NAHB Executives Host Teleconference on State of the Housing Industry:
Swift Action from Congress is Needed

Executives from the National Association of Home Builders (NAHB) hosted a conference Tuesday, March 4 to discuss the dire state of the housing market and what actions need to be taken to boost the housing market. DWM monitored the discussion to present to DWM readers.

“This is the deepest and most rapid downswing since the great depression,” said David Seiders, chief economist, for the National Association of Home Builders (NAHB).

He pointed out that new home sales are down 65 percent from the peak in 2005.

“New home sales will bottom out this year,” he said. “Sales are down 50 percent from peak to trough. That shows you just how steep and sudden this has been.”

Regarding mortgage rates he said the outlook is positive but added that it will be more difficult for potential buyers to get loans.

“There is no question that housing is the weakest part of the economy and pushing the economy toward a recession,” he added.

Jerry Howard, NAHB chief executive officer, weighed in on what initiatives Congress can take to help boost the housing market.

“It’s incumbent upon policy makers to take action—actions they could have taken several years ago, and if they had, perhaps we wouldn’t be in such trouble,” Howard said. “We have to encourage policymakers to take a hard look at the housing sector.”

He mentioned a bill before Congress that would reform the Federal Housing Administration and said this would be a good start. But he expressed concern over what Congress hasn’t done to help the housing market.

“I’m disappointed that the economic stimulus package that was passed didn’t include help for small businesses,” he said.  He added that the government has not taken steps to address the overwhelming amount of foreclosures.

Howard advocated a tax credit for first-time homebuyers that worked during the 1975-1976 recession.

“A similar type of proposal now would make a difference in releasing pent-up demand and diminish inventory,” he said.

Declining house prices are also a huge concern. “This is a significant issue for the economy,” said Seiders. “It is absolutely essential that home prices stabilize.”

“Obviously we are quite concerned,” said Howard. “Policymakers need to act quickly.”

Howard followed up the call with an appearance before Congress this week, suggesting that they move quickly to enact comprehensive regulatory reform for housing government-sponsored enterprises (GSEs), such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

"At a time when the housing market needs them more than ever, Fannie Mae and Freddie Mac have failed to adequately respond to the mortgage crisis," Howard told members of the Senate Banking Committee. "Rather than aggressively pursue market solutions, they are hunkering down to shore up financial results and shareholder returns - and are even taking steps that will further burden struggling mortgage borrowers."

Because their regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), continues to impose a 30 percent capital surcharge on both companies, Fannie and Freddie are attempting to build their capital reserves by imposing higher fees that will raise mortgage borrowing costs at the worst possible time, Howard said.

"OFHEO is constraining the ability of Fannie and Freddie to do all they can to promote affordable housing and to help strapped borrowers. At the same time, HUD's mission oversight over the two GSEs is lacking. HUD should be requiring them to do more, not less, in the present dire mortgage market circumstances," said Howard. "This just underscores why major reform of this flawed, bifurcated regulatory framework is long overdue and urgently needed."

According to Howard, NAHB believes that H.R. 1427, the Federal Housing Finance Reform Act of 2007, which passed the House last May, makes significant progress in allowing the GSEs to operate in a safe and sound manner while preserving the vitality of their government-sponsored status for the fulfillment of their vital housing mission.

In crafting a Senate bill to strengthen the regulatory framework of the GSEs, Howard urged lawmakers to:

• Balance the GSEs' housing mission with safety and soundness concerns;
• Provide Fannie Mae and Freddie Mac the flexibility to respond promptly, within their charters, to meet market needs;
• Extend the increase of conforming loan limits in high-cost areas;
• Focus and enhance GSE benefits to expand affordable housing opportunities;
• Employ capital as a precise instrument of risk management; and
• Preserve GSE portfolios as tools for achieving liquidity and their affordable housing mission.

"With the U.S. housing market now in the contraction phase of the most pronounced housing cycle since the Great Depression, passage of a GSE regulatory reform bill has the ability to greatly relieve liquidity and inventory pressures in the nation's mortgage markets, help stabilize housing prices and bolster consumer confidence. This would bring immediate benefit to the overall economy," said Howard.

CLICK HERE for Seiders' forecast slides.

CLICK HERE for information on NAHB’s actions urging Congress to enact temporary homebuyer tax credits.

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