Confronting one of the greatest challenges our industry has seen in decades, at its Fall Board Meeting in Seattle the NAHB directors resolved to pursue a prompt response on several fronts to limit the damage of the mortgage credit crunch and restore confidence in the housing market.
The enormity of the problem became apparent late in the summer. Investor concerns over the repercussions of rising defaults and foreclosures in sub-prime loans originated during the later stages of the housing boom precipitated a full-fledged panic in the financial markets, freezing up the flow of credit not only for housing but also for the economy at large. For our industry, the writing was on the wall. Following more than a year of substantial decline, further tightening of mortgage lending standards dealt a crippling blow to home builders who had been concentrating their efforts on working off unsold inventories. For the nation's economy, the implications were also unsettling. Just as housing had led the U.S. economy to higher ground earlier in the decade, it now appeared possible that housing could bring the economy down.
TAKING ACTION At year's end, while we are still waiting for our markets to stabilize and recovery to begin—which is now likely to occur in mid-2008—the good news is that we have been making steady progress in moving toward our objectives in what everyone had come to recognize would be a long, tough battle. The NAHB is the one organization in Washington that has been working closely with the key players in resolving the credit crunch. We have met with the Federal Reserve, Bush administration officials, and leaders in Congress to engineer a coordinated and effective solution. Here are some of the developments that suggest we will soon be able to extricate ourselves from today's hard times:
- The Federal Reserve has lowered interest rates, restoring confidence in the financial markets and sending a strong signal that it won't stand by and watch the economy slide into recession. Along with the continuation of relatively low mortgage interest rates, a healthy economy that is generating new jobs and income provides strong support for a resurgence in housing demand.
- Major players in the mortgage market have been recognizing their responsibility to step up to the plate and help subprime borrowers avoid losing their homes when their loans are reset at interest rates they can't afford.
- Congress has joined efforts to limit foreclosures. It has also been pursuing legislation to discourage unsound lending practices. Congress is revitalizing the FHA so that government-insured loans can once again return as a viable source of affordable financing for creditworthy families, including those who need to refinance out of loans with resetting interest rates. The credit crunch has also given impetus to efforts to reform Fannie Mae and Freddie Mac, including allowing them to purchase loans exceeding the conforming loan limit in high-cost markets.
- As “the voice of the nation's housing industry,” the NAHB has stepped up its presence in the news media, sending a loud and clear message about the steps that need to be taken to resolve the credit crunch. And, equally important, to encourage prospective home buyers not to be daunted by exaggerated media reports, we have been presenting a more balanced and accurate picture of the housing market and home buying opportunities. The “Myth Busters” section of the NAHB tool kit (www.nahb.org/toolkit) is helping state and local builders associations set the record straight on conditions in their markets.
BRIGHTER HORIZON The coming year is expected to be one of transition. The NAHB will continue to work steadfastly to resolve the credit crunch. Housing is not out of the woods yet, but the odds are improving that we will soon get a glimpse of the better times that lie ahead.
Brian C. Catalde
President, NAHB Washington, D.C.
Learn more about markets featured in this article: Seattle, WA.