TO: NAHB National Vice Presidents, State Representatives, State and Local HBA Presidents, Executive Officers of State and Local HBAs
FROM: Bob Simmons, Moderator of the National Vice Presidents
Mak Koebig, Moderator of the State Representatives
Andrew Chaban, Chairman of NAHB’s Public Affairs Committee
RE: Operation Myth Buster
DATE: September 27, 2007
In an effort to boost consumer confidence and debunk sensationalized and often false or misleading media reports about the nation’s housing finance system and housing market, we are asking for your help in recruiting a group of "Myth Busters" (housing spokespersons) in local markets around the country to present a more balanced and accurate picture of what is really happening in today’s housing market.
More specifically, we are asking state and local HBA presidents, with the help of local HBA executive officers, to step up their efforts and serve as more vocal spokespersons for the industry. Local HBA presidents who accept this challenge will be expected to make themselves available for local media interviews. In some markets, local HBA presidents might also want to consider recruiting several other seasoned and knowledgeable builders to create a team of a "myth busters" who can talk to reporters on the current state of the local housing market.
To help in this effort, NAHB Public Affairs will be providing up-to-date talking points, fact sheets, op-ed columns and other materials for the "myth busters" to use in preparing for interviews. In addition, the NAHB Public Affairs staff in Washington is available to help HBA executive officers who might need guidance in taking advantage of media opportunities with local reporters for print, television and radio outlets.
Because the press has so much influence on consumer behavior, we believe that it is very important for NAHB and its 800 local and state affiliates to be more pro-active in taking our message directly to the media and presenting a more balanced and accurate picture on current and projected conditions in the housing market. And that is what our new "myth buster" program is all about. Specifically, we need to correct the record on the following issues, which are covered extensively in the attached talking points.
Myth 1: The Sky is Falling.
If the truth be told, housing has always been a very cyclical business. In the mid 1970s and the early 1980s and 1990s, housing production and sales dropped by more than 60 percent in a matter of months. During those cycles, we confronted and overcame many of the same problems we face today – large numbers of unsold homes, skeptical and reluctant consumers, tight credit markets and shortages of money for certain borrowers, declining home values, and prospective buyers who had difficulty selling their existing homes. The important thing to remember is that over time the market corrected and we rebounded to production and sales levels that beat or matched the records of the previous cycle. The message is that housing is a very tough and resilient industry. We will be back – stronger and better than before.
Myth 3: Foreclosure Rates Are Skyrocketing.
While foreclosure rates have increased in the past year, almost all American home owners are making their mortgage payments on time and are in no danger of losing their homes. Most foreclosures are concentrated in the once super-heated markets in California, Florida, Arizona and Nevada and the upper Midwest states of Michigan, Ohio and Indiana, which have been hit hard by job losses, plant closings and depressed local economies. In fact, in 34 states the foreclosure rate actually declined last month. We are concerned about the two million subprime loans that are due to reset over the next two years. That’s a major problem that needs to be dealt with. But it’s important to remember than 37 percent of all single-family homes are owned debt free -- without any mortgage – and home owners nationwide have built up more than $11 trillion in equity that provides a good cushion against any decline in values. In addition, 97 percent of prime borrowers – the bulk of the market -- are up-to-date on their mortgage payments. Also a high number of defaults on loans to date have been among speculators or investors who were looking for quick profits and subsequently walked away from their investments when the housing market cooled.
Myth 4: Home Values Are in a Free-Fall with No Bottom in Sight.
Except for about 30 or so high-flying metro markets where home values doubled in four or five years, the correction in home values has been relatively modest. Over time, home values will stabilize and then edge upward with the next recovery. To argue that home values will continue to decline and will never recover, someone has to make a convincing argument that it will cost less to build a new home five years from now than it does today. That’s not going to happen.
Myth 2: There’s No Mortgage Money.
If you believed the headlines or the endless drum beat about subprime lending on cable television news, you would think that the pot of mortgage money has dried up completely. Nonsense! The vast majority of our buyers are seeking conventional, conforming mortgages at or below $417,000. These loans are purchased by Fannie Mae and Freddie Mac and have the implicit guarantee of the federal government. While underwriting standards may be tighter for all loans, credit-worthy home buyers should have no problems in finding conventional, conforming mortgages at very attractive rates – slightly above 6 percent for fixed rate, 30-year loans. And with the latest moves by the Federal Reserve to cut interest rates and increase liquidity, the availability of money for jumbo loans has also improved for credit-worthy borrowers, although rates on those loans are about one percentage point above conforming loan rates and downpayment requirements are higher. Nonetheless, getting the word out that mortgage money is available at a very attractive price for credit-worthy borrowers is critical to boosting consumer confidence and traffic of prospective customers.