History Is A Lie Agreed Upon “History is a lie agreed upon.” Napoleon Bonaparte Questions about housing that should be asked with answers that should be heard. By Larry Kush
More than 4,000 U.S. banks closed in 1933 when the Great Depression hit its lowest point. On Wall Street people were jumping out of windows. There were long food lines. Unemployment skyrocketed. Cole Porter wrote a hit Broadway musical that ignored the entire mess. And history recorded the disaster with dozens of conflicting versions. One wonders how history will treat our current economic catastrophe and the blow it delivered to America’s housing. For lawmakers and journalists of today and historians of tomorrow, a few questions come to mind:
Q. Employment being the key to just about everything, how important is housing? A. Every single family home built in America directly creates 3.1 jobs for one year. The ripple effect extends far into our economy and includes much more than just workers in the construction industry. The 3.1 figure is direct employment. Indirectly, the benefit is overwhelming. Q. Who really was at fault for the housing dilemma? A. Many in Congress are still accusing housing for shooting itself in the foot. This is about as dumb as blaming McDonalds for obesity which, incidentally, some in Washington seem to believe. Banks made ridiculous loans, part out of mismanagement and part from coercion that went something like this: “Want those new branch banks in Ohio? Make these sub-prime loans.” Many loans were made more out of pure greed than good business judgment, then packaged and sold on Wall Street, using investment vehicles that were impossible to understand. In fact, some of the people who did understand these convoluted investment instruments made billions betting on their eventual failure. Q. What will be needed to help set things straight? A. National Association of Home Builders Chairman Bob Nielsen said recently, “Unless we resolve the ongoing credit problems for home builders – the vast majority who are small business owners who employ less than 10 workers – the industry will lose even more jobs, resulting in longer term economic damage.” Lenders have stopped making acquisition, development and construction loans and are calling in existing loans, even when the borrower’s
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History Is A Lie Agreed Upon payments are current. Policymakers must act now to restore credit availability for viable home building projects. Overly conservative appraisals resulting from harsh requirements placed on them by the feds only serve to further dampen new home sales. Finally, governmental suggestions of curtailing or eliminating the mortgage interest deduction; eliminating the capital gains exclusion; eliminating the deduction for property taxes; eliminating the low income housing tax credit; and now the latest idea suggested by the FDIC of requiring a 20% down payment on a home loan! Any one of these “suggestions” will only serve to further damage existing homeowners, triggering a new wave of foreclosures, as well as placing another nail in the coffin of new home construction.
In a nutshell, we need more business in government and less government in business. Q. Where do we go from here? A. When hit by a tsunami, you can’t just bail out the boat; you have to take strong action. The need is immense. Between 1979 and 1999 the US, on average, built 1,052,000 million new single family homes per year to maintain a balance for growth and replacement. In 2008 we built just over 1.5 million homes. Over the last two years we have produced less than 500,000 new single family homes, and we are on track to build less than 400,000 this year. The result is a shortfall of nearly 2 million jobs! In Phoenix alone, we should be building about 35,000 new single family homes this year, but probably will be lucky to build 5,000. That’s a job shortfall of 100,000. Where we go from here will depend on how serious government is about saving jobs, how extensively, forcefully and accurately the mainstream media reports the facts as stated above and how focused we all can become in a world of distractions that range from Charlie Sheen to foreign wars to who will be eliminated from Dancing with the Stars. Housing in America is front page. It should be treated as such. If not, the recovery is going to be long term and much of history will become a lie agreed upon. Larry Kush is National Area Chairman of the National Association of Home Builders (NAHB) for a six-state area including Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. He is the former Board Chairman of the Home Builders Association of Central Arizona and currently serves as an Honorary Life Director of the Organization. A home builder for 30 years, he has been selected five times Phoenix Home Builder of the year. Larry can be reached at lsk@larrykush.com
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