Monday Morning Briefing Letter - 04/21/2008 By Sandy Dunn, NAHB President and Jerry Howard, NAHB Executive VP and CEO

Adding fuel to the argument that a stimulus bill is urgently needed to help buoy the economy and housing sector, NAHB Chief Economist David Seiders reported on April 15 that the economy has now entered a mild recession. "The worse-than-anticipated housing downturn, combined with systematic weakening in the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers," Seiders said. "It's now clear that we have entered what we anticipate will be a mild recession." Seiders also said he is adjusting his official housing forecast to indicate continuing downward movement in housing starts through the end of this year. Previously, he expected housing starts to bottom out in the third quarter, with a 27% decline registered for all of 2008. The total expected decline is now pegged at 30%. To guard against a longer and deeper downturn, Seiders said that Congress should take immediate steps to stimulate the economy through actions specifically targeted at improving the housing sector. In particular, he said, "Stopping the downward trend in housing prices is key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that." Read Seiders's full statement to the media.

 The mortgage credit crunch has spilled over into AD&C lending for new residential construction, thereby increasing the many challenges faced by home builders in the current housing downturn, said Past NAHB President Bob Mitchell in testimony before the Senate Small Business Committee on April 16. Reporting on the topic of "The Impacts of the Credit Crunch on Small Firms," Bob told lawmakers that, while tighter mortgage lending terms have made it difficult for home buyers to obtain financing to purchase new homes, "Likewise, there have been dramatic adverse swings in the cost and availability of acquisition, land development and home construction (AD&C) loans for home builders." He noted that the current situation "vividly illustrates the importance of developing additional sources of AD&C credit." He pointed out that currently there is no secondary market for residential AD&C loans where community banks could turn to help manage their balance sheets and obtain liquidity for additional lending. Read more about what Bob told the committee here.

Builder confidence was unchanged in April even as the traditional spring home buying season got underway. For a third consecutive month, the NAHB/Wells Fargo Housing Market Index (HMI) remained at 20, just two points above the record low of 18 set in December of 2007. While builders continue to report improvements in traffic through their model homes compared with late last year, this activity has not translated to actual sales. The HMI's component index gauging current sales conditions declined two points to 18 this month, while the component gauging traffic of prospective buyers held even at 19, and, perhaps surprisingly, the component gauging sales expectations in the next six months rose four points to 30 (although this was still down substantially from a year earlier). NAHB used the HMI and the next day's release of housing starts data for March (next item in this report) as further ammunition in our call for immediate congressional action on a housing stimulus bill. See NAHB's press release  summarizing the HMI results and check out the actual HMI tables online. Contact Paul Lopez (x8409) for help in dealing with any media inquiries.

 Builders continued to dial down the pace of housing starts amidst ongoing erosion in the overall economy and credit markets in March. Overall starts fell by just shy of 12% in the month to a seasonally adjusted annual rate of 947,000 units, while single-family starts fell 5.7% to a rate of 680,000 units, said the latest Commerce Department data released on April 16. Permits for new single-family homes also fell by 6.2% in the month to 606,000 units. Meanwhile, the multifamily side continued to display its characteristic month-to-month volatility with a 24.6% decline in starts and a 5% decline in permits. Regionally, starts were down across the board, with an 8.5% decline registered in the Northeast, a 21.4% decline in the Midwest, a 12.6% decline in the South, and a 5.7% decline in the West. Permit issuance was mixed by region, with gains of 3.8% and 0.4% registered for the Northeast and South, respectively, and declines of 10.6% and 20% registered for the Midwest and West, respectively. See NAHB's press release on the government data and the Commerce Department's full report online. Contact Paul Lopez (x8409) for help dealing with media inquiries. [return to top]