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Please pay special attention to the state and national updates included below. Much work is being done on both fronts to make sure our elected officials hear our concerns about the state of our industry. In an unprecedented move, the National Association of Home Builders Build-PAC trustees ceased all federal political contributions. In a release dated February 12th NAHB representatives said:
"Today, the National Association of Home Builders' Political Action Committee, BUILD-PAC, and its 150-member Board of Trustees representing all 50 states, agreed to cease all approvals and disbursements of BUILD-PAC contributions to federal congressional candidates and their PACs until further notice.
"This extraordinary action was taken because the NAHB BUILD-PAC Board of Trustees felt that over the past six months Congress and the Administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward. Housing and related industries account for more than 16 percent of the Gross Domestic Product. More needs to be done to jump-start housing and ensure the economy does not fall into a recession. This action will remain in effect until further notice."
And closer to home, several representatives from the Home Builders Association of Georgia have met with folks at the Georgia Department of Banking and Finance to express industry-wide concerns about the ever-tightening rules and regulations and share "in the trenches" stories from around the state.
We're working on your behalf! Please let us know if there's more we can do…
Jennifer Wickman
PCBA Executive Officer
770-443-8472
..."Qui desiderat pacem, praeparet bellum"…Let him who desires peace, prepare for war.
Vegetius, fourth century Roman military writer…
Have you stopped by www.hbag.org yet???
Check out some of the new "additions" in the General Counsel's area…
Recent court decisions that you may be interested in reading…
The next class on Georgia's new Energy Code will be Feb 27th at the Gwinnett Justice Center in Lawrenceville. There are also classes on March 6th in Douglasville and March 6th in Covington. Register at www.hbag.org. For more information and a list of classes, contact Ryan Meres at DCA at 404-679-3109 or rmeres@dca.state.ga.us.
Georgia's Secretary of State, Karen C. Handel was the guest speaker at the HBAG Winter Meeting luncheon this past week, and the Secretary gave a very positive report on the state of builder licensing in Georgia. She also made a strong point to thank the HBAG members that serve on the state Licensing Board (HBAG members on the Board are Bob Barnard, Steve Cash, Mark Herbert, Allen Richardson, Philip Thayer) and com mended them for their dedication and long hours of work.
A special called General Membership meeting was held prior to the Board Meeting for the filling of HBAG Officer vacancies. David Clough was elected VP-Treasurer and Doug Tumlin was elected VP-Secretary. Congratulation gentleman, all of us at HBAG look forward to working with you!!
HBAG's Board meeting saw the presentation of the Annual Audit with 2006-2007 excess funds being distributed to the Lewis Cenker Scholarship fund, the George McClure Builder Action Fund, the EasyLiving Home program, a new education fund to work with the locals and figure out how education for HBAG members can best be provided, and an EO scholarship fund. Helen Stembridge was confirmed by the Board to fill an Associate vacancy on the Board from Area VI. Alex DeBarr, President & CEO of Naylor Publications, addressed the Board about the upcoming Southern Building Show.
Great crowd at the Legislative Reception that saw many Senators and Representatives in attendance. Lt. Gov. Casey Cagle was there addressing his constituents along with many other HBAG members and Speaker Glen Richardson also made an appearance to shake hands and speak with HBAG members.
Bills Introduced:
- HB 1200 Georgia Local Government Public Works Construction Law
- HB 1215 Eliminates provisions for school system and school tax participation in tax allocation financing for redevelopment purposes
- HB 1217 Creates the State Licensing Board of Home Inspectors
- HB 1226 Georgia Water Supply Act of 2008
- HB 1281 Prohibits local governments from adopting outdoor watering restrictions that are more restrictive than the state
- HB 1283 Changes provisions relating to the law regarding the alienability of future interests in land
- SB 475 Georgia Fair Lending Act
- SB 485 Creates the State Licensing Board of Home Inspectors
- SB 488 Allows foreign nationals to keep driver's license from their home country
- SB 493 Provides that when a tax allocation district is created by the local legislative body of the municipality or the local legislative body of the county, all or part of the ad valorem property taxes levied by such community improvement district may be included in the computation of tax allocation increments if the administrative body of such community improvement district consents to such inclusion by resolution duly adopted by said administrative body
Committee Action:
- HB 979 Speaker's Property Tax Relief Plan-PASSED House Ways and Means on 2/21/08
- HB 1018 Provides for additional filing fees for recording an instrument that requires cross-indexing to other previously recorded documents-PASSED House Judiciary on 2/19/08
- HR 1246 Constitutional Amendment authorizing Property Tax Relief-PASSED House Ways and Means on 2/21/08
- SB 352 Allows the legislature to override a rule or directive of the Environmental Protection Division-PASSED House Natural Resources and the Environment on 2/21/08
- SB 403 Provides for prompt payment of wages to an employee following his or her resignation or discharge-PASSED Senate Insurance and Labor on 2/20/08
- SR 796 Freezes the valuation of real property and millage rates excluding specific adjustments- PASSED House Ways and Means on 2/21/08
- Applies to residential and nonresidential property
Chamber Action:
- HB 611 Changes the restrictions of the State Construction Industry Licensing Board for Class I licenses for electrical contracting-PASSED House 153-1 on 2/21/08
- SB 374 Revises certain time periods of filing materialmen's/mechanic liens-PASSED Senate 46-1 on 2/20/08
General Topics:
Highlights:
- House and Senate approve FY08 supplemental budgets
- Senate passes own version of Credit Freeze Bill
- Speaker's property tax reform passes House Committee
- Senate overwhelmingly approves T-SPLOST legislation
- Bills affecting Grady Hospital pass the Senate
Schedule:
- This week, the legislature worked in session Tuesday through Friday, days 19-22, respectively.
- The legislature will reconvene again on Tuesday, February 26th for legislative day 23.
Politics:
Mid-year budget clears both chambers
On Thursday, the Senate voted 51-2 to adopt their version of midyear budget, while the House adopted their version on Friday. The two chambers will begin negotiations of the two supplemental FY08 budgets on Monday. The House version restores $30.7 for equalization grants to the less affluent school systems that was originally cut by Gov. Perdue. It also includes an additional $65 million for school buses and technology. The Senate removed both of those items from their version and shifts school funding shortfalls to the 2009 fiscal year that begins July 1. Items in both budgets include:
- $6.3 million to the Hazardous Waste Trust Fund to continue cleanup efforts of landfills and abandoned hazardous sites
- More than $40 million to finance the development of new reservoirs
- $11 million to implement the new statewide water management plan
General Business:
Credit Freeze Legislation
On Tuesday, the Senate passed its own version of a credit freeze bill, SB 361, sponsored by Sen. Chip Rogers (R-Woodstock). The legislation enables consumers to request that credit reporting agencies put a freeze on their credit information. While the companion house bill (HB 130) limits the fees that credit agencies may charge for this service to $3, the Senate bill was amended on the floor by Sen. Rogers to eliminate that cap and authorize the state banking commissioner to set the fee based upon the "cost" to the credit agency of providing the service.
Property Tax Reform
On Thursday, the House Ways and Means Committee passed out Speaker Glenn Richardson's (R-Hiram) legislation to eliminate part of the state's property taxes, HB 979 and HR 1246. The Committee also passed Sen. Chip Roger's portion of the tax reform package, SR 796, which caps both property assessments and millage rates. Effective January 1, 2009, Richardson's proposal would eliminate ad valorem taxes on auto license tags and would impose the state sales tax on lottery tickets and groceries.&n bsp;
Effective January 1, 2010, the proposal would begin providing relief from school property taxes through a state grant equal to the amount of a person's taxes and would add a statewide sales tax on consumer services (this would not include business-to-business, home construction, medical, childcare, or education services). The Speaker wants to give the Department of Revenue 13 months to develop rules and regulations for administering the services tax and expects to update the tax during the 2009 session. The North American Industry Classification System code will be used to determine taxable services.
The Speaker has said that he expects the bills to go before the House of Representatives sometime next week, where it will need a two-thirds vote to pass.
Transportation bill clears Senate
On Wednesday, Sen. Jeff Mullis' constitutional amendment allowing counties to levy a one-cent sales tax to pay for local highway projects, SR 845, passed the Senate 51-4. If adopted by the House, SR 845 would be on the general election ballot in November for consideration by Georgia's voters. If ratified, it would authorize county governments to call referendums for the regional transportation sales tax starting May 1, 2009.
Under the proposal, local counties that imposed a regional sales tax would be allowed to keep 80 percent of the proceeds and return 20 percent to the state. The state would be required to spend at least 10 percent of this money on mass transit systems.
Healthcare:
Three Grady Bills Pass
On Thursday, the Senate adopted three measures sponsored by Sen. David Shafer (R-Duluth) dealing with the operation and oversight of Grady Memorial Hospital, which has struggled financially over the last few years. The Senate approved SR 722, which would create an oversight committee for the hospital 46-6.
The Senate then adopted SB 353, the "Public Hospital Integrity Act," prohibiting persons from serving on Grady's authority if they are an employee or contractor doing business with the hospital by a vote of 51-0. The bill was also amended to prohibit someone from serving on the Grady authority if they had an interest in another hospital operating within five miles of Grady.
Finally, the Senate passed SR 748 by a 51-2 vote. The resolution urges Grady to change its employee health benefits plan to require or encourage its employees to utilize the Grady Health System for their primary health care and open up credentialing to community doctors so that other insured patients might be encouraged to use Grady for primary health care.
The Economy Is Skating Close to Recession
Economic growth slowed to a crawl (0.6%) in the final quarter of 2007, according to the "advance" GDP report released by the Commerce Department on Jan. 30, and data received since then do not point toward upward revisions. The "preliminary" fourth-quarter estimate will be released on Feb. 28.
Available information for the early part of 2008 point toward further weakness in GDP growth for the first quarter of this year "we're currently estimating 0.3%" and negative growth is a distinct possibility for this period.
NAHB's baseline (most probable) forecast still says that the U.S. economy will avoid recession in 2008, although there's a nearly even chance of slipping into the red zone during the first half of the year.
If so, the setback should be brief and shallow, due largely to the double-barreled dose of monetary and fiscal stimulus being applied to the economy.
Housing Remains a Heavy Drag on the Economy
The housing contraction continues to exact a heavy toll on the U.S. economy. Residential Fixed Investment contracted at a 24% annual rate in the final quarter of 2007, knocking off more than a percentage point from the GDP growth rate. Also, associated setbacks in related parts of the economy, such as mortgage lending, have compounded housing's negative economic impacts.
Downward momentum in home sales and housing starts through the end of 2007 strongly suggest another heavy hit to the economy from housing in the first quarter of 2008.
Furthermore, recent data on housing starts and building permits for January (released today) show further substantial declines in these measures, particularly in the single-family sector.
These patterns virtually guarantee another large deduction from GDP growth in the first quarter as the relentless housing contraction pushes the U.S. economy to the brink of recession.
Inflation Concerns Flare Up at Exactly the Wrong Time
By all rights, a pronounced slowdown in economic growth should relieve inflationary pressures in the economy, allowing long-term interest rates to recede as the Federal Reserve drops the short end of the yield structure.
Unfortunately, inflationary impulses are coming from commodity markets (primarily food and energy), and "core" inflation measures also have moved up recently. The Consumer Price Index for January, also released today, displayed such patterns and caused a good deal of heartburn in bond and mortgage markets.
Upward pressure on long rates is the last thing that housing and the economy need at this time, and our central bank can't just ignore documented upward pressures on inflation. We, and the Fed, expect the slow pace of economic activity to relieve inflation during the months ahead, although this outcome no longer feels like a slam-dunk.
Financial Market Turmoil Persists
The widespread stampede to credit quality that was triggered by the meltdown of the U.S. subprime mortgage market still is a pervasive force in U.S. and global financial markets.
Indeed, a financial system that for decades had evolved into a complex fabric of securitized vehicles now is unraveling - shutting down normal credit channels, raising credit costs for many private-sector borrowers and shifting credit demands back to depository institutions that used to carry the load.
In the home mortgage area, the securities markets for subprime, Alt-A and jumbo loans are essentially gone and yield requirements at portfolio investors are extremely wide.
Only the markets with explicit or strongly implied federal government backing are functioning well, although even the spreads between yields on mortgages saleable to the secondary-market Government Sponsored Enterprises, Fannie Mae and Freddie Mac, and yields on comparable-maturity Treasuries have widened out a good bit since last summer.
The Fed Is Focused on Growth and Market Stability
The Federal Reserve cut short-term interest rates by 125 basis points in January, including an "emergency" cut of 75 basis points on Jan. 22 and an additional cut of 50 basis points at the regularly scheduled Federal Open Market Committee (FOMC) meeting on Jan. 30. The FOMC statement highlighted considerable stress in financial markets and downside risks to economic growth while pushing inflation concerns into the background.
On Feb. 14, Fed Chairman Ben Bernanke testified on "The Economy and Financial Markets" before the Senate Banking Committee. Bernanke made it clear that the Fed has become increasingly concerned about mounting stresses in the financial system as well as increased downside risks to growth - stemming largely from ongoing deterioration in the housing market.
We continue to believe that the Fed will cut the federal funds rate by an additional 50 basis points at the March 18 FOMC meeting and by another 25 basis points at the April 30 meeting - taking the nominal funds rate to 2.25% and the real (inflation-adjusted) rate well below 1%.
The Economic Stimulus Package Will Help Soon
The Economic Stimulus Act of 2008 was signed into law by the President on Feb. 13. The centerpiece of this short-term stimulus package is $117 billion in rebates of personal income taxes, to be distributed starting in May, along with $51 billion in business investment incentives. The bill also substantially raised loan-size limits for both the FHA mortgage insurance program and for conventional loans eligible for purchase by the secondary-market GSEs.
The personal income tax rebates and the business investment incentives figure to provide a bit of support to GDP growth in the second quarter and solid support in the second half of this year, actually pushing growth above trend in the second half. These effects naturally will dissipate early next year, making the economy vulnerable to relapse into a slow growth mode.
The temporary increases in loan-size limits for FHA and the GSEs - up to a maximum of about $730,000 - are bound to help the housing market in such high-priced areas as California to some degree.
It will take some time for the higher limits to be operational, of course, and it remains to be seen how much additional home buying will be stimulated over the balance of the year.
The expiration of the higher limits at year-end figures to be a serious problem --in the likely event that the private secondary market for jumbo loans still is not functioning properly by then.
Glimmers of Hope for Housing?
Key data on home sales, housing starts, building permits and residential construction activity still paint a downbeat picture of the U.S. housing market. However, a few recent indicators show glimmers of hope with respect to the interest of prospective home buyers.
Falling mortgage rates (at least in the prime market), falling house prices (at least in some places) and growing income (in most places) have combined to boost standard measures of housing affordability in recent months.
Furthermore, surveys of consumer sentiment show that growing numbers of households believe that buying conditions have improved in recent times - because of lower mortgage rates and lower house prices.
The buyer traffic component of NAHB's monthly Housing Market Index (HMI) appeared to hit a cyclical low last December. The traffic component edged up in January and made a decisive move upward in February - presumably reflecting the improvements in affordability and the brightening of consumer sentiment toward home buying.
The HMI components for current sales and sales expectations have yet to stage meaningful improvements, of course, but perhaps the essential first step toward a housing market recovery is underway.
A Second Round of Economic Stimulus That Focuses on Housing Is Needed
Despite recent glimmers of hope about the interest of prospective home buyers, the dramatic housing contraction still has substantial downward momentum and the housing market still poses major downside risks to the economic outlook.
This situation cries out for a second stage of temporary economic stimulus, directed squarely at the sector that's at the root of the daunting problems facing the U.S. economy and the financial system.
It must be recognized, first of all, that a substantial tightening of lending standards is occurring in all components of the home mortgage market, as recently documented by the Fed, and this tightening may make it impossible for prospective home buyers to obtain financing they can afford.
Secondly, a record volume of vacant homes on the for-sale market inevitably will put persistent downward pressure on home prices, further sapping the quality of outstanding mortgage credit and making it even more difficult to refinance or restructure adjustable-rate mortgages facing payment resets. This problem, in turn, will bolster the alarming upsurge in mortgage foreclosures and dump even more inventory onto the for-sale market, stretching out the contraction in new housing production.
House prices and inventories are central to the outlook for the economy and the financial markets. Policies that stimulate home purchases in the immediate future can pay huge dividends.
The biggest bang for the buck most likely would be provided by a temporary program of tax credits for home buyers.
Indeed, the recent revival of interest among prospective buyers suggests that temporary credits could unleash a wave of home buying that would quickly restore balance to housing markets and halt the dangerous erosion of house prices and mortgage credit quality.
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