I recommend reviewing and supporting this by calling the office of Montana's Senator, Max Baucus, chairman of the Senate Finance Committee. Contact Jim Messina (202) 224-2611 (Messina is Baucus's Chief of Staff)
Here is a truncated portion of the article:
January 24, 2008 - The National Association of Home Builders (NAHB) took out a full-page ad in USA Today and sent letters to the House and Senate leadership today, calling on Congress to make housing incentives a key part of any economic stimulus package being crafted on Capitol Hill.
"Any stimulus plan needs to address the housing downturn in order to stabilize financial markets and get the economy moving forward," said NAHB President Brian Catalde, a home builder from El Segundo, Calif.
In addition, Catalde urged Federal Reserve policymakers to enact further interest rates cuts when they meet at the end of the month to restore confidence and increase liquidity in the financial markets.
To help stimulate the economy and address the current housing situation, NAHB, in a letter to lawmakers, urged them to consider the following policy options when crafting a stimulus package:
- Create a tax credit for the purchase of a home.
- Expand the net operating loss (NOL) tax deduction. Under present law, a business loss can only be deducted from taxes paid from the previous two years.
- Expand the mortgage revenue bond program.
- Designate housing as an eligible investment for tax-preferred retirement accounts.
- Increase the conforming loan limit for Fannie Mae and Freddie Mac.
- Modernize the Federal Housing Administration (FHA)..."
Here is the letter from NAHB to Congresspeople:
Dear Speaker Pelosi, Majority Leader Reid, Minority Leader Boehner, and Minority Leader McConnell,
On behalf of the 235,000 members of the National Association of Home Builders (NAHB), I am writing to share our views on the economic stimulus discussions currently taking place in the Congress. Congress last passed economic stimulus legislation in 2002, when housing was a key economic driver that significantly softened and shortened the economic downturn. Now, the reverse is true and housing is contributing to slow economic growth. NAHB respectfully urges the Congress to include in any stimulus package incentives that address the underlying causes for this crisis and to include housing incentives in the package.
NAHB expects 2008 housing starts be approximately one million; a fifty percent decline from the over the two million housing starts realized in 2005. Some reduction in building was expected, given the above-norm production levels and resulting excess inventory in some parts of the country. However, even with this historic reduction in starts, the inventory "overhang" of housing continues to be a serious problem. The for-sale inventory of new homes is 505,000, which represents a 9.3 month supply; a record for the last twenty years in terms of both months supply and number of units.
Existing home inventory and sales are in a similar position with a 10.3 month supply at the current sales rate of 4.3 million units per year. The excess inventory of homes-for-sale places significant downward pressure on housing prices, which present a significant danger to the national economy. Recent actions of the Federal Reserve, such as cutting the federal funds rate to 3.5%, may help stimulate housing demand. However, the Federal Reserve only controls short-term interest rates, and because of the fear of inflation, changes in these rates can have little or even negative effects on long-term mortgage rates.
If housing prices fall 10 % from peak to trough, as many economists expect, then households spend less because they feel (and are) less wealthy. One key reason for reduced consumer spending is that housing wealth is the primary source of savings for most households. If housing prices fall, then homeowners' wealth decreases. As a result, households may decrease current consumption to offset the lost wealth. According to the Congressional Budget Office (CBO), the fall in housing prices would reduce consumption and ultimately subtract 0.4 to 2.2 percentage points January 22, 2008 Page 2
from Gross Domestic Product (GDP) growth. Given that many economists expect only 1% growth in GDP this quarter, the CBO estimates indicate that falling housing prices can easily push the economy into recession. In dollar terms, the CBO report estimates that a 10% housing price decline would subtract $55 to $316 billion from GDP.
The decline in the home building industry is also having direct effects on national economic growth. In the third quarter of 2007, the latest quarter for which data is available, residential fixed investment (home building) subtracted a full percentage point from real GDP growth. Falling activity for home builders also has led to large job losses. On January 4, 2008, the Bureau of Labor Statistics reported that the economy produced only 18,000 jobs in 2007. For home builders, 28,500 jobs were lost in December 2007 alone. Total home building employment is down 293,000 since March 2006; a decline of 8.5%, with forecasts for further declines in the year ahead. Furthermore, many home builders are now reporting substantial financial losses when only a few years ago they were generating jobs, providing local development and paying taxes.
Please find attached a summary of policy options [above] recommended by NAHB to aid the Congress in addressing the housing crisis and, more importantly, help stimulate the economy. NAHB looks forward to working with the Congress and the Bush Administration to craft a comprehensive economic stimulus package that returns the economy to vibrant growth and expansion. Thank you for your consideration of our views.
Gerald M. Howard
Executive Vice President
and Chief Executive Officer
cc: House Ways and Means Committee
House Financial Services Committee
Senate Banking Committee
Senate Finance Committee
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Taunya Fagan Bozeman Montana Real Estate 406.579.9683 email@example.com