Builders fear expiration of home buyer tax credit will erode sales
From press release
WASHINGTON, D.C.—Home builders in Illinois and Minnesota participating in a teleconference conducted by the National Association of Home Builders (NAHB) said Oct. 15 that they are worried the recent improvements they have been seeing in home sales are beginning to fade with the approach of the expiration of the $8,000 tax credit for first-time home buyers Dec. 1.
Citing the prospect of unemployment climbing into the double digits in the period ahead, the builders also voiced concerns about the staying power of the economic recovery that now appears to be materializing. Stabilizing housing, which accounts for more than 15 percent of the gross domestic product, must be a top priority of Congress, they said, to create jobs and put the nation’s stalled economy on the path to sustainable growth.
The panel included Ed Brady, president, Brady Homes, Bloomington, Ill.; Monte Mraz, owner, Heritage Minnesota, LLC, Pequot Lakes, Minn., and president of the Builders Association of Minnesota; and David Crowe, chief economist, NAHB.
The teleconference was one of several that are being held across the country as part of NAHB’s “Revive Housing, Restore America” campaign.
“Housing is a major factor in any economic recovery because it creates jobs, boosts revenues for state and local governments, and stimulates demand for goods and services all across Main Street America,” said NAHB Chairman Joe Robson, a home builder in Tulsa, Okla. “Every new home built means three good-paying jobs for one year, and that’s a winning formula.”
The grassroots effort is enlisting the association’s more than 200,000 members “to educate lawmakers and the public about the critical role that housing plays in creating jobs,” Robson said. “We need to ensure that there is strong and continued momentum that can push through the inevitable headwinds that could stall a recovery.”
At the top of their agenda, NAHB is asking Congress to extend the $8,000 tax credit for an additional year and make it available to all eligible buyers of a principal residence. In the near term, this would spur 383,000 additional home sales, including 80,000 housing starts, and create 350,000 jobs over the coming year.
Brady noted that the current home buyer tax credit has been gaining traction in his market over the last several months, but sales gains could end fairly abruptly once the popular tax incentive is no longer available.
“We’re seeing a jobless recovery,” Brady said. “Housing has to recover in order for the economy to grow. That’s why we are calling on Congress to extend the tax credit for at least a year and to make it available to all buyers, not just first-time buyers.”
Teleconference panelists also noted that they are being hampered in their recovery efforts by faulty appraisals in which run-down foreclosed or short-sale properties are being used as comparables in determining the value of new homes. One-quarter of the builders responding to a recent NAHB survey reported losing home sales because the appraised value came in below the price in the sales contract.
“It is difficult now for us to get the financing we need to build a home, even if the home buyer owns the land,” Mraz said. “The appraisal process is so messed up that we can’t get an appraisal high enough to cover the cost of materials.”
In its campaign, NAHB is asking 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.
Builders on the panel added that the scarcity of financing for acquisition, development and construction loans to produce new housing is a major impediment to industry recovery. NAHB is calling on Congress to urge regulators and the banking industry to restore the flow of credit for housing.
“A lot of builders who have been in business for many years have had to close their doors because of pressure from regulators on banks to reduce their lines of credit,” Mraz said. “These are good builders who employed a lot of people in the community.”
NAHB is also supporting Net Operating Loss (NOL) legislation in the House and the Senate that would allow building and other industries hit hard by the recession to report their losses in a way that would help their businesses and prevent further layoffs.
NAHB is a Washington, D.C.-based trade association representing more than 200,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as “the voice of the housing industry,” NAHB is affiliated with more than 800 state and local home builders associations around the country.
From the October 28 – November 3, 2009