US home builders say fed law will restore market

04 August 2008 21:21  [Source: ICIS news]

WASHINGTON (ICIS news)--The housing relief bill signed by President George Bush will restore consumer confidence, stimulate home buying, stem the tide of foreclosures and help clear the huge inventory of homes for sale, industry officials said on Monday.

 

Officials and industry executives with the National Association of Home Builders (NAHB) said the housing market relief measure signed by Bush last Thursday “will provide a real shot in the arm for the housing industry”, in the words of Richard Dugas, president of residential building major Pulte Homes.

 

The law approved by Bush provides a $7,500 (€4,800) tax credit to first-time home buyers and makes $300bn in loan authority available to the Federal Housing Administration (FHA), which insures home mortgages.

 

“The $7,500 first time buyer tax credit is the centrepiece of this effort, and it will stimulate home buying and reduce the inventory of unsold homes,” said Sandy Dunn, president of the home builders association and a home builder in West Virginia.

 

The US housing market has an inventory of unsold homes equal to 11-12 months of sales at current buying rates. In a normal market, the inventory of available residential properties would be only 5-6 months worth.

 

She said the $7,500 tax credit is “a significant financial incentive that will increase housing demand and get home buyers back into the market and shore up home prices”.

 

The US home building sector is a crucial downstream consuming sector for the chemicals industry.

 

Dunn also said the $300bn in loan authority being made available to FHA will help existing home owners avoid loan defaults and foreclosures, which in turn will keep additional vacant homes from coming onto the already flooded market.

 

She said that the benefits of federal housing stimulus was proven in the 1975 congressional action that provided a $2,000 tax credit for new home buyers.

 

“Within nine months, that tax credit helped clear off a record number of unsold homes and helped the country dig its way out of a recession,” Dunn said.

 

Speaking in a conference call with reporters, Dugas said that first-time home buyers made up 20% of the US housing market in 2007, accounting for 2.5m residential property sales.

 

Ed Brady, a home builder in Illinois, said the federal stimulus package - the Housing and Economic Recovery Act - “will restore consumer confidence, reduce inventories and send a signal that the housing sector is at bottom or very near the bottom”.

 

($1 = €0.64)

 

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By: Joe Kamalick
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