Monday Morning Briefing Letter - 12/05/2005 (Plain Text Version)

By David F. Wilson, NAHB President and
Jerry Howard, NAHB Executive VP and CEO

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Resounding public support for housing tax incentives

...that's the culmination of findings from NAHB's latest national survey in which an independent polling firm asked Americans for their opinion of proposals that would replace the mortgage interest deduction and ditch other critically important tax breaks.

Given a choice between simplifying federal tax laws or retaining current housing incentives, the polling of 1,001 adults, conducted by RT Strategies on Nov. 17-20, found that two out of three respondents favored retaining deductions for mortgage interest and state and local taxes. These findings offer a cautionary note to those in the Bush Administration and on Capitol Hill who may be tempted to endorse the recommendations of the President's Advisory Panel on Federal Tax Reform. Such proposals would wipe out widely popular incentives that promote homeownership and affordable housing development. According to the polling firm, "Registered Democratic and Republican voters in all age groups view efforts to tamper with home interest deductibility as a major threat to their retirement security and their ability to pay for their children's educations." Following are a few highlights of the polling results:

68% favored retaining deductions for mortgage interest and state and local taxes over simplifying the federal tax code.
79% said it is reasonable for the federal government to provide tax incentives to promote homeownership.
82% believe the government should use the tax code to encourage affordable housing.
71% oppose the idea of changing the tax code to encourage people to invest more in stocks and bonds and less in the homes that they own.

Contact Jay Shackford (x8406) for details, or check www.nahb.org/taxreform or our press release as of Monday, Dec. 5.

NAHB launched a major ad campaign on tax reform

this week, using results of the above-mentioned survey to emphasize our point that the majority of the American public wants to keep the mortgage interest deduction and other housing tax incentives wholly intact. Targeting mostly policymakers and legislators on Capitol Hill, our ads will appear the first week in December in The Washington Post as well as inside-the-beltway publications like National Journal, Roll Call and CQ Weekly. NAHB Executive Vice President and CEO Jerry Howard will unveil NAHB's ad campaign during the Winter Executive Board Meeting, taking place on the weekend of Dec. 3-4 in Charleston, SC. Readers of this report will be able to view the ad in its entirety on www.nahb.org/taxreform this Monday. [return to top]

Indianapolis is the most affordable major U.S. housing market

according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) for the third quarter of this year, released Dec. 1. In that city, 89.7% of all homes sold during the third quarter were affordable to families earning the area's median income of $64,000. The median price of homes that sold in Indianapolis in the period was $125,000. Meanwhile, the HOI showed that overall U.S. housing affordabilty fell for the third consecutive quarter to its lowest level since the HOI was first reported in 1992, at just 43.2. This means that slightly more than 43% of homes sold nationwide in the third quarter were affordable to median-income families. The latest decline, of 2.7 points, was primarily attributed to a 5% gain in the average price of homes sold between the second and third quarters. See our press release for details, and see the complete HOI tables online. Contacts: Gopal Ahluwalia (x8480) and Rose Quint (x8527). [return to top]

NAHB to Supreme Court: Ditches aren't "navigable waters."

NAHB recently filed an amicus brief on behalf of the petitioners in two important wetlands cases that are now before the U.S. Supreme Court. In those cases, John Rapanos and June Carabell are asking the court to overturn previous appeals court rulings that said ditches or storm sewer systems qualify as "navigable waters" and are therefore subject to federal permitting requirements under the Clean Water Act (CWA).

As defined by Congress under the CWA, ditches are point sources meant to transport water and sediment from a source (such as a construction site) into a storm drain. Permits are required to control sediments and other pollutants that leave a ditch and actually flow into a navigable water — as opposed to sediments that enter a ditch and are held there or diverted to another non-navigable water. Treating a manmade ditch itself as a navigable water and requiring a permit before water and sediment even enter that ditch is more than Congress intended with its original legislation, with no additional environmental benefit. (In fact, the federal government made no attempt to claim in either Rapanos or Carabell that downstream waters were affected by upstream activites undertaken by the court petitioners.) In real-world application, such overregulation means that a home builder must seek a permit for water and sediment that enter a ditch that he himself created to appropriately control storm water runoff from his construction site. That's an unfair and costly requirement that can add thousands of dollars to a new home's cost. NAHB focused on all of these points within our amicus brief.

Opening arguments in both cases are expected this coming February, with decisions likely sometime in the summer of 2006. For more, contact: Duane Desiderio, x8146. [return to top]

The latest government data on house prices

seems to go hand-in-hand with results of NAHB's housing affordability gauge known as the HOI (story above). The numbers revealed that U.S. home prices have risen by just over 12% in the past 12 months and nearly 3% between the second and third quarters. In fact, every state in the union posted increased home prices, though the pace of price gains did slow overall. Metros with the fastest-rising prices in the period included Phoenix, AZ and Cape Coral-Fort Myers, FL, while metros with the slowest-rising prices included Mansfield, OH and Greeley, CO. See the government figures by visiting the Office of Federal Housing Enterprise Oversight (OFHEO) online. [return to top]

New-home sales jumped 13% in October

from the previous month, according to the Commerce Department's figures, released Nov. 29. This good news reflected a 9% gain from one year before and surprised many forecasters, who had expected to see evidence of a slightly softer market. NAHB Chief Economist David Seiders theorized that the upshift in interest rates may have pushed a lot of fence-sitters into a buying mode, and builders may have deepened sales incentives to counter growing buyer resistance to home prices and interest rates. Yet Seiders noted that it's quite possible that the government's numbers are a little off. "It's likely that today's report overstates the true pace of home sales because of well-known statistical deficiencies," he said. Read our press release online. [return to top]

The pace of remodeling activity slowed in the third quarter

compared to the previous three months, according to professional remodelers responding to NAHB's Remodeling Market Index (RMI). Released on Nov. 22, the RMI declined one and a half points from 52.4 to 50.9, indicating modest yet positive growth in remodeling outlays. According to NAHB Chief Economist David Seiders, "The small declines in the overall RMI measures of current market conditions and expectations for the future reflect relatively firm readings for owner-occupied housing, but serious deterioration for the rental housing market." In fact, while owner-occupied units saw almost no change in current market activity with a one-tenth of a percent decline on the RMI scale, renter-occupied units posted a nearly eight-point drop this time around. Meanwhile, the RMI "special questions" section, where remodeler respondents are asked about specific topics, focused on those professionals' upcoming plans to expand their businesses. A substantial 58% of remodelers said they intend to expand their businesses organically, versus just 4% who envision an acquisition or merger in their future. Four out of 10 businesses have no plans to expand into other areas of work or new geographic regions, while about 11% of remodelers have been approached regarding a possible acquisition by another business. See our press release and RMI tables online, or contact Jim Lapides, x8451. [return to top]

Excellence in Marketing & Home Design Awards

from NAHB's Building Systems Councils (BSC) were announced during the BSC's annual SHOWCASE event in Louisville, KY this November. "Today, many new homes are constructed with a building system," explained BSC Sales & Marketing Committee Chairman Kelly Romigh. This can include anything from a simple roof truss to an insulated concrete form foundation. The extensive list of winners across all categories of the awards is too large to reproduce in this report, but you can find it in our press release or in the January/February issue of Building Systems Magazine that will be distributed during the 2006 International Builders' Show in Orlando. Contact Eric Fulton, x8577. [return to top]