Famed college football coach Lou Holtz was the master of the obvious in observing “houses are not a fad” during his keynote speech last month at the International Builders’ Show (IBS) in Las Vegas.
It’s hard to dispute those words of wisdom, but the current trend for new home demand is anything but hot.
The seasonally adjusted annual rate of new home sales slid nearly 15 percent to 331,000 units for December. This represents a staggering 76 percent decline from the market peak in 2005, according to the National Association of Home Builders (NAHB).
The housing market’s implosion translated into a 30 percent drop in attendance and contracted exhibit floor space at IBS, Jan. 20-23. Still, more than 60,000 professionals attended the show to view new products, learn at educational seminars and, in general, position their companies for better days.
How quickly the market improves remains to be seen. Reports of 598,000 job losses in January, bringing the nation’s unemployment rate to 7.6 percent, and an 8.6 percent drop in the S&P 500 index seem to indicate that the economy has not hit bottom.
Plenty of Blame to Go Around
A lot of finger pointing has taken place to lay the blame for the housing meltdown. Suspected culprits include: former Fed Chief Alan Greenspan for over-greasing the market with low interest rates; lending institutions for dropping their credit standards and being overly creative in pushing ARMs and sub-prime mortgages; and consumers for biting off more than they could chew. Certainly the NAHB and its members helped create the problem every time they praised the Fed for dropping interest rates and helping hoist home building to record highs.
Absent any much-needed oversight, the housing industry has sunk to new lows and taken with it manufacturers of kitchen cabinets, furniture, flooring, windows, doors, mouldings, etc.
Now, traditionally Republican-minded manufacturing industries are counting on President Obama and his Democrat colleagues, who now control both houses on Capitol Hill, to turn things around and quick.
‘Fix Housing First’
“Fix Housing First” is the rallying cry of the NAHB and the name of a coalition that numbers more than 600 associations and individual companies as members. Among those jumping on the Fix Housing First bandwagon are the Kitchen Cabinet Manufacturers Assn., the American Home Furnishings Alliance, the Hardwood Plywood & Veneer Assn., and the Wood Manufacturers of America. NAHB notes that a housing stimulus package passed by Congress in 1975 “rapidly improved the market and the economy in dramatic fashion.”
“We need a significant stimulus on the demand side, because otherwise, home sales will only continue downward, dragging down values, consumer confidence and consumer spending, which in turn creates further downward pressure on sales,” said Joe Robson, a home builder from Tulsa, OK, and newly elected 2009 chairman of NAHB. “Because this vicious, self-perpetuating cycle can only be curtailed by offering a real incentive to those on the sidelines, NAHB is urging Congress to substantially enhance and extend the $7,500 first-time home buyer tax credit as part of the economic stimulus package…Doing so would go a long way toward putting a floor under declining home values that are at the core of the current economic crisis.”
Sen. John Ensign, (R-NV), has proposed an amendment to the economic stimulus bill that would provide a tax credit of $15,000 for all primary resident buyers. “Let’s put together a true stimulus package that fixes housing and creates jobs,” Ensign said. “Let’s let folks refinance their homes with a 4% interest rate, which would give the average household almost $500 a month extra to spend in this economy. Let’s target tax relief to encourage business to invest and create jobs.”
Wood & Wood Products could not agree more. We also throw our support behind the Fix Housing First movement. Restoring a healthy home building industry is fundamental to improving the nation’s economy and helping to reenergize the secondary woodworking industry. Unlike an auto industry bail-out, housing touches more people in more ways everywhere. A revitalized housing industry will help create jobs and restore consumer confidence.
Pushing through a successful economic stimulus package is President Obama’s first major test. Let’s hope he aces it.
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