The National Association of Home Builders, hoping to appeal to Congress for assistance in rescuing the housing industry, took the unusual step of seeking help from the national press in making its case, announcing its latest batch of bad news in a Monday teleconference. The NAHB/Wells Fargo Housing Market Index, a window into the thinking of single-family new-home builders, fell back to a level of 18, tying its record low set in December, the NAHB announced Monday.
The HMI is calculated on a scale of 0-100, with zero being the low point. The HMI is a measure of how new-home builders feel about current sales volumes, projected sales over the next six months, and the current level of traffic of prospective buyers.
But before announcing its results, NAHB CEO and executive vice president Jerry Howard pleaded for help from Congress. Housing and the overall economy are hurting, Howard said, recounting how the U.S. economy has lost jobs for five straight months, a total of 324,000. Howard also said that the value of home equityacross the U.S. fell by $879 billion between the first quarter of 2007 and the first quarter of 2008.
"While the Fed has been very aggressive in trying to hold back the downfall in housing, it is now up to Congress to break that spiral," Howard said, encouraging the House of Representatives and the Senate to get together and work out a package deal to save housing. "Another 15,000 Americans will lose their jobs this week, and more than 47,000 homeowners will go into foreclosure. Congress quite simply needs to finish the job, and they must do it now before the Fourth of July recess."
But how the NAHB feels Congress should act has changed. Howard is no longer calling for Congress to allow businesses to carry back net operating losses for five years. Instead, Howard feels that home buyers should be offered a large (he did not say how much) home buyer tax credit.
"That tax credit needs to be as big, and as unencumbered, and as rapid-acting as Congress can make it so as to stimulate home buying during this summer home buying and home building season," Howard said.
He also called on Congress to include Federal Housing Administration modernization, reform of the regulatory structures of Fannie Mae and Freddie Mac, expansion of the mortgage revenue bond program, as well as a low-income housing tax credit program, to help expand affordable housing opportunities.
"Too much time has passed, too many homeowners are in trouble, too many home buyers are waiting, and too many home builders are going out of business for us to worry about looking backwards, we need to look forward," Howard said as a way of explaining why the NAHB is abandoning its call for the net operating loss carry back provision.
The housing market is in such bad shape, that though NAHB chief economist Dave Seiders has remained adamant that the bottom in new-home sales would come in the middle of this year, he started to back off his previous predictions, acknowledging that he would likely have to re-tool his housing forecast yet again. Since early 2006, Seiders has revised his housing forecast countless times.
"I do expect to see the sales volume erode further in the months ahead," Seiders said. "I do keep thinking that we're approaching a bottom, but the readings from this survey about the demand side of the market are really quite weak."
And because the data was collected in the first 10 days of June, it failed to factor in last week's jump in mortgage rates, when 30-year fixed mortgage rates jumped from 6.09 percent to 6.32 percent, and five-year adjustable mortgage rates increased from 5.51 percent to 5.70 percent.
"It is a threat to the housing market," Seiders said.
The overall HMI is down 75 percent from its peak value of 72 in June 2005. The four major regions are also down from their respective peaks during 2005, with the Northeast off 84 percent, the West down 82 percent, the South down 71 percent, and the Midwest seeing a decrease of 69 percent, Seiders said.