Builders Urge Congress to Maintain Ongoing Federal Role to Ensure a Healthy Mortgage Market

WASHINGTON, May 26 - With some members of Congress actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing, the National Association of Home Builders (NAHB) told Congress today that maintaining an appropriate level of government support is absolutely essential to preserve financial stability.

Testifying before the Senate Banking Committee, NAHB First Vice Chairman Barry Rutenberg, a home builder from Gainesville, Fla., said that absent a federal role to help reassure mortgage market investors, the cost and availability of mortgage credit would be subject to unpredictable volatility.


"The historical track record from the 1998 Russian crisis to the tragedy of Sept. 11 clearly shows that the private sector is not capable of providing a consistent and adequate supply of housing credit without a government backstop," said Rutenberg. "Therefore, as the private market transitions to assume a greater responsibility, there must be a predictable, permanent federal role in order to ensure a consistent supply of mortgage liquidity and to allow rapid and effective responses to market dislocations and crises."
While NAHB strongly supports efforts to modernize the nation's housing finance system, it is critical that any reforms be well-conceived, orderly and phased in over time.

NAHB opposes legislation pending in the House and Senate that would effectively wind down the operations of Fannie Mae and Freddie Mac without offering a clear vision for the future housing system and a non-disruptive transition to a new secondary market framework. Similarly, NAHB believes that more than a dozen short-term legislative proposals offered by House Republican lawmakers to reduce the support Fannie Mae and Freddie Mac provide to the mortgage markets represent a piecemeal approach to reform that would disrupt the housing market and could push the nation back into a deep recession.

New legislative efforts would take a very different tack from these proposals. Recent bipartisan legislation (H.R. 1859) introduced by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.) would replace Fannie Mae and Freddie Mac with five private companies that would issue mortgage-backed securities that have government backing. Legislation currently being developed by Rep. Gary Miller (R-Calif.) would also include a predictable government role in the secondary mortgage market to preserve financial stability in the market and maintain a stable housing sector.

"NAHB views the introduction of H.R. 1859 and Rep. Miller's draft legislative proposal as very positive developments as debate on the future of the housing finance system moves forward in Congress," said Rutenberg. "Maintaining a continuing and appropriate level of government support is necessary to promote investor confidence and ensure liquidity and stability for homeownership and rental housing."
Absent a federal backstop for housing, Rutenberg warned that the 30-year, fixed-rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace. Similarly, the availability of financing for multifamily housing would fall woefully short of the growing need.

Qualified Residential Mortgages

Also of great concern to NAHB are proposals unveiled in late March by six federal agencies that would establish a "Qualified Residential Mortgage" (QRM) standard featuring a minimum 20 percent downpayment on a home loan. Requiring 20 percent down would keep homeownership out of reach for most first-time home buyers and middle-class households.

About 62 percent of first mortgages taken out to purchase a home would not have qualified under the proposed QRM standard because they had downpayments of less than 20 percent, according to LPS Applied Analytics, a mortgage data firm.

NAHB estimates that it would take 12 years for a typical family to save enough money for a 20 percent downpayment on a median-priced single-family home and other research has found it would take even longer.

"If buyers are denied access to affordable housing credit, the shadow inventory of foreclosed homes will not be drawn down, a housing recovery will not take hold and economic growth will stall," said Rutenberg.
Moreover, low-downpayment home loans have been originated safely for decades and are not what drove the housing lending crisis, added Rutenberg.

"Subprime, no-doc and other alternative mortgage products crashed our economy," he said. "We believe the Administration and regulators must acknowledge this fact and offer a new plan that ensures a safe and healthy mortgage market and keeps homeownership affordable for working American families."

OFFICE CLOSED

Please note: The HBAGTA Office will be closed on Monday, May 30 to honor those who have served for our freedom.

HOUSING AFFORDABILITY RISES TO RECORD LEVEL, TIGHT FINANCING CONTINUES TO CONSTRAIN SALES

WASHINGTON, May 25 - Nationwide housing affordability during the first quarter of 2011 rose to its highest level in the more than 20 years it has been measured, according to National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data released today.

The HOI indicated that 74.6 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. This eclipsed the previous high of 73.9 percent set during the fourth quarter of 2010 and marked the ninth consecutive quarter that the index has been above 70 percent. Until 2009, the HOI rarely topped 65 percent and never reached 70 percent.

"With interest rates remaining at historically low levels, today's report indicates that homeownership is within reach of more households than it has been for more than two decades," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "While this is good news for consumers, home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales."

Syracuse, N.Y., was the most affordable major housing market in the country during the first quarter of the year. In Syracuse, 94.5 percent of all homes sold were affordable to households earning the area's median family income of $64,300.

Also ranking near the top of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Indianapolis-Carmel, Ind.; Warren-Troy-Farmington Hills, Mich.; and Toledo, Ohio.

Among smaller housing markets, the most affordable was Kokomo, Ind., where 98.6 percent of homes sold during the first quarter of 2011 were affordable to families earning a median income of $61,400. Other smaller housing markets near the top of the index included Monroe, Mich.; Cumberland, Md.-W.Va.; Elkhart-Goshen, Ind.; and Springfield, Ohio.

New York-White Plains-Wayne, N.Y.-N.J., led the nation as the least affordable major housing market during the first quarter of 2011. In New York, 24.1 percent of all homes sold during the quarter were affordable to those earning the area's median income of $65,600. This marks the 12th consecutive quarter that the New York metropolitan division has held this position.

Other major metro areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, Calif.; Los Angeles-Long Beach-Glendale, Calif.; Honolulu; and Santa Ana-Anaheim-Irvine, Calif., respectively.

San Luis Obispo-Paso Robles, Calif., where 47.6 percent of the homes were affordable to families earning the median income of $72,500, was the least affordable of the smaller metro housing markets in the country during the first quarter. Other small metro areas ranking near the bottom included Santa Cruz-Watsonville, Calif.; Laredo, Texas; Ocean City, N.J; and Santa Barbara-Santa Maria-Goleta, Calif.

Please visit www.nahb.org/hoi for tables, historic data and details.
EDITOR'S NOTE: The NAHB/Wells Fargo HOI is a measure of the percentage of homes sold in a given area that are affordable to families earning that area's median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board.
The NAHB/Wells Fargo Housing Opportunity Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public.

Selling Tips for Home Buyers

There are incredible opportunities to buy a home in today’s market. Interest rates are near historic lows, prices are more competitive than they’ve been in years, and there is a large selection of homes available for sale to choose from. Whether you would like more space to accommodate a growing family or less to better suit an empty-nester lifestyle, the current buyer’s market makes it an ideal time to make a change.

But what if you have to sell your current home before you buy a new one? While the buyer’s market means when you buy your new house you will be able to get more for your money than a few years ago, it also means you will have to make sure your existing home is presented in its most attractive light in order to attract bids from potential buyers.

Here are some tips to help you improve your chances of attracting a buyer:

·        Start with a realistic price. Thoroughly research what homes comparable to yours have sold for in the past year, as well as what the asking price is for the homes that are currently for sale. If you are working with a Realtor, they can do this for you. A price that’s too high may keep your home on the market so long that buyers will assume there are problems.

·         Curb appeal is critical. Some prospective buyers never get out of the car before deciding that a run-down house is not for them. Keep your lawn neatly mowed and seed bare spots, mulch all the garden beds and plant colorful annuals, and paint or touch up fences, trim and the house itself, if it needs it. Fix anything sub-par that’s visible from the street.

·         Clean, clean, clean. From the minute buyers arrive at your front door, make sure that everything they see is super clean. Put out a new welcome mat. Thoroughly clean carpets, floors, baseboards, curtains, windows, and especially all the surfaces and appliances in your bathrooms and kitchens. Repaint the walls if they are scuffed or stained.

 ·        Don’t forget odor. The home should both look and smell clean and welcoming. Open windows in good weather to encourage fresh air to circulate. Use scented cleaners or air fresheners. Some sellers even pop a batch of cookies into the oven or simmer spiced cider on the stove if they know a potential buyer is coming.

·         Make sure everything works. Fix everything from the merely cosmetic such as burned-out light bulbs, to things that could raise red flags with buyers such as broken sink disposals and leaky faucets. If you don’t fix it, their home inspector will find it.

·       Clutter kills sales. Make sure beds are made, toys are put away, bookshelves are neatly organized, and counters are cleared of personal items. If your house is too full—and that includes attics and basements—prospective buyers will have trouble visualizing their furnishings and possessions fitting in the space. Consider temporarily moving some furniture or boxes to the homes of friends or family, rent a storage facility, or even have a yard sale.

Prospective buyers can see that buying a house that’s already attractive and in good working order will make their lives easier—and could help you get into the home of your dreams that much sooner.

To learn more about homes for sale in the Grand Traverse Area contact the Home Builders Association of the Grand Traverse Area or the Traverse Area Association of Realtors.

The Lasting Value of Homeownership

During National Homeownership Month in June, the housing industry celebrates the many benefits of owning a home. Despite the downturn in the housing market, families continue to seek to achieve the American Dream of homeownership and take their place among the more than 74 million Americans that own a home.

The value Americans place on owning their home continues even through times of economic hardship. The Fannie Mae National Housing Survey conducted in January 2010 showed that two-thirds of American adults said they still preferred owning a home. And 70 percent of respondents said they believe buying a home continues to be one of the safest investments available.

Home appreciation over the long term builds financial security for a family’s future. But most home owners don’t have to wait for the home’s value to increase to realize the financial benefits. Right from the first year, the majority of home owners are able to annually deduct the mortgage interest and property taxes they paid off their taxable income. This can mean thousands of dollars saved off a family’s tax bill every year. 

When the family sells the home, the capital gains exclusion exempts up to $250,000 of the profit ($500,000 for married couples) from taxes. 

But the value of homeownership can be much more than financial.

Owning a home can often be a lifestyle improvement, enabling a family to enjoy a neighborhood, features and other amenities that suit their present and future day-to-day activities.

Newly-constructed houses can deliver energy efficiency, storage space, well-designed floor plans, and the latest technologies in electrical systems and appliances. Rooms are often spacious, with high ceilings and lots of windows to let in light.  A new home also comes with the peace of mind of little maintenance needed and a warranty against defects.

Existing homes offer neighborhoods whose character has already been established, mature landscaping with tall trees, and an existing selection of businesses and services for the home owner to use. If the home isn’t already a great fit to the buyers’ taste, it can be renovated to reflect the new owners’ needs and preferences.

Homeownership lets families build connections. Owners take pride in their homes, and develop friendships with other people who also own homes and care about the neighborhood. A home is a place where families make a sanctuary that feels comfortable and safe, and where they develop social networks, begin friendships and create memories that will last a lifetime.

To learn more about the lasting value of homeownership in the Grand Traverse Area, contact the Home Builders Association of the Grand Traverse Area at (231) 946-2305.

Appraisers Making Headway in Recognizing Value of Green Home Features

The continuing effort to provide recognition for the added value of energy-saving and other green features in homes will take another step forward around mid-summer when the Appraisal Institute is expected to add a green and energy addendum to its appraisal report form.

Green builders have been waging an uphill battle in recent years to convince the lending community to recognize the difference between homes that are just built to code and those that incorporate techniques, systems and products that can dramatically reduce monthly utility costs, which represent a significant expense for home owners.

Sandra Adomatis, whose firm, Adomatis Appraisal Service, is located in Punta Gorda, Fla., announced the new Appraisal Institute addendum on May 3 during NAHB’s National Green Building Conference & Expo in Salt Lake City.

Adomatis said she hopes the addendum will be adopted by the Federal Housing Administration, Fannie Mae andFreddie Mac. “Builders can fill it out ahead of time and give it to the appraiser,” she said, who “can’t always see what’s behind your walls.”

Adomatis confessed that she herself knew little about the attributes of green homes until she ran into a green builder whose home she was appraising who was kind enough to point out that she didn’t know what she was doing.

She told him it was the first green home she had ever worked on, and that prompted the builder to provide a crash course in green housing, the start of her education on an increasingly important segment of the housing industry about which most appraisers still know next to nothing.

“Ask 10 appraisers and only one has ever seen a HERS report,” she said, referring to the evaluation that a trained energy rater provides on the overall energy efficiency of an individual home.

The Appraisal Institute, she said, has been stepping up efforts to make its members more knowledgeable through its Valuation of Sustainable Buildings Professional Development Program, which is conducted in the classroom and online and whose curriculum includes an introductory course and a course presenting case studies on residential green buildings, with a similar course on commercial buildings coming on line soon.

Some builders have been signing up for the instruction, she added, and more courses will be added as new technologies are developed.

Correcting a ‘Blind Spot’ in Mortgage Underwriting

As commonly discussed during the conference, consumers themselves have a lot to learn about green building, and upgrading the existing housing stock, which lags far behind new housing in energy efficiency, represents a major opportunity for the industry.

Adomatis described one concept, embodied in legislation championed by Sen. Michael Benner (D-Colo.), that would correct a “blind spot” in current mortgage underwriting and home appraisal practices by adding expected energy costs to the principal, interest, taxes and insurance now entered into the equation when qualifying a buyer for a mortgage.

The SAVE (Sensible Accounting to Value Energy) Act would hand a clear advantage to new homes over existing homes, she said, but also would create a healthy retrofit market.

The second phase of the program envisioned by SAVE would tackle water consumption.

Adomatis recommended Home Energy Saver Pro as a tool for assessing average utility bills for homes compared to other homes in the same zip code. “This is a good tool for appraisers,” she said.

Finding Qualified Appraisers

Along with other panelists, Adomatis emphasized that finding appraisers who are experienced in green is key for green builders and their customers.

“Qualify the appraiser,” she said, and determine “what education and experience they have in green. Ask lenders to ask for them.”

“The appraiser is still under pressure from the lender,” she added, stemming largely from policies in the secondary mortgage market, where extra construction costs for green are not allowed to be used in valuations.

“The comparables have to be there,” Adomatis said, making it important to pair up houses to demonstrate the savings in average monthly utility bills in a more expensive, and valuable, green home over a comparable home built to code.

In cases where there are disagreements over appraisals of green homes, Adomatis directed builders to guidance provided by Fannie Mae last year.

“If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report,” she said, and “try to work it out with them.”

However, if the appraiser has overlooked certain green features and has not correctly described the quality of the property, that can be the basis hiring someone else to complete the appraisal report.

If they are unable to resolve their concerns with the appraiser, “the lender must obtain a replacement report prior to making a final underwriting decision on the loan,” Adomatis advised.

Greening the Multiple Listing Services

Including green attributes in the homes on Multiple Listing Services has received a major push in the past couple of years from those who understand the need for sales comps to show appraisers and lenders how green certifications and features can boost the value of green homes and to enable prospective buyers to more effectively search for the green homes they want.

On that battlefront, there has been considerable headway, according to Al Medina, director of the National Association of Realtors®’ (NAR) Green Resource Council, but there is considerably further to go in aggregating data from the MLS system.

Comps are the “holy grail” in the quest for a system that can support proper green home appraisals, Medina said, but the going has been slower than he would like because the nation’s 862 MLSs are independently owned and the NAR is not constituted so that it can dictate to local Realtor® groups what they must do on this issue.

A Realtors® survey at the end of last year found that 80 of the MLSs, or 13%, had live searchable green fields.

About 70, or 11%, were in the process of implementing these fields, and about 80, or 13%, said they were in the planning stages.

That leaves several hundred MSLs that have yet to take steps to incorporate green into their listings, but Medina pointed out that there were fewer than 20 of the services that acknowledged green in their listings before the NAR launched its Green MLS Tool Kit in April of 2010.

Designed to support the flow of green home information in the marketplace and provide a step-by-step process that MLSs can follow to include green in their listings, this educational resource is already receiving a makeover.

The Tool Kit 2.0 will be more concise and better organized, and it will provide the opportunity to make “another marketing and communications push to MLS owners and operators,” Medina said.

A Need for Documentation

The Realtors®’ Green Resource Council is also working to address some of the significant shortcomings that have been found in the early adapters of adding green to their listing fields.

“The problem is, agents aren’t using the fields or are putting in wrong information,” Medina said. “The MLS has to have a way of preventing erroneous entries, and some only have one serviceable field.”

With a focus on comps and appraisers, efforts are now underway to ensure that the MLS green fields include documentation, with possible certifications including the National Green Building Standard, a RESNET- orDepartment of Energy-approved HERS rating and Energy Star Qualified New Homes.

“Appraisers need validated comparables,” he said. “Documentation is critical.”

Efforts are also underway to link green programs to MLSs, he said, starting with builders, architects and contractors. Evolving retrofit programs include the Better Buildings Initiative in 35 communities, Home Performance With Energy Star and DOE’s Home Energy Score.

Medina also reminded builders that NAR Green Designees are available to lend their expertise.

Keeping Up the Pressure

Leading efforts for years to make green mortgages a mainstay of the financing options available to home buyers, David Porter, of Porterworks in Stanwood, Wash., indicated that now is hardly the time to ease up on exerting pressure on the lending, appraisal and sales community.

While there are many lending products available that recognize the value of green homes, both for new housing and renovations, none is being consistently offered by lenders, he said.

“Force lenders to learn these programs,” Porter said. “Require lenders to get trained and offer programs to borrowers at the time of loan application.”

Builders should also be pushing for the inclusion of green in consumer search sites.

And “when you build green, have the certification recorded with the title so that it will travel with the property,” Porter said.

“Communicate to the buyer what the power of green is,” he said. “Go through the list of green features and turn them into benefits, such as a higher R value equals lower utility costs.”

And builders need to ensure that the appraiser evaluating the home is competent, with the experience and education needed to do the job competently.

Porter also gave a plug for the Database of State Incentives for Renewables and Efficiency (DSIRE), which he called a “great resource.”

Bud Hierlihy Awarded HBAGTA Lifetime Membership

Marc Burkholder, President of the Home Builders Association of the Grand Traverse Area, awarded Bud Hierlihy the distinction of "Lifetime Membership" last Monday evening at the Association's May General Membership Meeting held at Northwood Paint & Supply. 

Bud, President of Vacation Home Building Company, is a Charter Member of the HBAGTA, establishing the Home Builders Association of the Grand Traverse Area in 1970. He served as the President  in 1972.  He also represented the HBAGTA on the State Friends of Housing Committee and has attended numerous state and national meetings on behalf of the local organization.

Bud was recognized for his outstanding representation and contribution to the Home Building Industry.