US home builders ask Congress for bailout

28 February 2008 22:46  [Source: ICIS news]

WASHINGTON (ICIS news)--US home builders urged Congress on Thursday to authorize a new economic stimulus package for the housing sector, warning that the housing and credit crunch is getting worse.

 

David Seiders, chief economist for the National Association of Home Builders (NAHB), told the Senate Finance Committee that new home construction across the country is down by 60% from early 2006 “and the bottom is not yet in sight”.

 

The US housing industry is a key downstream consuming sector for a wide range of chemical or derived products such as roofing and siding materials, adhesives, artificial fibres, paints and coatings and plastic pipe, among others.

 

Seiders said the credit crunch for home loans and broader commercial lending “actually appears to be worsening despite the concerted efforts of central banks here and abroad”.

 

The US central bank, the Federal Reserve Board, has lowered its key federal funds interest rate by 2.25 points since August last year, and earlier this month Congress approved a $168bn (€111bn) package of personal tax cuts and business tax credits to help stimulate the economy.

 

However, Seiders noted that those interest rate reductions have not had the intended effect of lowering home mortgage rates.

 

In testimony before the committee, he cautioned that the $168bn stimulus package - which will not take effect until the second and third quarters this year - is “short-lived and does not address the deep problems posed by the housing contraction that are at the root of today’s economic and financial market problems”.

 

Seiders called for a second round of economic stimulus, but “this time stimulus measures should be directed squarely at the housing sector - the sector that is at the root of the challenges facing the economy and the financial markets”.

 

He urged Congress to approve quickly legislation that would offer first-time home buyers a tax credit of up to $5,000 when they purchase a newly built or existing home.  Limiting the stimulus to first-time home buyers would create immediate housing demand among buyers who do not have an existing home to sell.

 

Committee chairman Max Baucus (Democrat-Montana) appeared receptive, saying that Congress needs to enact policies “that will help more Americans to keep their heads above water”.

 

($1 = €0.66)

By: Joe Kamalick
+1 713 525 2653

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