Housing Market Pressure Points
During their confabs with Capitol Hill lawmakers last week, the 500 or so homebuilders who trekked to Washington, D.C., to plead their case for easier credit probably didn’t have to elaborate all that much on the pressures they’re facing as they try to position themselves for economic recovery.
Two key members of the House of Representatives, North Carolina Democrat Brad Miller and Ohio Republican Patrick Tiberi, who both visited the National Association of Home Builders’ National Housing Center for the NAHB Legislative Conference, already support restoring homebuilder access to acquisition, development and construction (AD&C) loans. Tiberi, chair of the House Ways and Means Subcommittee on Select Revenue Measures, says he supports regulatory changes that would create a better lending climate for homebuilders, who have complained that increased equity requirements for existing loans, and overly conservative appraisals and requirements for loan modifications, have made it difficult for builders to regain their footing.
Miller – who last year supported H.R. 6191, a now-dormant amendment to the Small Business Jobs Act of 2011 that was designed to include certain construction and land development loans in the definition of small-business lending – also says he’s committed to finding a remedy for the homebuilder credit crunch. What remains to be seen, obviously, is whether there’s enough political will elsewhere in the House and Senate to tinker with a number of banking regulations, including a risk-retention provision of the Dodd-Frank Act that requires lenders to retain at least 5% of the value of their asset-backed loans.
Springtime in the housing market
With the National Association of Realtors reporting a 9.6% drop in existing-home sales for February (median price: $156,000, the lowest since February 2002), and the announcement by the Treasury Department that it will be selling about $10 billion a month of the $142 billion in mortgage-backed securities it acquired in 2008 and 2009 from Fannie Mae and Freddie Mac – a move that could cause mortgage rates to edge up slightly – housing market observers might give up hope for an at least decent spring sales season.
But as a recent Wall Street Journal story points out, the sales-price situation and currently low mortgage rates – and, for that matter, the prospect of mortgage-rate increases – actually could get prospective homebuyers off the fence and into purchase contracts.
“The job market is getting better and that will make people feel more confident about their income-earning prospects,” David Berson, chief economist for mortgage insurer PMI Group, told the Journal. “You need that confidence to buy a house. Household formations are also very important…. Kids may have moved back in with their parents, or two people may have moved in together, because of job concerns. Now they can move into their own place.”
Added Moody’s Analytics’ chief economist, Mark Zandi: “Few think mortgage rates are going lower. It’s more likely they will be 6% than 4% next spring. This lights a fire under buyers.”