Washington Hotline - November 21, 2008

Faltering Economy, Oversupply of Units Hurt Rental and Condo Markets

Builder confidence in the multifamily housing market sagged in the third quarter of 2008, pushing both the Multifamily Condo Market Index (MCMI) and the Multifamily Rental Market Index (MRMI) to their lowest levels since the National Association of Home Builders created the indexes in 2003.

The MCMI, which gauges current and expected supply in the condominium market, sank into single digits for the first time: the index value for current conditions stood at 8.1 in the third quarter, dropping more than five points from 13.5 at the same time last year.

Apartment builders are not optimistic about the next six months, either—the component tracking expectations for supply for market-rate apartments fell from 47.1 in the third quarter of last year to 19.1 in the third quarter of this year. Affordable housing developers were even more pessimistic: the component of the index tracking their expectations for supply over the next six months slipped to 20.3 in the third quarter of 2008, down from 39.1 at the same time a year ago.

According to David Seiders, even in those markets where the rental apartment demand and supply are in balance – or where demand exceeds supply— multifamily developers have been unable to get new projects started because of the ongoing credit problems in the capital markets. Since early this year, NAHB has ratcheted down its forecast for multifamily housing starts substantially.

View the full press release.

FHA Multifamily Update: Housing and Economic Recovery Act of 2008

HUD has made some progress implementing the improvements to the Low Income Housing Tax Credit program that were included in the Housing and Economic Recovery Act of 2008, including drafting a mortgagee letter that will revise the subsidy layering requirements for a LIHTC-FHA-insured loan that eliminates the need for the review. For a complete update, click here.

For more information e-mail Claudia Kedda, or call her at 800-368-5242 x8352.

Finance: FDIC Bank Takeovers Hurt Home Sales, Builders Report

Builders with outstanding construction loans are reporting that they are having to stop work on new  developments and are losing sales as the result of failed banks and thrift institutions being taken over by the Federal Deposit Insurance Corporation (FDIC).

Regulatory: Newly Finalized RESPA Rules Still Pose Problems

The newly finalized RESPA Rules still present concerns for NAHB, despite improvements from what was previously proposed.

Specifically, HUD made changes to the proposed rule to address NAHB concerns on the required use definition, and the clarifications do clearly permit a residential builder to offer incentives through the financing process for use of the company's finance or title affiliate, including reduced fees and interest costs. However, the revised language would prohibit such companies from offering price reductions and upgrades on a residence an incentive for the buyer to use an affiliated company. Going forward, NAHB will continue to work with the mortgage finance affiliates of our member companies to develop strategies on this concerning issue.

Other significant changes resulting from the new RESPA language are as follows: 

• For the first time ever, HUD will require mortgage lenders and brokers to provide borrowers with an easy-to-read standard Good Faith Estimate (GFE) that will clearly answer key questions such as what the term of the loan is, whether the interest rate is fixed or may change; whether there is a pre-payment penalty; whether there is a  balloon payment and what are the total closing costs.
  
  
• HUD has withdrawn a proposed requirement that closing agents read and provide a "closing script." Instead, there will be a new page on the HUD-1 Settlement Statement that allows consumers to easily compare their final closing costs and loan terms with those listed on the GFE.
    
  
• HUD's new Good Faith Estimate has been reduced from 4 down to 3 pages, including an instructional page to help borrowers better understand their loan offer. The GFE also will consolidate closing costs into major categories to prevent junk fees and display total estimated settlement charges prominently to allow for easy comparison of loan offers. HUD will specify the closing costs that can and cannot change at settlement, and will limit the amount that certain costs may change.

HUD estimates that by improving upfront disclosures on the GFE and limiting the amount that estimated charges can change, it will save consumers nearly $700 in closing costs.

For more information, e-mail Bill Renner or call him at 800-368-5242 x8597.

Codes and Standards: Design Guide for Duct Systems Released for Public Review

The Air Conditioning Contractors of America (ACCA) Educational Institute recently released for public review a new version of its manual outlining the methods and procedures used to design residential duct systems. The revised version of the manual will be submitted as the new reference in preparation for the 2012 version of the code. This directly affects multifamily builders who must comply with this manual when using the International Mechanical Code.

"Residential Duct Systems," also known as “Manual D,” is one of a series of Air Conditioning Contractors of America (ACCA) manuals that are used in the design and installation of residential and commercial heating and air conditioning systems.

NAHB is reviewing the revised "Manual D" and proposed changes and will submit comments on behalf of its membership. Comments should be e-mailed to ACCA by Dec. 8. Visit www.acca.org/ansi to download the review version of the manual and the response form that explains how to submit comments.

For more information, e-mail  Don Surrena at NAHB, or call him at 800-368-5242 x8574.

View the full article in NBN.

Economy: Government's Mortgage Rescue Efforts Under Way

The government's new mortgage rescue plan focusing on Fannie Mae and Freddie Mac could serve as a model for stabilizing the housing market and stemming the tide of foreclosures.

Together, Fannie Mae and Freddie Mac own or back approximately 31 million mortgages worth a combined $5 trillion. Both government sponsored enterprises have been placed in federal conservatorship. Under the plan unveiled on Nov. 11, qualifying home owners whose mortgages are held by the two entities will be able have their mortgage payments adjusted through lower interest rates or longer repayment schedules to bring them to below 38% of monthly household income. 

Those eligible would have to be at least 90 days late in their mortgage payments, owe at least 90% of their home's current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. In some cases, interest rates on those owners' loans could be lowered for five years and then raised to a predetermined level. In others, loan terms could be lengthened to 40 years.

The hope is that such standards for loan modifications will speed up the process of adjusting troubled borrowers' payments, and that other banks and mortgage investors will follow this model. Under the program, loan balances will not be lowered and loans will not be forgiven, but rather paid back at more affordable terms, said representatives of the Federal Housing Finance Agency, Hope Now coalition and FHA, who announced the plan. 

Read more on CNN.com. For more information e-mail Dave Ledford, or call him at 800-368-5242 x8265

2009 Operating Cost Adjustment Factors Published

HUD issued a notice establishing the operating cost adjustment factors (OCAFs) for 2009. OCAFs are used to adjust Section 8 rents renewed under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). These changes will come into effect on Feb. 11, 2009.

The OCAFs apply to the following projects:

• Section 221(d)(3) BMIR
• Section 236
• All projects with Section 8 contract renewals or adjustments under Section 524 of the Multifamily Assisted Housing Reform And Affordability Act 94 1997 (MAHRA).

View the notice issued by HUD.

Multifamily Events at IBS — More Hotel Savings Through NAHB

Don't miss out on Multifamily events during IBS!

Convene with your peers and industry partners at the International Builders Show to network and recieve the lastest strategies to navigate a challenging market. Be sure to attend! Here's what we have planned:

• NAHB Multifamily New Members Orientation Luncheon  Register NOW!
  The Multifamily New Members Orientation Luncheon brings members of the NAHB Multifamily Council together to meet members of the Multifamily Leadership and learn about the council’s staff and resources. This is an opportunity to lunch and learn while making great connections and taking advantage of all the benefits and resources that the National Association of Home Builders has to offer.
  
  
• Multifamily Developers Reception  Register NOW!
  This exclusive member-only free networking event for Multifamily Council members brings developers, builders, managers and other multifamily industry professionals from across the country together to mix, mingle and discuss successful strategies for dealing with the challenges of multifamily industry.  
   
• Multifamily Builder Networking & Design Coffee Break
  Visit the NAHB Multifamily Headquarters Lounge, room S113 in the Las Vegas Convention Center on Tuesday, January 20 from 2:00 p.m. to 3:15 p.m. to mix and mingle with other condo and apartment professionals and view designs from finalists of the Multifamily Pillars of the Industry Awards.

Book Your Reservation With NAHB
If you decide to book your Las Vegas hotel reservation through the NAHB hotel block, we have great news for you. The NAHB staff continues to negotiate lower hotel rates, and any savings will be passed along to you regardless of when you book your room. For example, if the hotel block room rate is $180 a night when you make your reservation today, but a lower NAHB room block rate becomes available in the future, you will receive the lower rate upon check-out. Again, you do not need to do anything to get the lower NAHB room block rate—we'll handle that for you! Just one of the great benefits of booking in the NAHB block.

The NAHB hotel block closes Friday, December 12^th. Register for IBS and reserve your room today!

NCHI Product: SHARP Insight Pro® Cooktop+Microwave Drawer®

Sharp expands its popular Microwave Drawer^® appliance line with the  oven, a one-of-a-kind unit that combines the world’s first microwave drawer oven with a smooth glass ceramic cooktop.   

Sharp's 1000-watt Microwave Drawer is ideal for open-plan kitchens, islands and tight spaces. Located at a convenient height, the drawer brings ease to the cooking process, opening automatically with a touch of the control panel, and is large enough to hold a 9-inch by 13-inch dish.  

The Cooktop+Microwave Drawer design features front-mounted angled and lighted glass touch-screen controls that are readily accessible, easy to use and easy to clean. It uses Sharp's LCD touch-screen technology, which simplifies the cooking process with step-by-step instructions and helpful tips.

For more information about NCHI, E-mail David Cooper, or call him at 800.368.5242 x8247.

Resources: GM Red Tag Combination Offer

Members, Combine GM $500 Private Offer With Red Tag Event

NAHB members can combine the GM $500 Private Offer with GM’s Red Tag Event for even bigger savings through Jan. 2.

During the Red Tag Event, participating GM dealers are offering special sales prices on select, red-tagged vehicles and displaying the prices customers will pay — including all cash back incentives.

As participants in the GM Private Offer, NAHB members can take an additional $500 off the GM Red Tag price.

The Red Tag Event provides special pricing and “Customer Cash” from $0 to $7,250 to customers purchasing an eligible new 2008 or 2009MY vehicle, while supplies last. (The Red Tag offer excludes the Cadillac CTS-V series, Chevrolet Corvette ZR-1 and medium-duty trucks.)

The Red Tag Event is available through Jan. 5. The GM Private Offer is available through Jan. 2. Visit the NAHB Member Advantage Web page for complete details.

Calendar: Conferences and Events

December 2008

LIHTC Utility Allowance Estimates: Understanding an Applying the New Methods. Dec. 3, 2008 2:00 PM - 3:00 PM EST Join NAHB for this audio seminar in which experts in Low Income Housing Tax Credit (LIHTC) policy will break down the new options for calculating utility allowances: obtaining a utility estimate from the agency with jurisdiction over the building, using the Department of Housing and Urban Development (HUD) Utility Schedule Model, and using the energy consumption model. HCG Steering Member $39 per Phone Site HCG Builder Member $59 per Phone Site Non-Member  $89 per Phone Site Presenters on the audio conference will: -Provide an overview of the new methods and practices allowed -Go over the HUD utility schedule model in depth -Discuss hiring qualified contractors to run energy consumption models Speakers: Scott Michael Dunn, HCCP, Compliance Solutions Craig Drumheller, NAHB Research Center Paul Emrath, NAHB To register visit www.nahb.org/HCG or e-mail Carmel Mcguire  for more information.

January 2009

If you decide to book your Las Vegas hotel reservation through the NAHB hotel block we have great news for you. The NAHB staff continues to negotiate lower hotel rates and any savings will be passed along to you regardless of when you book your room. For example, if the hotel block room rate is $180 a night when you make your reservation today but a lower NAHB room block rate becomes available in the future, you will receive the lower rate upon check-out. Again, you do not need to do anything to get the lower NAHB room block rate, we'll handle that for you! Just one of the great benefits of booking in the NAHB block. Reminder, the NAHB hotel block closes, Friday, December 12th. Register for IBS and reserve your room today!

March 2009

NAHB Multifamily Pillars of the Industry Conference March 17-18, 2009 San Diego, CA Hotel Del Coronado Register NOW! The fluctuating economy and risky credit markets have even the most savvy multifamily developers rethinking their business plans. They’re strategizing new ways to finance current deals and positioning their companies for future opportunities. NAHB’s Multifamily Pillars of the Industry Conference is the place where smart developers and other industry professionals know they can come for: The most up-to-date market and financial information Interactive learning on key topics such as REIT’s, debt markets, sustainability and emerging trends The chance to network with peers, potential partners, capital sources and essential product and service providers View more about the Pillars of the Indstry Awards here.