One thing is clear about this economy; its future is very unclear. No one — not even the experts — knows when the economy will bottom out and start moving forward again down the road toward prosperity.
Take a look at a graph of housing starts dating back to 2005 and you’ll see a steep, downward-sloping line that can’t go much lower, because if the drop in starts continues at its current pace, we’ll be close to zero starts by this time next year.
Yes, home builders created the excessive inventory of unsold homes that’s forcing builders to do the right thing and cut back on housing production. But the government isn’t doing its part, according to a group of builders other housing industry businesses that formed the Fix Housing First coalition.
The National Association of Home Builders is behind this coalition’s efforts to convince Congress to address housing’s troubles first, before enacting other recovery efforts. And why not, the group asks? This country’s economic problems began with housing’s collapse, so why shouldn’t economic recovery begin with housing’s resurgence?
Fix Housing First is asking Congress to enhance the $7,500 first-time home buyer tax credit. The group recommends placing the credit’s value on a sliding scale based on the value of the house, rather than what amounts to a $7,500 loan. The group also wants the credit to truly be a gift by not requiring homeowners to pay it back. In addition, the credit should be made available to all home buyers, not just first-time home buyers, the group insists.
Another part of the plan is to couple the enhanced tax credit with a below-market 30-year fixed-rate mortgage. Lastly, Congress should continue foreclosure prevention measures to keep people in their homes, thus stabilizing home prices and bolstering the economy.
NAHB held a conference call with national media to build momentum for this effort, during which Phil Hoffman of Hoffman Custom Built Homes in La Place, La., reminded everyone that current low production levels — while necessary to reduce unsold inventory — are far below the pace needed to meet the need for the estimated 10 million homes a year some experts are predicting we’ll need between now and 2030. Hoffman also said pent-up demand, when released, will recreate some conditions that existed before housing’s collapse. A deficit of available homes will create a rush to fill the void, and material prices and labor costs will rise, he said.
The way the housing market is structured positions it to come out of a recession quickly, whereas other projects touted as ways to revive the economy such as infrastructure and green technologies represent a slower approach, Hoffman said. It would take six months to work through unsold inventory, and 600,000 jobs would be created in the first year after effective stimulus legislation passes.
Fix Housing First’s plan would not amount to a bailout, or handout. As NAHB CEO Jerry Howard said during the conference call, builders and designers know how to make their own money. All they need is for Congress to set the table for success.
Supporting Fix Housing First’s efforts is the right thing to do. For more information or to become involved with Fix Housing First, visit fixhousingfirst.com.