With Bailout Uncertain, Builders Share Ideas for Fixing Housing, Economy

What builders don't want the government to do is buy these foreclosed homes and put them back on the market. "Whether the government buys [distressed mortgage loans] or buys foreclosures from the bank, I can't see how that helps new-home builders," says Hawksley of Fischer Homes."To me, that just looks like cheaper competition for us."
 
Jim Soules agrees. "I was in Orange County (Calif.) and saw my first 'bank-owned' sign on a home for sale. We must get rid of the excess inventory fast; just transferring the loans to the U.S. will still mean empty, poorly kept homes for sale," says Soules, formerly with The Cottage Company in Washington State, but who recently sold his interest in the business to focus on green building opportunities.
 
How can the government get this excess inventory off the market? By offering a real incentive to home buyers. "We need to offer something that is meaningful for all home buyers of new homes, not just first-time home buyers who are credit-challenged anyway," Hawksley argues. "How many first-time home buyers are there out there who didn't get down-payment assistance or didn't get a subprime loan or didn't have credit problems [and therefore could have taken advantage of the new tax credit]? That is a pretty shallow market."
 
He thinks the government should provide a permanent tax credit equivalent of between five and 10 percent of the median home value in a buyer's metro area, rather than a flat amount, as the housing rescue bill did. "In Cincinnati, $15,000 would have a pretty big impact," Hawksley notes. "But in California, that amount would mean diddly."
 
Thomas Hastings would enhance the current tax credit in two ways. "First, I would give first-time home buyers a one-time tax credit of $50,000 towards their purchase of a new house," says Hastings, president of The Hastings Company in Hingham, Mass. "Second, I would allow withdrawals from IRAs and Keoghs of up to $100,000 for the purchase of a owner-occupied home without an early-withdrawal penalty" for tapping those savings.
 
Several builders also suggested the government could help housing, stimulate the economy, and address an area of growing concern by investing in the country's infrastructure. “The bigger question is what can we do to create more jobs; that’s the group you have to focus on because they are your buyers," says Joel Carlins, co-CEO of the Magellan Development Group in Chicago, who suggests rebuilding the country's urban infrastructure in a new version of the New Deal's Works Public Administration would have a trickle-down effect on the entire economy.
 
Adam Patterson, a senior strategic marketing analyst with Centex Homes in Illinois, responded similarly to a BUILDER Online story regarding the bailout. "I would reallocate more funds to capital infrastructure throughout the country – roads, bridges, airports, rail, and energy such as windmills, power plants, etc. Our infrastructure desperately needs improvement. Those jobs have to be created here, and they pay fairly well. This would help address unemployment, and people who are employed will spend more money. Or at least cover their rent. Obviously most people can’t buy a house if they are unemployed."
 
That may not have been the case during the boom, but it certainly is now. “Mortgage credit restrictions, along with current down payment requirements, are putting almost every prospective buyer on the sidelines," says Tom Lewis, CEO of TW Lewis Homes in Phoenix, who favors loosening of underwriting requirements on conforming and jumbo home loans.
 
But others believe the only solution for today's housing crisis is time.

“I’m not an economist, but it seems like artificially propping up prices or demand will only prolong the inevitable," says Charles Petersheim of Catskill Farms, a small builder in upstate New York. "I think we have to let the housing market naturally correct itself and find the correct pricing for these homes. The boom was 17 years long and prolonged with a lot of magic tricks. I don’t think any regulatory magic trick is going to shorten the hangover from a very long, prosperous, and speculative boom. And all the smart builders knew this in some compartment in their brain.”

Alison Rice is senior editor, online, at BUILDER magazine. Boyce Thompson, John Caulfield, Jenny Sullivan, Nigel Maynard, and Ethan Butterfield also contributed reporting to this story.