WASHINGTON, Oct. 7 – The National Association of Home Builders this week called on Congress to help housing take a lead role in putting America back to work by taking quick action to extend and enhance the $8,000 first-time home buyer tax credit, resolve appraisal problems that have been slowing home sales and urge regulators to restore the full flow of credit needed by both home buyers and home builders alike.
Though existing and new home sales appear to have stabilized in recent months, NAHB Chairman Joe Robson, a home builder from Tulsa, Okla., told members of the House Small Business Committee that the industry is facing a number of housing-specific headwinds that are continuing to buffet any significant housing recovery.
"Not only are we continuing to feel the impact of foreclosures and short sales in the market, but we're facing a severe credit crunch for acquisition, development and construction (AD&C) lending," said Robson. "Meanwhile, the use of foreclosed and short-sale properties as comps is resulting in inappropriately low appraisals that are effectively sinking one quarter of all new-home sales right now. Add to this the fact that demand and home sales are already showing signs of slowing with the pending Nov. 30 expiration of the first-time home buyer tax credit."
To create jobs and put the housing market and the economy on sounder footing, NAHB is urging Congress to extend the credit for an additional year and to make it available to all purchasers of a principal residence.
"We estimate that this would increase home purchases by 383,000 in the next year and help mitigate the foreclosure crisis by whittling down inventory at all levels of the housing market, setting the stage for a full recovery," said Robson. "This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now."
In a recent survey of more than 500 builders by NAHB, 25 percent reported they are losing sales because the appraisal is coming in below the contract sales price. The process has gone seriously wrong because some appraisers are using distressed properties - many of which have been neglected and are in poor physical condition - as comparables in assessing the value of brand new homes without accounting for major differences in condition and quality.
"Any prospective buyer would recognize the differences in the value between a well-kept home and a distressed property that is damaged or not properly maintained. The same should be true of an appraiser," said Robson.
He said Congress can help resolve this issue by urging the Federal Housing Administration and Fannie Mae and Freddie Mac to adopt and enforce guidance that instructs appraisers on the proper procedures for the use of distressed and/or foreclosed properties as comparables.
Lawmakers can further help put the housing industry back on its feet by exerting their influence on regulators and the banking industry to restore lending for viable home building projects and to take meaningful steps to avoid unnecessary foreclosures on outstanding loans.
"This would provide relief for a major sector of the economy that has suffered because of regulatory overkill and the inability of banks to provide the necessary funding and flexibility that would otherwise keep loans performing as scheduled," said Robson.
To further promote energy efficiency in new-home construction, Robson called on Congress to make permanent and enhance the new energy efficient home tax credit due to expire at the end of the year. Section 45L of the Internal Revenue Code provides a $2,000 tax credit to a home builder who constructs a qualified new energy-efficient home that is certified to achieve a 50 percent reduction in energy usage.
"As the only incentive in the tax code for energy efficiency in single-family home construction, this program will help to ensure that new homes built today and going forward are highly energy-efficient," said Robson. "We strongly urge the Congress to make the 45L credit permanent and increase the credit amount to $5,000 to pay for a bigger percentage of the higher building costs that are incurred when making a home 50 percent more energy-efficient."