Looming 'housing recession' has builders appeal to Biden administration

Mortgage rates sit above 5%: Freddie Mac

As mortgage rates and home prices reach record highs, the National Association of Home Builders is now calling on the White House to take action. 

On Wednesday, the group sent a letter to the Biden administration warning that the housing market is nearing an inflection point and threatening the stability of American communities. 

HOUSING INFLATION, SUPPLY CHAIN CREATE BUILDERS' PERFECT STORM 

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"We are very concerned that we will have a housing recession, and that this unsustainable, undesirable fact that right now the average American can't afford the average house will continue to get worse," Jerry Howard, chief executive officer of the National Association of Home Builders told FOX Business."We will have a real and unsolvable housing crisis if we don't get on top of it soon."

The letter, signed by over 10,000 homebuilders, says that just as the administration moved aggressively to ease inflation and rising gas prices by tapping the Strategic Petroleum Reserve and allowing the summer sale of a blend of ethanol fuel, it should also act to help reduce housing costs. The housing sector accounts for more than 15% of the nation’s gross domestic product, and waiting to act any longer will have dire repercussions for the economy, the letter outlines. 

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The builders are calling for a range of demands to be met to make housing more affordable. Immediate and foremost remedies include suspending tariffs on softwood lumber from Canada and ending the trade dispute. Such first steps will "lower construction costs and increase production of badly needed affordable housing." The dispute has raised the cost of a single-family home by $18,600 since last August. 

The group is also urging the administration to scale back regulations to add more housing and rental opportunities. According to the NAHB, regulatory compliance accounts for nearly 25% of the costs of building a single-family home and over 30% for a multifamily development. 

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Meanwhile, the administration needs to address the supply chain bottlenecks and labor shortages that are fueling transportation issues and preventing raw materials and appliances.

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All of this is creating the "perfect storm" for all Americans, but especially first-time homebuyers and renters, according to Howard. 

Freddie Mac estimates that the nation is four million homes short as a result of rising demand over the COVID-19 pandemic. And with mortgage rates climbing to 5% for the first time since 2011, as well as looming interest rate hikes ahead, would-be homebuyers are postponing or forgoing purchases and stepping out of the market this year. 

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