NAHB

The National Association of Home Builders (NAHB) told Congress (September 25) that the Federal Emergency Management Agency’s (FEMA) oversized emphasis on adopting the latest building codes to enhance safety against disasters is unwarranted and would needlessly raise housing costs.

Testifying before the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings, and Emergency Management, NAHB First Vice Chairman Buddy Hughes, a home builder and developer from Lexington, N.C., said that new homes built to modern building codes (post-2000) are efficient, safe and resilient.
“These homes are designed to withstand major disasters and already offer substantial protection against high seismic activity, strong winds, heavy snow, wildfires and flooding,” said Hughes. “This makes increasing code stringency on a tri-annual basis unnecessary.”

Rather than focusing solely on adopting the latest version every three years, Hughes suggested the priority should be on acknowledging the resiliency of current modern codes and ensuring proper enforcement to maximize their effectiveness while maintaining flexibility to address regional risks and specific needs.

Hughes further emphasized that resiliency is not just about making buildings stronger, but about ensuring that all key infrastructure within a community, such as energy transmission, flood control, communications and transportation are equipped to handle disasters.

“Creating true resiliency requires a holistic approach that encompasses all community systems,” he said. “FEMA’s emphasis on building codes can divert attention and resources from the necessary improvements in infrastructure, emergency services and existing buildings. A resilient building is of little value if the supporting infrastructure is lacking, and a resilient home offers little comfort if it remains unaffordable.”

Hughes also stressed that when considering building codes as a way to enhance community resilience, it is essential that state and local governments retain the flexibility to adopt the hazard-resistant codes that are best for them by having the option to remove or modify provisions to align the codes with local construction practices, geographical risks and economic conditions.

Steady as she goes

EPAB President’s Message

Jaime Gonzalez, President
El Paso Association of Builders

Running a small business in the construction industry is a rewarding endeavor, but like in any business, it comes with its unique set of challenges. Unlike larger companies, small businesses often lack the resources to weather prolonged periods of downtime, making it crucial to establish strategies that keep the work coming in steadily.

Throughout my career, I have worked with large production homebuilders, and now, as a small business owner, I can tell you firsthand that there is a big difference in the way these two types of companies operate. Even though both produce the same product, new homes, the way we react to challenges and opportunities are very different.

Think of it this way: one of the companies I worked for could be compared to a naval aircraft carrier. Today, I’m on a jet ski. They both float, they both travel on water, but the experience is very different. A jet ski is a lot of fun, it’s nimble, fast-paced, and can navigate through tight spots. But if you’re not careful, you can get thrown off in the blink of an eye.

On the other hand, the aircraft carrier is big and slow, it requires a lot of space to maneuver and a large crew to operate it. Yet, it’s also steady, can weather large storms, and, because of its towering height, can see further into the horizon.

As small business owners, our resilience and adaptability are what set us apart. Achieving a consistent workload is not easy, but it’s essential for the growth and sustainability of our businesses. By diversifying services, building strong relationships, and investing in marketing and networking, we can create a stable foundation that will support our businesses year-round.

Executive Message

The interest rate conundrum

By Ray Adauto
Executive Vice President, EPAB

The word conundrum means conflicting or confusion. And the recent action by the Fed certainly fits. Since the announcement of a fifty-basis point reduction the results are a little confusing. In my own way of explaining please indulge me.

In the brief period leading up to the announcement most economist had predicted some sort of a rate reduction would be coming; however few predicted a full fifty basis points. According to my understanding the reason we had seen the Fed rate go up was because of inflation, and inflation is high in a significant way due to in large part the massive spending from government. The Consumer Price Index (CPI) is also tied to interest rates, normally when rising the Fed stays the course. In August, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.5 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in August (SA); up 3.2 percent over the year (NSA). Not this time.

The fact that there is a Presidential election may or may not play a role in the reduction. As one of our member said after the announcement “The Fed put out the economic projections today, while the comments were hawkish at the press conference what’s in writing is likely to be prioritized. The economic projections showed one hundred basis points being cut this year 100 basis points being cut next year, and fifty basis points being cut in 2026.” Whatever the reason or reasons the housing market needs all the help we can muster.

A couple of weeks ago I had the opportunity to be on a speakers panel at the WestCom commercial real estate conference, joined by Justin Chapman and Doug Schwartz. We were anticipating a rate cut, I said twenty-five basis points now, maybe more in an October surprise. Again, while it all helps, the underestimated culprit is over regulations and government policy.

So needless to say my conundrum is whether this rate cut will stick or come roaring back vigorously. Too much is resting on it to be played with. The Fed may yet be wondering the same thing.

Mortgage News

4 ways Fed's rate cut could change housing market

NPR

After months of anticipation, the Federal Reserve cut interest rates by half a percentage point.

That will have an impact on the housing market — but it's unlikely to make a huge difference for those struggling to afford a home.

Let's take a look.

Mortgage rates might not actually drop much further right now
Mortgage rates have been pretty high for the last couple of years, especially compared with the historic lows they reached during the peak of the COVID- 19 pandemic.

Rates bottomed out below 3% for a 30-year fixed-rate mortgage during 2020 and 2021 when the pandemic led to lockdowns, but they then climbed to nearly 8% last year amid a robust economy and rising inflation.

But the prospect of rate cuts has already helped send mortgage rates lower, even before the Fed announced its actual decision on Wednesday. Long-term fixed-rate mortgage rates are now at 6.2%, the lowest since February 2023. (It's worth noting, though, that other factors besides the Federal Reserve's benchmark interest rate influence mortgage rates, including economic conditions.)

This means effectively that the rate cut announced by the Federal Reserve may already be priced in — though mortgage rates are bound to fall a little more given that policymakers have made clear they intend to continue cutting interest rates into next year.

Charlie Dougherty, a senior economist at Wells Fargo, expects mortgage rates to drop "marginally" after the Fed's rate cut on Wednesday.

He and his colleagues forecast that the average rate on a 30-year fixed-rate mortgage will be about 6.2% by the end of this year — where it is now.

But Dougherty expects the 30-year mortgage rate to fall closer to 5.5% by the end of 2025, still above pre-pandemic levels.

Lower mortgage rates could actually mean higher housing prices
Here's the thing: Lower mortgage rates may not make it easier to buy a home. In fact, it could make it more difficult and lead to higher home prices.

That's because lower mortgages are likely to lure more buyers back to the market, bringing in more competition for a limited supply of houses.

That's tough for first-time homebuyers. Kim Kronenberger, a real estate agent in the Denver area, says she worries for the would-be homebuyers who keep waiting for affordability to improve.

These buyers have struggled to find their first home as many were scared off by bidding wars during the low-interest-rate era — and then were rebuffed by high mortgage rates and still-high prices.

"A lot of those buyers, they absolutely have regret," she says of people who didn't buy a home at the start of the pandemic, when rates were low but home prices hadn't yet skyrocketed. "Because had they bought four years ago, they would have been in a whole different place than they are now."

Don Payne, a real estate agent in Columbus, Ohio, says there's more inventory of larger homes for homebuyers trading up: "Builders are building them, and existing homeowners have those too."