NAHB News
REMODELING MARKET ACTIVITY BUILDS MOMENTUM
Residential remodeling showed modest gains during the second quarter of 2009 with increases in all indicators, according to the latest National Association of Home Builders (NAHB) Remodeling Market Index (RMI). The current market conditions measure grew to 38.1 in the first quarter. Future expectations rose to 34.2 in the previous quarter.
The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as improving. The RMI has been running below 50 since the final quarter of 2005.
"With more calls from homeowners and more projects under way, remodelers are seeing better activity in their businesses," says NAHB Remodelers Chairman Greg Miedema. "Although remodeling jobs are still harder to find, homeowners are showing more interest in remodeling spending."
Indicators for current remodeling market conditions improved across all regions: 36.9 in the Northeast, 38.3 in the Midwest, 39.7 in the South, and 40.5 in the West. A significant portion of the market improvement came from the measure for major additions and alterations (jobs worth $25,000 or more) with a leap to 38.2. Smaller growth was observed in the indicators for minor additions and alternations (less than $25,000) at 41.5, and maintenance and repair at 33.6.
All measures for future expectations in the remodeling market increased significantly. Remodelers reported growth in calls for bids at 38.8. The backlog of remodeling jobs jumped to 34.4. And appointments for proposals climbed to 40.3.
"While remodelers remain cautious, they report business is looking a little better after several challenging quarters," says NAHB Chief Economist David Crowe. "Conditions for this quarter have returned to nearly the levels of this time last year. The uptick in the expectations component suggests this trend will continue as the entire housing market begins its recovery."
BUILDERS CALL ON CONGRESS TO EXTEND, ENHANCE BUYER TAX CREDIT
To help create jobs and set the stage for a strong recovery, NAHB called on Congress to extend and enhance the $8,000 first-time home buyer tax credit due to expire on Dec. 1. Specifically, NAHB is asking Congress to extend the home buyer tax credit program through Nov. 30, 2010 and make it available to all buyers of principal residences.
"If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing starts, creating nearly 350,000 jobs over the coming year," says NAHB Chairman Joe Robson. "That's good for the economy and good for America."
Although there have been some signs of economic stabilization in recent weeks, the unemployment rate is rapidly approaching double-digits. Without a concerted focus on the housing sector, which comprises more than 15 percent of the GDP, any hope for a recovery could fade. "At best, it looks like a jobless recovery once it gets underway," says Robson. "This is why Congress needs to take bold, meaningful action now."
In addition to extending the tax credit, Robson says homebuilders will meet with their lawmakers in their home districts during the congressional recess and urge them to:
- Correct a faulty appraisal process. NAHB is urging Congress to work with housing and federal regulators to adopt and enforce clear, concise regulatory guidance that will allow appraisers to develop realistic valuations based on sales that are truly comparable. Lawmakers should also call on the Federal Housing Administration, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac to establish an appeals process similar to the one used by the Veterans Affairs Loan Guaranty Program. Under the VA program, the appraiser is required to seek more information when it appears the appraised value will fall short of the sales price.
- Improve housing credit conditions. Since there can be no meaningful economic recovery until the flow of credit is restored to housing, NAHB is calling on Congress to urge regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that has emerged as a major impediment to the housing recovery. Congress needs to urge regulators to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes.
- Co-sponsor Net Operating Loss (NOL) relief legislation in the House and Senate. NOL bills H.R. 2452 in the House and S. 823 in the Senate would prevent further layoffs in building and other industries hit hard by the recession. The legislation would help all businesses by eliminating the current $15million cap on average annual gross receipts and allowing 2009 losses to be eligible for the expanded carryback.
In addition, the bills would also help taxpayers who have been hit by the Alternative Minimum Tax to fully benefit from any NOL carryback. The bills both enjoy bipartisan support. Currently, H.R. 2452 and S. 823 have 92 and 37 co-sponsors, respectively.
Taken together, these four issues--extending the $8,000 home buyer tax credit for one year and making it eligible for all home buyers; bringing common sense to the appraisal process; urging banking regulators to ease AD&C credit; and passing the NOL carryback legislation--will not only create needed jobs for American workers quickly, but also stimulate demand for goods and services throughout Main Street America.
CREDIT CRUNCH HITS NAHB SHOW HOME
The New American Home 2010, a model of innovation in energy and resource efficiency, has now become a high profile model of restrictive lending practices by a banking industry that is choking off the supply of credit for residential construction. As Las Vegas builder, Domanic Custom Homes, works tirelessly to complete the home in time for its debut in January at the 2010 International Builders' Show (IBS), the company must now contend with lenders who have cut off the supply of capital for even the best projects.
The 6,000-square-foot, desert contemporary home is being built to the new National Green Building Standard and will be a near net-zero energy home. It's a model of space efficiency in residential design, and the green building features include APEX block construction for exterior walls, a solar hot water system with gas backup, several types of insulation for different parts of the house, and photovoltaic cells.
It also includes a greywater recycling system, tankless hot water heaters, high-efficiency furnaces, and "intelligent" fireplaces. It even has a green roof system to cover part of the patio. It is now 60 percent finished, but Domanico Custom Homes has not been able to find a bank that will finance the final draw needed to complete the home.
NAHB is calling on banking regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that have emerged as a major impediment to the housing recovery. "The banking regulators need to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes," says Joe Robson, chairman of NAHB.
Adam Knecht, general manager at Domanico Custom Homes, says he understands the lenders' perspective. "Banks are just not lending because Las Vegas has been a tough market," Knecht says. "But this is a beautiful home in a great location and it is the state-of-the-art in green building. The New American Home is seen by thousands of people--millions if you include feature articles in newspapers and magazines. We're not going to have trouble selling this home. If there is an investor out there looking for a good lending opportunity, I would love to hear from them."
Sponsored by the National Council of the Housing Industry (NCHI) and Builder Magazine, The New American Home is one of NAHB's most visible programs. The show home is just 10 minutes from the Las Vegas Convention Center. The home will be open for free guided tours during IBS 2010 exhibit hours.
APARTMENT MARKET STALLS WHILE CONDOS SHOW MOVEMENT
While some sectors of the housing industry are showing signs of rebounding, the apartment sector is on a slower trajectory for recovery, according to data released by NAHB in its Multifamily Market Index.
NAHB's Multifamily Market Indexes for the second quarter of 2009 continued a downward movement across all rental sectors. The index value for market-rate apartment starts was at 16.7. The lower-rent apartment index fell to 21.3. Lower-rent apartment starts expectations for the next six months showed some improvement by rising to 38.2 in the second quarter of 2009.
The Condo index is at about 15. The expectation index for condo starts six months into the future rose modestly to a level of 27.1.
"The continued contraction in multifamily starts is exacerbated by the 'shadow market' of empty, foreclosed single-family homes and condos that are being rented at below-market rates by investor-owners," says David Crowe, NAHB's chief economist. "Lenders see the high apartment vacancy rates and vacant condo inventory, and step away from backing any new production."
Increased vacancies and slower absorptions confirm the builders' and developers' current market assessment. The current quarter's apartment vacancy rate, as reported in this survey, is 8.1 percent. During the second quarter, only 36 percent of new units were reported as being rented within 60 days. Demand for apartments fell as household formations and job creation numbers also dropped. The demand index for higher-end apartments fell to 27.1.
NAHB's Multifamily Market Indexes are derived from quarterly surveys of multifamily builders and developers in which they rank their perceptions of the current conditions and expectations for the new future as "good," "fair" or "poor." The responses are used to create a scale of zero to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.
Just over half of builders report that they've dropped their condo prices and the average reduction is 17 percent. Other top marketing incentives include optional items at no cost, paying for closing costs or fees and absorbing financing points.
"The depressed current level and six-month expectations for multi-family construction is likely to result in supply shortages in rental apartments one to two years from now when the economy recovers," says Crowe.
