Lobbyists for the National Association of Home Builders aren’t too worried that Congress will fail to stop the plunge off the fiscal cliff in the next few weeks, they said during a recent webcast overview of how last November’s election might affect housing.

“Congress is like college students, they do better when they have hard and fast deadlines,” Jim Tobin, NAHB’s chief lobbyist said.

More likely, Congress will extend the tax cuts for the time being and make some sort of down payment on the national debt to signify that they think the issue is important, he said.

“We are also urging Congress not to tinker with the tax deduction [on mortgage interest] and exemptions right now,” he said. “We believe that any changes to the tax code or laws of the land should go through regular order” of business, rather that changed quickly under deadline pressure. 

“Our industry has been in a state of depression for the past five years and we have given at the office; why tinker with us now that we are beginning to improve,” Tobin said.

While in some ways the election means status quo for the White House and the Senate and House of Representatives, there are some differences.

“While the players remain the same, the American public clearly spoke about moving forward with the issues that affect the country,” Tobin said. However, he added, there is going to be some turnover in some committees, including the Senate banking committee and other committees important to housing.

Next year some issues NAHB is expecting to be dealing with in Congress include taxation of businesses that are sole proprietorships. NAHB would like to see some tax breaks to small-business owners who plow their profits back into their companies rather than take the proceeds as personal income.

Other issues likely to be important to NAHB members next year is a potential reform of the GSEs, Fannie and Freddie, and the implementation of some 1,000 regulations in the Dodd Frank Bill that have yet to be enacted.

“This could have a chilling effect on the private sector,” said Tobin. “We want to insure that those regulations as they come out are responsible and reasonable and don’t represent an over-reaction.

“We need to clear all the obstacles out of the way for recovery,” said NAHB CEO Jerry Howard.

And that recovery is underway, NAHB Economist David Crowe told listeners to the webcast.

“It started from small and disparate locations,” said Crowe. “But now there are enough of these individual local markets that show improvement that they are actually adding up to real numbers on a national scale.”

There were 12 markets considered to be improving in September of 2011 when the NAHB began its NAHB/First American Improving Markets Index. By the end of November 2012, the count had climbed to 125. The index uses three sets of independent monthly data, employment, house price, and single family housing growth, to determine if a market is improving.

“Home prices are beginning to recover too,” said Crowe. “They bottomed out early in 2011, wandered around without much change until late ’11 early ’12. Now we’ve seen a pretty nice increase, a little over 6%.”

Another sign of improvement is an increase in household formation. During the boom, household formation grew to a whopping 3.4 million a year, before collapsing to about half a million during the housing recession. Now it’s back up to about 900,000.

Single-family home starts, too, are on their way up. Crowe predicted 800,000 in 2013 with numbers climbing closer to 1.5 million in 2014.

“The path (to recovery) is a very long one,” he said. And it could be thwarted or stalled by a few things that are looming:

  • Credit availability. The required FICO score for mortgage approvals has climbed.
  • Appraisals. A recent survey of builders said that 60% had lost a sale because of appraisal issues.
  • Policy uncertainty. Home buyers that are worried about what might happen with government sometimes don’t want to buy homes.
  • Low lot inventory. Development of lots for homes virtually stopped during the recession. “Getting raw land ready to be built on does take longer,” said Crowe. “We could see some spikes in lot prices.”
  • Availability of materials. Material supplies could be limited, Crowe said. “Some plants closed.”

“I think we are experiencing pent-up demand right now” for new homes, he said. “That suggests renters are converting [to buyers], and there’s the pent-up normal flow of homeowners who have been waiting to move up.”

Teresa Burney is a senior editor at Builder.