Life According To the National Association of Home Builders

I freely admit to being highly selective about the things I comment on. Comprehensive coverage of events marking the Decline of the Empire would require an Army of Bloggers working all day long 7 days a week. Our comatose housing market is one of the subjects I keep track of. Our suburban expansion (1946-2007, RIP) played a central role in spurring economic growth during the American Century. The End of Suburbia is central to our Decline in the 21st century.

I was highly amused very concerned when I saw this press release by the National Association of Home Builders (hat tip, ckm3).

May 27, 2010 - Legislation introduced yesterday by Reps. Brad Miller (D-NC) and original co-sponsors Carolyn Maloney (D-NY) and Joe Baca (D-Ca) would help alleviate the severe lack of credit for acquisition, development and construction (AD&C) financing that threatens to end the budding housing recovery before it has time to take root, according to the National Association of Home Builders (NAHB).

“We applaud these lawmakers for taking the lead to address the housing production credit crisis that is jeopardizing the housing and economic recovery now under way,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich.

H.R. 5409, the Residential Construction Lending Act, would create a new residential construction loan guarantee program within the Department of Treasury to provide loans to builders with viable construction projects. Designed to unfreeze credit for small home building firms, the measure would expand the flow of credit to residential builders on competitive terms.

Viable construction projects? You mean like this one?

If you want details about why the American housing market is going nowhere fast, you can find them in my The New Housing Bust. Housing data released since I wrote that article—for example, the latest Case-Shiller Index—only underscore my conclusions.

Don't hold your breath waiting for a housing recovery. The only things budding right now are the Spring flowers. As the National Association of Home Builders prays for rain in the form of additional Government largess, remember that any "recovery" we've had in the last year was just another government subsidy.

We're paying builders to build homes that nobody wants

Comments

[Amy Whilldin]

I appreciate your post and observations, Dave, but believe they're a bit out of context in this case. You're comparing a recent jump in housing starts to the lack of AD&C credit and coupling that with the housing bust (illustrated in your first photograph), and that's not apples-to-apples kind of stuff.

It is widely held that there will be no sustained economic growth without a healthy housing market. The Federal homebuyer incentives were a good step in stimulating an otherwise stagnant market - and that's largely what's behind the Case-Shiller Index report.

The bust at the onset of this Great Recession and the resulting AD&C credit crisis are completely different balls of wax from the April home sales & starts, just as much as they are different from each other.

Your photograph illustrates the recession's impact on the homebuilding industry perfectly - the bottom fell out almost overnight. People lost their jobs, banks were failing and huge companies were getting bailed-out by the Federal Government. This tremendous sense of fear and uncertainty stopped the economy in its tracks. Projects that were already underway (like this one, I would imagine) stopped almost as abruptly. And why would you (or anyone with good business sense) proceed when potential buyers were hunkering down to ride out the storm rather than entering the marketplace? But I digress...

The AD&C crisis is a current and persistent problem. Viable projects cannot secure adequate funding because lending has been frozen. This icing has had an unnecessarily pervasive and chilling effect on otherwise beneficial projects - beneficial in terms of job creation, demonstrated need, plus short- and long-term economic stimulus. Acquisition, development and construction financing must be made available in order for the building industry to get the locomotive known as our economy moving once again.

So please, do continue to keep your eye and your interest on the comotose housing market, because until it begins to recover, the US economy will continue to languish and suffer with far-reaching impact. Meanwhile, please understand that correcting the AD&C crisis is one of the critical components of this recovery process.