Within the next few weeks, and possibly within days, a coalition of home builders will petition federal lawmakers to enact emergency legislation to stimulate home buying and reduce the risk of further deterioration in the general economy.
“Fix Housing First” is the battle cry of a group that includes at least 18 of the industry’s largest production builders, which have joined forces with the NAHB and are seeking endorsements from associations representing banks, real estate agents, and other housing-related constituencies.
Sources familiar with this coalition say that the big builders have kicked in more than $7 million for this effort. NAHB is also contributing “substantial monies,” according to its CEO Jerry Howard, who adds that builders “will be approaching Congress as a unified front.” More than 100 building product suppliers have been contacted to support the coalition, which has also sought help from economists and market research firms to fine-tune the details of a proposal that the coalition wants to present to Congress as quickly as possible.
“We’re looking for specific legislation to be passed during the lame-duck session” between the Nov. 4 election and inauguration of a new president, says Richard Dugas, CEO of Pulte Homes, who frames the coalition’s initiative as going beyond the immediate needs of the housing industry. “If we leave this up to time and don’t help stimulate housing, the economy will be at significant risk,” he predicts. A stimulus package could also stabilize asset values, says Larry Mizel, CEO of MDC Holdings. “We need to create confidence in the consumer that the value of what he buys will not go down.”
What the builder group wants Congress to approve is a tax credit of between $10,000 and $22,000, depending of the FHA loan limit in a given market, which would be available to all home buyers and would not have to be repaid by the buyer. The housing stimulus that Congress passed earlier this year has failed, asserts Dugas, because the $7,500 tax credit was too small, was limited to first-time buyers, and was in the form of an interest-free loan.
(NAHB’s Howard also believes the first tax credit “was a victim of subsequent events” that included the collapse of Fannie Mae and Freddie Mac. “It never had a chance,” he says.)
The second part of the coalition’s proposal would make available to buyers a below-market rate of 2.99 percent on 30-year mortgages for homes purchased through June 30, 2009; the interest rate would increase to 3.99 percent for homes bought between July 1 and December 31, 2009. NAHB estimates the cost of the builders’ proposal at $268 billion, Howard confirms.
At press time, builders were hammering out the mechanics of the mortgage-rate buydown, which Dugas envisions would include some kind of direct involvement of Fannie or Freddie. He also said that the coalition is working with researchers to determine the potential impact of this proposal, which he predicts would be “extremely stimulative.”
If Congress does pass a second stimulus with the components that builders advocate, Howard says there will be a “national marketing effort” on the part of the housing and real estate agent industries to impress on potential home buyers that “this is the last bite of the apple” to take advantage of purchasing incentives.
Builders have already started feeling out lawmakers about their willingness to come to the aid of the housing industry, and Dugas says they have found legislators to be “surprised to hear how bad the problem is.”
When asked whether the industry should have done a better job of making its case earlier, Dugas responds that it’s hard to convey any message when so many want to determine who’s to blame for the financial mess. But the Pulte CEO says it’s too late to worry about that. “That horse is way out of the barn,” he says.
What’s needed urgently, Dugas says, is action: “The United States economy is at risk.”
John Caulfield is senior editor at BUILDER magazine
Learn more about markets featured in this article: Washington, DC.
