Everything You Need

The International Builders' Show (IBS) is the one place in the world a home builder would expect to find “Everything You Need Under One Roof,” and that's exactly how the February 2008 show in Orlando, Fla., is being billed.

With expanded educational offerings, new executive-level programs, and more than 1,900 exhibitors showcasing everything from cutting-edge appliances to dazzle buyers to innovations in power tools aimed at improving performance on the jobsite, IBS is the largest annual light-construction show anywhere.

More than ever, attending IBS is your ticket to success in the nation's competitive home building industry. Most housing markets across the country continue to find themselves in the midst of tough times. Selling homes in today's buyer's market requires a reassessment of your business from head to toe to determine how you can get the job done more efficiently and more effectively. It also requires delivering a product that stands out from the competition, knowing where to best spend your advertising dollars, and knowing how to work with your lender to ensure that affordable financing is available for the mortgages your customers need to buy your homes and for the loans you need to build them.

In the homes we build, we need to demonstrate more convincingly than ever that there is no substitute for a new home when it comes to supporting the lifestyle that our customers want. Today's new homes consume less energy, they're more sensitive to environmental concerns, they're easier to maintain, and they provide a level of comfort and performance that has never been available before. That's the message that can increase your business even in a slow market.

IBS is the one place that will enable you in a few short days to put together all of the pieces of a plan that could see you safely through today's hard times and put you in a position to make the most of the more robust marketplace that will emerge after this housing downturn.

A great deal of thought and preparation has gone into the 2008 IBS to ensure that it's tailored to meet your immediate and future needs. Here are some features you need to know about:

I don't need to remind you that this is no time for complacency. It's up to you to make the most of today's tough circumstances. I hope to see you in Orlando in February at the show—the place to see our industry at its best and to tap the potential that will see your business through to better times.

For more information and to register for IBS, go to www.buildersshow.com.

Brian C. Catalde
PRESIDENT, NAHB WASHINGTON, D.C.

In September, the NAHB applauded the Federal Home Loan Bank of Des Moines' successful efforts to include single-family construction loans as eligible collateral for member loans. The Des Moines Bank received approval from its regulator, the Federal Housing Finance Board, on Sept. 10 to accept one-to-four-family construction loans as part of a basket of other real estate collateral that may back the Bank's secured lending to member financial institutions in its district, which includes Iowa, Minnesota, Missouri, North Dakota, and South Dakota. With this regulatory approval, the Des Moines Bank can proceed in developing specific collateral criteria with the intent of implementing its expanded authority in the near future. “In adding construction loans to its collateral menu, the Federal Home Loan Bank of Des Moines has shown outstanding responsiveness to credit needs in its district,” says NAHB President Brian Catalde. “The collateral expansion is an important signal that the Des Moines Bank is making every reasonable effort to support the home mortgage lending of its member institutions, in addition to establishing a long-term foundation for housing production credit availability. This news further highlights the very positive role of the Federal Home Loan Banks in supplying credit during the current mortgage market difficulties.”

The NAHB announced the 25th anniversary of its NAHB Remodelers (NAHBR) council in August. Formed in 1982, in response to growing member demand, the council was created as a way to deepen knowledge and professionalism and to promote the accomplishments of remodelers. “For 25 years, NAHBR has trained, supported, and promoted the best professional remodelers in the country,” says Mike Nagel, NAHBR chairman and a remodeler from Chicago. “This council and its members have been instrumental in advancing the industry, and we are proud to celebrate this significant anniversary and look forward to continued growth and success.” Remodeling has grown into a booming $228 billion business, and NAHBR has grown along with it, with membership now topping 7,500. NAHBR has expanded its offerings to include everything from training courses and certifications to remodeling guides for consumers and advice for remodelers on expanding and maintaining their businesses. For more information about remodeling, visit www.nahb.org/remodel.

Despite reporting increased traffic by prospective buyers, condominium builders and developers are concerned about current conditions in the condo market, according to September's results of the Multifamily Condo Market Index (MCMI), released by the NAHB. The index lost 14 points in the second quarter of this year to stand at 18, which is 14 points lower than it was a year ago—and its lowest level since the NAHB created the index five years ago. “The problems in the mortgage market are rattling consumer confidence in for-sale housing at the same time that the condo sector is trying to shake off excess inventory in a lot of markets,” says David Seiders, NAHB chief economist. “That combination is delaying any recovery in the condo sector.”

Critical Steps

The Fed must continue to ease monetary policy.

The Federal Reserve Chairman, Ben Bernanke, recently said that the housing market is not as sensitive to monetary policy as it once was. Even so, central bank actions still have major impact on housing-market activity. This is particularly true when mortgage markets have been damaged by a frantic flight to quality in credit markets generally and mortgage-related securities markets in particular.

The Federal Reserve's reactions to the severe credit crunch that erupted in August deserve mixed reviews. Not until Sept. 18 did the Fed take decisive steps to address the evolving credit crisis. Deepening of the housing downswing since that time cries out for further monetary easing to keep housing from pulling the total economy into recession.

At the Aug. 7 meeting of the Federal Open Market Committee (FOMC), the Fed held monetary policy steady and issued a statement reaffirming the central bank's concern about potential upward pressures on core inflation—a maddening position in the face of worsening financial market conditions that were increasingly obvious to market participants and private sector analysts. But financial market turbulence really boiled over a few days later, compelling the Fed to shift gears several times in attempts to calm financial markets and contain the damage to housing and the economy.

The Fed's initial reactions (Aug. 10) were weak, simply stating that the central bank would keep the effective federal funds rate close to the unchanged target rate (5.25 percent) and reminding the world of the existence of the Federal Reserve discount window where banks could borrow at a 1 percent penalty rate. These efforts unfortunately failed to calm the markets or alleviate serious liquidity problems in short-term credit markets. Within a few more days (Aug. 17), the Fed was compelled to take bolder steps—primarily, cutting the penalty rate at the discount window in half and amending the FOMC statement between scheduled policy meetings to focus more heavily on downside risks to the economic expansion.

The Aug. 17 words and actions by the Fed changed market expectations about the future course of monetary policy and seemed to provide some benefit to financial markets. But financial market conditions then deteriorated further, provoking widespread speculation about an inter-meeting cut (before Sept. 18) in the Federal funds rate target. But the Fed held fast, avoiding the appearance of being pushed around by the markets. By the time of the Sept. 18 policy meeting, an avalanche of bad news on the housing market (provided partly by the NAHB), together with overwhelming evidence of tightening credit conditions (outside the Treasury market), compelled the FOMC to unanimously enact half-point cuts to both the Federal funds rate target and the discount rate—taking them to 4.75 percent and 5.25 percent, respectively. The FOMC statement focused on the disruptions in financial markets and stressed that tightening credit conditions have the potential to intensify the housing correction and restrain economic growth.

The Fed should cut short-term rates further before the end of the year, choosing to buy more insurance against a dangerous shortfall in economic growth. The NAHB's forecast assumes quarter-point cuts in the funds rate target at both the Oct. 31 and Dec. 11 FOMC meetings, followed by an extended period of stability.

David. F. Seiders
CHIEF ECONOMIST, NAHB WASHINGTON, D.C.