case to the media.

·         To help our members share their financing experiences, NAHB has set up an easy-to-use template located at www.nahb.org/adccasestudy.

Qualified Residential Mortgages

• In a major blow for housing affordability, the FDIC this week called for a 20 percent down payment for a loan to be considered a “qualified residential mortgage,” or QRM.
  
  
• Under the Dodd-Frank financial reform law passed last year, lenders must retain 5 percent of the credit risk of any home loan they securitize.

• Anything that regulators deem to be a qualified residential mortgage would be exempt from those rules.

• In response to the proposed rules, NAHB on March 30 hosted a teleconference with other industry and consumer groups and financial experts to discuss how this plan would harm consumers, the housing market and the fragile economic recovery.

• Requiring a high down payment would disproportionately harm first-time home buyers, who have limited wealth and on average account for 40 percent of home-buying activity. It would take an average family 12 years to scrape together a 20 percent down payment.

• Borrowers who can’t afford to put 20 percent down on a home and who are unable to obtain FHA financing will be expected to pay a premium of two percentage points for a loan in the private market to offset the increased risk to lenders, according to NAHB economists.

• This would disqualify about 5 million potential home buyers, resulting in 250,000 fewer home sales and 50,000 fewer new homes being built per year.

• Five other agencies are expected to sign-off shortly on this plan and then it will go out for a 60-day comment period before the agencies make a final decision. NAHB will weigh-in forcefully.

• Low-down payments are not what drove the lending crisis. It was lax underwriting standards.

• Loans that receive the QRM exemption should provide prudent underwriting and strong loan documentation, and prohibit high-risk loan features like negative amortization and balloon payments.

• That’s the best way to ensure a safe and healthy mortgage market, lower the risk of default and keep homeownership affordable for working families.
  
  

Appraisals

·         Meanwhile, appraisals remain a major problem for the industry, particularly the inappropriate use of foreclosed and distressed properties as comparables.

·         This has negatively affected property values and remains an obstacle to the recovery of the housing market.

• To help find constructive solutions to appraisal problems, NAHB on Dec. 9 hosted its third “Appraisal Summit” with federal regulatory agencies and the major housing and financial institution stakeholder and appraisal groups.

• The summit provided a good venue to further explore opportunities for clarifying and improving methods used in valuing newly built homes.

·         NAHB continues to work with all stakeholders involved in this issue to enact concrete reforms to ensure that appraisals accurately reflect true market values.

Congressional Resolution Supports MID

·         Regarding the mortgage interest deduction, NAHB continues to urge policy makers to preserve this vital tax tool and other housing tax incentives.

·         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 66 co-sponsors in the House, shows that lawmakers are aware of the critical role that the MID plays in supporting homeownership in this country.

·         NAHB is encouraging its members to call the Capitol Switchboard at 202-224-3121 and urge their representatives to co-sponsor H.Res.25.

SaveMyMortgageInterestDeduction.com

·         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.  

Housing Equals Jobs

·         As policy makers 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 economy.

·         When you consider the enormity of the total number of jobs attached to housing, a sector that accounts for 15 percent of our nation’s GDP, now is hardly the time to step back from our long-standing commitment to homeownership.

·         The construction of 100 single-family homes generates 305 jobs, $14.5 million in salaries and wages, and $8.9 million in federal, state and local tax revenue.

·         Restoring the health of the housing industry is a crucial first step in putting America back to work and addressing the federal deficit.

·         The path forward is perfectly clear: Congress needs to take actions that will create sustainable upward momentum in housing – not raise taxes on America’s home buyers and home owners.

Housing Market Snapshot

Housing Starts*    (February  2011)
                Total:  479,000                     Single: 375,000                   Multi: 104,000     

                Home Sales*       (February 2011)
                New: 250,000           Existing: 4.88 million

                Median Home Prices        (February 2011)
                New: $202,100        Existing: $157,000  

*Seasonally Adjusted Annual Rate

NAHB/Wells Fargo Housing Market Index – The index, which measures builder confidence in the market for newly-built single-family homes, rose one point to 17 in March. Any number under 50 indicates that more builders view sales conditions as poor than good.

NAHB Chief Economist David Crowe’s analysis:  “The key to recovery is job growth. NAHB expects an improving job market this spring will help prospective buyers feel more confident and propel more sales activity later this year. However, the continued problems that builders are facing in acquiring construction credit, maintaining performing lines of credit, and obtaining accurate appraisal values could significantly slow the onset of a housing recovery.”

Spring Board Meeting registration is now open…  www.nahb.org