Although I have broken the blow of this otherwise smooth and informative article, I feel compelled to insert an opinion and a question.  Those of the electorate who ignored all the available evidence (including Joe the Plumber), threw logic out the window and voted for Hope You Can Believe In, are getting what they deserve: a socialist American President.  If it were only the foolish who voted for Obama that  had to pay for that folly, I wouldn’t have a problem with it.  But, all Americans, in fact, most citizens of the world will suffer under Obama.  To those of you who smack talk Trickle Down Economics in your class-warfare-like manner, please remember that nothing trickles up and a rising tide really does lift all boats.  Instead, we’ve got holes in the boat and an incompetent at the helm, steering a steady course to trillions of dollars in entitlement programs.  Way to go folks.

Obama said this year’s deficit would increase to $1.75 trillion and fall to $533 billion by the end of his first term and that his budget blueprint provides investments in massive entitlement programs, health care, energy conservation and education to modernize the nation’s economy in the long-term. "What I won’t do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century — investments that have been neglected for too long. These investments must be America’s priorities," Obama said.  Only investments really translates into Entitlements.

After the President announced his budget plan, NAHB Chairman Joe Robson issued a media statement highly critical of the Administration’s proposal to reduce the value of the mortgage interest and real estate tax deductions for home buyers and home owners in order to pay for an expanded health care initiative.

Robson’s comments were as follows: “With the housing market still reeling from its worst downturn since the Great Depression, this is not the time to talk about raising taxes on home buyers and home owners. This proposal will increase the cost of housing for many middle-class families, particularly in high-cost areas such as California and the Northeast, which will only further undercut the housing market, exert more downward pressure on home values and work against the President’s efforts to stabilize housing and turn this economy around. “The proposed budget would also tax ‘carried interest’ as ordinary income, which could significantly impact the multifamily and commercial real estate sectors at a time when they are already experiencing a severe downswing. At this critical point in the recession, we should be doing everything we can to stimulate demand in housing and avoid proposals that would reduce housing affordability and further destabilize prices.

“The notion of ‘robbing Peter to pay Paul’ just won’t work — not when the stakes are so high with our economy. This week alone, existing home sales dropped another 5.3% and new homes sales plunged 10.2%. The months supply of unsold homes is at an all-time high. Financing health care reforms by chipping away at the mortgage interest and real estate tax deductions is certainly not the answer. This will only hurt the ailing housing market and U.S. economy."

Obama is expected to send Congress a complete budget plan in April and Congress is not anticipated to approve the fiscal year 2010 budget until later in the year. Given the size, cost, complexities and major policy overhauls that this blueprint entails, the budget battle in the weeks and months ahead is likely to be contentious as lawmakers on both sides of the aisle debate its merits on an array of fronts — from social spending, to energy policy to taxes. In a press release commenting on the President’s budget, Senate Finance Committee Chairman Max Baucus (D-Mont.) praised the plan but expressed concerns similar to those raised by NAHB. "Some of the reforms and offsets contained or referenced in the budget, such as the limitation on itemized deductions, raise concerns and will require more study as we determine the best policies for getting America back on the track," he said.

Following is a snapshot of tax and spending items of interest to the builder community that are included in Obama’s proposed budget: Taxes Limits the mortgage interest deduction, real estate tax deductions and all other itemized deductions for couples making over $250,000 and single taxpayers earning more than $200,000 A tax increase for home owners and home buyers, as well as small business taxpayers who report income on their individual income tax return Significant impact in high-cost areas Taxes carried interest as ordinary income Increases the capital gains tax to 20% for couples earning more than $250,000 Provides an expansion of net operating loss (NOL) carry back for all businesses (stimulus legislation limited this to small businesses) Appropriations Increases funding for green jobs Adds more weatherization funding Provides more funding for OSHA enforcement Mandates employers to re-enroll employees in retirement accounts Creates more lobbying restrictions and databases Eliminates a HUD low-income housing program Provides full CDBG and Section 8 funding Funds the Affordable Housing Trust Fund (Fannie Mae and Freddie Mac money is now gone, so this becomes a direct appropriation) Creates a HUD energy innovation fund to create an “energy-efficient housing market”

NAHB will remain deeply engaged as the budget process moves forward, fighting to strip out any provisions that will harm housing and promoting elements that will help small businesses and the housing sector. For more information on the tax components in the budget, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421. For information on specific housing and spending programs, contact Jenna Hamilton, x8407.

Okay, the housing market is lousy, we get it.  This really isn’t breaking news, so I’ll skip over it, for the moment and move the remainder of the factual content below.  What I’d really like to know - and what I really wish someone could finally explain - is this:  Does the release of a gloomy report like this, along with the accompanying bad news which main-stream media is seemingly required to

heap on help or hurt?  Has the impartial media coverage actually become self-fulfilling?  Main stream media is about as impartial as the Texas Stadium crowd when the Cowboys play the Redskins in November. 

But, I digress.  In the actual story subject matter, in free fall, US housing starts and permits hurtled downward in January, the US Commerce Department reported, to seasonally adjusted annual rates of 466,000 and 521,000 units, respectively. Both represented new record lows in a downturn that has gone unbroken for seven straight months.

"Builders are continuing to exercise extreme caution in response to market conditions, particularly weak consumer demand and the large inventory of homes for sale that is being fueled by a constant flow of foreclosures," said NAHB Chairman Joe Robson.

"We are certainly optimistic that the newly signed economic stimulus package — and particularly the enhanced first-time home buyer tax credit — will help spark more consumer demand for homes going forward,” Robson said. “However, until that happens, builders have little choice but to put a hold on new construction."

Okay, I digress again.  Please read Related Post.

Single-family starts fell 12.2% in January to a seasonally adjusted annual rate of 347,000 units, a new record low, for those still tracking record lows, while multifamily starts plunged nearly 28% to a rate of 119,000 units — also a record low.

Regionally, starts plummeted nearly 43% in the Northeast and 29.3% in the Midwest. They were down 12.8% in the South and 6.4% in the West.

January permit issuance, typically an indicator of future building activity, declined 8% to a seasonally adjusted annual rate of 335,000 units on the single-family side and 1.6% to a rate of 186,000 units on the multifamily side.

Regionally, permits were down 3.3% in the Northeast, 2.4% in the Midwest, 6.9% in the South and 1.8% in the West.

Maybe that’s Obama’s solution.  If the economy continues hurtling towards earth, as he reminds us daily, housing starts will actually reach zero, thus forcing the rapid absorption of remaining inventory. Hey, that might just work. Except we’ll all be penniless and working for the government or a government bank by then.

Maybe thinking through the first gnawing question in light of my last smart ass as usual statement has caused enlightenment.  The force that really is at work here is that builders are being prudent.  Yes, those unabashed greedy capitalists are keeping a measured eye on output given economic conditions and demand.  Let’s see main stream media types give them credit for that.

At Lexington Luxury Builders we have deferred plans to start a dozen townhomes and three big custom single family homes in First Quarter 2009.  And the greedy, capitalist pig bankers I’ve heard so much about on NBC can’t be found.  No sir, my bankers are a bunch of conservative, prudent guys reminding me to be cautious.  But CNBC isn’t telling anybody about us.

“We applaud the Obama Administration for unveiling its plan to stem the rising tide of foreclosures that is flooding the market with excess inventory and undermining overall home values,” said NAHB Chairman Joe Robson. “This is an important first step to address the acute supply problems confronting the housing market.”

The plan has three main components:

1. A refinancing program for borrowers of mortgages held or guaranteed by Fannie Mae and Freddie Mac who are current on their mortgage payments but who have been unable to refinance because the value of their home has declined.
2. A mortgage modification program for borrowers in default, or at imminent risk of default, that builds on the model established by the Federal Deposit Insurance Corporation by expanding eligibility and establishing incentives for borrowers, mortgage holders and servicers.
3. Actions to bolster the financial stability and mortgage support capacity of Fannie Mae and Freddie Mac.

Of particular interest to NAHB are provisions that relate to mortgage loan modifications for primary residences.

“We hope this will focus only on those mortgages responsible for the surge in defaults,” said Robson, adding that NAHB looks forward to working with the Administration and Congress to ensure that any legislative change is done in a careful manner that will have a positive impact on the marketplace.

The Administration believes its plan will enable Fannie Mae and Freddie Mac to refinance four million to five million home owners. Currently, these institutions have rules that make it difficult to refinance mortgages valued at more than 80% of the home’s worth.

For example, on a home valued at $300,000 with a mortgage of $270,000, a home owner might have trouble refinancing through Fannie Mae and Freddie Mac. The Administration will remove limitations on Fannie and Freddie so that they can refinance mortgages they already own or guarantee.

The plan would create new incentives for lenders to work with borrowers to modify the terms of loans at risk of default or foreclosure. This would require both borrowers and lenders to do their part. Lenders would be required to reduce payments to no more than 38% of a borrower’s income. The government would provide a subsidy to help further cut the borrower’s mortgage debt-to-income ratio to 31%. 

To encourage lender participation in the program, the plan provides them with additional financial incentives to modify loans prior to default.  The program also encourages borrowers to stay current on their payments. Those who participate will be required to make payments on time in return for this opportunity to reduce their monthly mortgage payments and stay in their homes. Home owners who remain current on their mortgage payments following loan modification will be eligible for an incentive of up to $1,000 a year from the government for five years. The bonus will be applied to the borrower’s mortgage to lower the principal balance.

The mortgage modification program will also be available to home owners who are “underwater” and owe more on their mortgage than their home is worth.

The plan seeks to shore up Fannie Mae and Freddie Mac to help keep mortgage rates low for millions of middle-class families looking to buy a new home or to refinance an existing one.

The Treasury Department will provide additional financial support for Fannie and Freddie and allow them to increase their portfolios, which is designed to help the broader mortgage finance market.

The Treasury and the Federal Reserve will also continue purchasing Fannie Mae and Freddie Mac mortgage-backed securities to lower mortgage rates and to maintain stability and liquidity in the marketplace.

The foreclosure prevention package also calls on Fannie and Freddie to provide support to state housing finance agencies. These agencies are currently frozen out of the credit markets and are unable to provide much-needed support to first-time home buyers.

With Fannie and Freddie helping the state housing finance agencies to increase their liquidity, this will provide a ripple effect to strengthen the mortgage markets, said Robson.

While the Administration’s plan is aimed at helping to ease excess capacity in the market due in large part to an unprecedented wave of foreclosures, Robson said that Congress still needs to take additional measures to stimulate housing demand to get the economy moving forward again.

“Until we move to resolve the housing crisis, we will not be able to pull the nation out of recession,” he said.

I’d add to that folks, that until we pull the government out of the crisis, we’ll never see a sustainable recovery.  For all of you out there who are now looking at the government as the savior, I’d like to remind you that the government struggles to deliver mail, can’t keep illegal aliens from walking across the border and takes 90 days to be able to deliver a passport.  And these are the same brilliant people you want running the most evolved economy in the history of mankind?  Not me brother.

When the housing market stages its official recovery, the markets listed on the following pages are likely to lead the parade. It may take a year or more for the weakest markets–where burgeoning foreclosure sales are still pounding new home values, making building and selling new homes an exercise in futility– to finally stage a turnaround. We’ll present that list next week.

The healthiest markets have many things in common. Most of them are great places to live, either close to the ocean, mountains, or major universities. Most of them didn’t have a huge run-up in prices during the boom and aren’t experiencing rampant deflation during the bust.

To compile these lists, we analyzed the top 75 housing markets in the country. We ranked them based on population trends and job growth, perennial drivers of housing demand. We also examined what’s happened with home prices; many of the healthiest markets have managed to hold the line on home values. And finally, we considered the rate building permits, which may be the single best ongoing indicator of builder confidence in a market. We combined all these metrics to produce a score for each market. Here are the top 15, in reverse order.

READ MORE

The bill is seen as a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama’s recovery plan. The tax break was adopted without dissent and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider scaling back spending.

Cost of the Housing Stimulus portion of the mammoth economic stimulus package is estimated at a measly $19 billion. It’s not that I’m not appreciative, really, because I am. For selfish reasons, I am a homebuilder. From a selfless point of view (which, at the moment I am maintaining) many people have lost their homes in foreclosure and many more are faced with it, and they need some help. But when housing - the backbone of the American economy and way of life - only merits $19 billion in effort, when more than $1 trillion is being splashed around like so much water at Jones Beach in this spending package, it makes one wonder about the priorities our all knowing President and Congress seem to have. It also begs the question: Where in the hell are they spending the other $981 billion?

I know I sound insensitive and just downright critical, but think, this used to be alot of money.

Jeez, at our new Lexington Park at Rice Field neighborhood in Downtown Plano, the government providing 5% of your down payment while Lexington is providing 4.25% fixed rate mortgages for 30 years. I was going to say with only 5% down, but now it seems the government will pick up that cost for you. You can’t afford not to buy one! I’m buying one tomorrow.