David Crowe

Chief Economist 


Washington, D.C.

Anje Jager/agencyrush.com David Crowe Chief Economist NAHB Washington, D.C. dcrowe@nahb.com

Home builders have plenty to worry about although a lot of little signals are indicating that the list may be diminishing instead of growing. Periodically, the NAHB asks builders their most significant problems in the past year and what they expect in the next. A recent survey highlights just how tough it has been to sell homes.

The most frequently cited problems are issues around attracting buyers. The top reason expressed by 83 percent of respondents was that buyers are unable to sell their current home and 77 percent expected that to be a concern in 2012. Not only does a repeat buyer have to sell their home, but they face many of the same hurdles builders face. In fact, six of the top eight builder concerns could equally apply to the repeat buyer. In 1997 and 1998 when a shortened version of the list was asked, inability to sell a home got less than 20 percent of the responses.

The second most cited problem in 2011 was customers’ concerns about employment and the economic situation. Buyers are uncertain about their jobs, and until job growth is more consistently and significantly positive, that fear will continue.

The third greatest concern in 2011 at 77 percent of those asked and the No. 1 concern for 2012 was regulation of financial institutions. Builders realize that the sources of credit for their businesses and for their customers’ mortgages are undergoing significant change in overcorrecting efforts to solve past problems. Financial institutions will be required to hold more capital, see more restricted investment options, and retain more risk. The cost of credit will rise and may continue to be difficult to access because of impending regulations. Even with these fears, the lack of credit for acquisition, development, and construction was 13th on the list at 42 percent.

The fourth, fifth, and sixth most frequent concerns were all pervasive market issues: competition from foreclosures, inaccurate appraisals, and difficulty qualifying buyers for a mortgage. These issues have been concerns since the 2008 meltdown, often show up in open-ended responses, and rate high for 2012.

Washington gridlock rated seventh on the list by 68 percent of builders and is expected to be even worse in 2012. The uncertainty created by no legislative decisions leaves consumers with little ability to plan their future and reluctant to make a major purchase. Limiting housing tax incentives such as the mortgage interest deduction was a 2012 concern by 60 percent of the builders. That concern was so far off the radar in 1997 that it wasn’t listed on the survey.

The more traditional builder issues connected with actually building homes fell further down the list. In 1997 and 1998, top issues were labor, land, and lumber availability and cost. One-third or less of the builders listed those issues as concerns in 2011 or expected in 2012. Instead, the next class of concerns centered around government intrusions such as impact/permit fees, environmental regulations, safety and health regulations, and local and state regulations. From 40 percent to 50 percent of builders checked these as problems in 2011, and all showed increased concern for 2012.

On the positive side, the things that worry builders the least include high interest rates, inadequate public infrastructure, immigration policies, and employee classification reporting requirements. Also indicative of the slow building environment, development issues such as obtaining zoning, development standards, and government steering of development had low cites as concerns. The permit approval process was the fourth highest concern in 1997 and 1998.

Members serving on the NAHB Board or committees did show greater concern for long-standing NAHB advocacy pursuits such as environmental regulations, attempts to limit housing tax preferences, safety and health regulations, building codes, and development standards. As expected, participation in NAHB policy making does affect the association’s priorities.