Two executives from the National Association of Home Builders
held a teleconference on the "credit crunch" on Tuesday. The
one hour conference was hosted by Jerry Howard, CEO of NAHB and David Seiders,
Chief Economist.
The teleconferencing format is difficult to cover as the presenters tend to outline
materials very rapidly and NAHB does not provide transcripts of the intended remarks
although there are usually Power Point slides available shortly before the conference
begins. We generally find our notes so garbled within minutes of the beginning
of the conference that we give it up. Mother always told me I should learn shorthand.
This time, however, the Power Point materials provided to support Mr. Howard's
presentation stand on their own.
His part of the discussion involved a survey bankrolled by
Bank of America and NAHB which surveyed builder-members of the latter organization
about the effect tightening credit is having on their business.
When asked what impact tighter mortgage lending standards
had had on new home sales during the past month, 28 percent of the builders
surveyed said that the impact had been substantial in the last month compared
with 18 percent in July and 7 percent in March. 34 percent responded that there
had been some impact, 20 percent said they had perceived no impact, while 18
percent were not sure. The number of builders who responded that there had been
no impact on their sales had dropped to the current level from a response of
50 percent in March with the "some" and "substantial impact" responses picking
up all of the earlier responses. The number of builders who did not know what
the impact had been remained remarkably consistent across the six months of
the study.
Of those builders reporting some impact on their business, the average decline
in sales was pegged at 31 percent and the median was 25 percent. In March these
numbers were 15 and 10 percent respectively.
Over a third - 36 percent - of builders reported that they had had sales contracts
cancelled during the past month when buyers were unable to
qualify for a mortgage. Responses to this question in earlier months of the
study had been consistently in the 28 to 29 percent range until the sudden jump
this month.
Mr. Seiders' presentation largely involved a rehash of the various economic
indicators we have already talked about here although he did present results of
the Standard & Poor's/Case-Shiller index which came out Tuesday morning.
That widely respected report showed national home prices down a record 3.2 percent
in the second quarter of 2007 as compared to the second quarter of 2006.
The Dow Jones Newswire quoted Lou Crandall, an economist at Wrightson ICAP
as saying that, because the second quarter is a period in which sales are normally
strong (the "Spring Market") "these figures would translate into annualized
declines of more than 10 percent if seasonally adjusted."
Dow-Jones also quoted Joshua Shapiro, chief U.S. economist for MFR Inc.: "We
are fast approaching the rate of price decline seen at the end of the 1990-91
recession, and the odds strongly favor blowing past this mark in coming months."