During the Big Builder '08 CEO Power Panel moderated by CNBC correspondent Diana Olick on Nov. 4, Hovnanian Enterprises CEO Ara Hovnanian called on Congress to “Fix Housing First.” Photo: Jamie Windon

Fix Housing First

Builders reach out to other industries in an effort to push Congress toward enacting a second housing stimulus.

A coalition of home builders, financial institutions, lenders, and community groups called “Fix Housing First” has plans to push a lame-duck Congress to act decisively on a stimulus package that would address the housing market directly with true tax credits and below-market mortgage rates.

Larry A. Mizel, CEO of M.D.C. Holdings, and Ara Hovnanian, CEO of Hovnanian Enterprises, each called for support of the coalition during the Big Builder '08 conference in National Harbor, Md., Nov. 3–5.

“We should act rather than be victims,” said Mizel as he opened the conference, urging the assembled home builders to visit fixhousingfirst.com, which outlines the coalition's goals and provides links to contact members of Congress.

“The housing crisis is at the center of the economic crisis, and if we don't address housing head on, we can't fix the financial crisis,” said Hovnanian during a panel discussion with Taylor Morrison president and CEO Sheryl Palmer and Standard Pacific Corp. chairman, president, and CEO Jeffrey Peterson.

Hovnanian added that he thought Congressional plans to direct stimulus spending into infrastructure projects, while perhaps beneficial in the long term, would do little to mitigate the current economic slowdown.

“We don't have a bridge crisis; we have a housing crisis,” he said.

It was unclear how much support Fix Housing First has received in housing-related industries, although many builders have expressed support for a true tax credit (see “A Stimulus Sequel,” page 10). The initial push behind the collation came out of the High Production Builders Council at the NAHB, which was at odds with the overall association over the lobbying effort for an extension of net operating loss tax carry backs, which failed earlier this year. The NAHB did not return phone calls seeking comment on the initiative.

The Fix Housing First plan advocates replacing the $7,500 first-time home buyer tax credit from the housing stimulus package passed in July with a $10,000 to $22,000 true tax credit for all home buyers, with the provision that the credit would be incrementally repaid to the government should the home buyer sell within three years. It also seeks a below-market rate mortgage with a 2.99 percent fixed interest rate for 30 years for all existing and new homes. The rate would be available for contracts signed between now and June 30, 2009. For contracts signed between June 30, 2009, and Dec. 31, 2009, the rate would be 3.99 percent.

A potential key ally for the builders would be the National Association of Realtors (NAR). As of press time, NAR had not signed on, but at its annual convention, which opened in Orlando in early November, the group put out a statement reiterating its support for a four-point housing stimulus plan that was delivered to Congress last month.

Said NAR president Richard F. Gaylord, a broker with RE/ MAX Real Estate Specialists, Long Beach, Calif., “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan—stabilizing the mortgage and housing markets—to help families avoid foreclosure.”

NAR's plan called on Congress to eliminate repayment of the existing $7,500 first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached, and permanently prohibit banks from entering into real estate transactions.

NAR also has pushed the administration to refocus the Federal Housing Finance Agency's efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for owners who need to refinance. A recent NAR economic analysis demonstrated that a reduction of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce inventory by as much as 20 percent. The current 9.9 months of supply would decrease to roughly 7.5 months of supply.

“The result of these changes would stabilize homes values and the housing industry,” Gaylord said. A lower interest rate combined with removing the tax credit repayment would reduce inventory by an additional 10 percent, down to a 6.5-month supply, and would produce modest home price gains of 2 percent to 4 percent, he said. Such price gains would provide up to $760 billion in housing equity for the nation's 75 million homeowners.