The Chicago housing industry called on Congress today to address the housing crisis that is at the root of the nation's recession. Alan Lev, 2008 president of the Home Builders Association of Greater Chicago and president and CEO of Belgravia Group, Ltd; Scott Eckstein, president of James Scott Custom Builders; and Terry Holm, operations manager of Edward Hines Lumber, urged Congress to enact bold measures that will stimulate the housing market and, in turn, revive the local, state and national economies.
"Housing is central to our economy and is an engine of production that can lead us out of the recession," said Lev. "But it is crucial for Congress to enact a major stimulus package to stop the decline in home values, stem the tide of foreclosures, stabilize financial markets and re-ignite consumer demand."
To get the Chicago economy moving again, the housing industry is urging Congress to support enhancements to the home buyer tax credit and provide below-market, 30-year fixed-rate mortgages for home purchases.
Specifically, the legislation should include:
1. A 10 percent tax credit for all qualified home buyers capped at 3.5 percent of FHA, Freddie Mac or Fannie Mae loan limits (equaling $10,000 to $22,000 depending on geographic market). All primary home purchases through December 31, 2009, would be eligible. Repayment would be required only if the home was sold within three years. And the credit would be available at closing, making it easier for buyers to use it as a downpayment;
2. A below-market, 30-year fixed-rate mortgage for home purchases. The second component of the stimulus plan would provide qualified home buyers with 30-year fixed-rate mortgages at 2.99 percent interest on contracts closed until June 30, 2009 and 3.99 percent interest on closings between June 30 and December 31, 2009; and
3. Continued measures to reduce foreclosures and keep people in their homes.
The housing industry representatives cited a similar plan with both a tax credit and a mortgage rate subsidy that was enacted in 1975 when the nation was also in the midst of a recession. That successful stimulus plan jump-started the depressed economy, and the effects continued in communities across the country long after the measure expired.
"I started this company in a slow economy 19 years ago, and took it from a one man operation to a staff of about 12 or 14," explained Scott Eckstein, president of James Scott Custom Builders, based in Naperville, Ill. "At our peak we built 19 homes a year; we're down to two this past year. Currently, I have no homes scheduled to build. We have to try and make our living through remodeling - but that market has become so diluted because of the huge influx of trades people trying to find any sort of work in this crisis. I've had to lay off all my employees except for one."
Terry Holm is the operations manager for Edward Hines Lumber out of Buffalo Grove, Ill. "Like the builders we work for, we are really hurting right now," stated Holm. "This downturn has actually been going on for three years and we've been tightening up and shutting locations -- but the stock market has pushed everything into a downward spiral. Our business was down 36 percent in '06, 27 percent in '07 and now 35 percent in '08. That's three consecutive years of huge downturns. The customers we work with and provide supplies for are all putting their projects on hold. We're projecting another down year in 2009, and we're looking at possibly needing to close more locations."
"When the housing industry is in a crisis, the entire community is affected," noted Lev. "Retailers, manufacturers, service providers and even the local government are affected. Most important, local residents suffer."
"Three million home building-related jobs across the country have been lost as a result of the slowdown in housing production, which represents $145 billion in lost wages and $4.9 billion in lost purchases," said Bernard Markstein, senior economist at the National Association of Home Builders in Washington, D.C. "Deterioration in these jobs has now spilled over into virtually all sectors of the U.S. job market and the economies of cities like Chicago."
In the Chicago metropolitan area, housing values are down by 3.5% compared to the first quarter of 2007, while the unemployment rate has risen to 7.3%.
"We are leaving no stone unturned in our efforts to convince Congress to quickly enact a robust housing stimulus program. There's no question that stopping the decline in home values and restoring demand for housing is the fastest and most effective way of reviving the economy," Lev said.
The housing leaders in Chicago are part of a new coalition called Fix Housing First, consisting of more than 600 organizations, home building companies and manufacturers advocating for this major stimulus package to stem the decline in home values, stabilize financial markets and re-ignite consumer demand. To learn more about Fix Housing First, go to www.fixhousingfirst.com.
ABOUT NAHB: The National Association of Home Builders is a Washington, D.C.-based trade association representing more than 235,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as "the voice of the housing industry", NAHB is affiliated with more than 800 state and local home builders associations around the country. NAHB's builder members will construct 80 percent of the nearly 1 million new housing units projected for 2008.