The politically powerful National Association of Home Builders (NAHB) has started the ball rolling on a new policy position regarding the future role and structure of the government sponsored housing enterprises.
Though the group's current policy statement was adopted only a year ago, leadership believes that it is now time to become more specific. "Change is coming," said Housing Finance Committee Chairman Earl Armiger, a Maryland apartment builder. "We need to be out front with detailed policies." A final document will go through an arduous vetting process culminating with a vote by the NAHB board at the group's convention in Las Vegas on Thursday.
But over the three-day Martin Luther King holiday weekend, the group's housing finance and federal government affairs committees signed off on a carefully worded resolution that, among other things, backs the notion that Fannie Mae and Freddie Mac should retain sufficient government backing to allow them to continue to ensure a reliable flow of credit at reasonable rates.
"Mortgages should be packaged and sold as securities with a federal government guarantee of timely payment of principal and interest to investors," the resolution also said. "The federal government should incur exposure only for catastrophic risk." The two panels also voted to back the idea that entities benefiting from securitization of their mortgages should have some skin in the game by paying a fee to capitalize an insurance fund to mitigate government risk. And while they agreed that part of Fannie and Freddie's problems resulted from being public companies with an eye toward their bottom lines, they rejected a call that the two companies be recast as public utilities with limits on their profit.
They also agreed that policies concerning the Federal Home Loan Banks should be kept separate so as not to inflict collateral damage on that GSE. "We need to focus on what needs to be fixed," said Dallas builder Kent Conine, a past NAHB president.
In other NAHB news, the supply of ready-to-occupy new houses has fallen to a point where the lack of inventory "could become a problem in certain markets and certain prices ranges," David Crowe, the chief economist for the NAHB, warned in Las Vegas at the group's annual convention.
While there's still a six-month supply of houses sitting on builders' shelves, Crowe said the actual number of new units that are finished and waiting for buyers is at the lowest level since 1971. That point was part of a rather upbeat forecast by the housing economist, who told the meeting that "we are starting to see some improvements" in the housing landscape.
Crowe's annual outlook wasn't without some negatives, or, as he called it, "not so good news." But he pointed out that the recession is over, inflation is in check, mortgage rates will remain under 6% through the rest of the year, and house prices have "finally settled down" to a point where they are now at 3.28 times median income, which is roughly in line with long-term stability. At the height of the housing bubble, the price-to-income ratio had reached 4.7% nationally - and 9.2% in California. Noting that "conditions are ripe for people to come back into the market," Crowe predicted that it won't be long before buyers recognize that the bottom has been reached.
He also said by the end the year, ten states — Mississippi, Alabama, Louisiana, Texas, Oklahoma, Nebraska, New Mexico, Wyoming, North Dakota and Montana — will be back at 100% or more of normal production.
At the same time, though, 10 others — California, Nevada, Arizona, Florida, Michigan, Ohio, Illinois, Minnesota, Vermont and Maryland - will still be below 70% of normal.