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Persistent Tight Lending Conditions for Home Builders Threaten Economic Recovery

WASHINGTON, Dec. 6 -- The commercial banks on which home builders and
developers largely rely to finance their projects continued in this
year's third quarter to hold tight reins on acquisition, development and
construction loans (AD&C), according to the most recent quarterly survey
by NAHB's Economics and Housing Policy Group on the availability of
credit to the housing industry.

"Restoring the flow of credit to housing is critical for the industry to
rebound, provide jobs and boost the economy," said NAHB Chairman Bob
Nielsen, a home builder from Reno, Nev.

More than half of the single-family builders and developers surveyed by
NAHB indicated they had decided to put any new construction or land
activity on hold until the financing climate improves.

This has broad repercussions for housing and the economy. With
inventories of new homes nearly depleted in many markets, builders
should be gearing up to meet demand, create new jobs and keep the
expansion moving forward. Unfortunately, production remains stymied
because builders in these locations cannot get credit from lending
institutions to begin work on new homes.

In normal times, housing accounts for more than 17 percent of the
nation's gross domestic product. Constructing 100 new-homes generates
more than 300 full-time jobs and $8.9 million in local, state and
federal tax revenue that supports local schools and communities across
the land.

"There can be no economic recovery without a housing recovery," said
Nielsen. "While NAHB's Improving Market Index shows several housing
markets around the nation are slowly starting to mend, a full-fledged
revival will not take hold until we resolve the ongoing credit problems
for home builders."  

NAHB has been working to obtain a legislative solution on Capitol Hill.

On May 5, Reps. Gary Miller (R-Calif.) and Brad Miller (D-N.C.)
introduced H.R. 1755, the Home Construction Lending Regulatory
Improvement Act of 2011, to address specific regulatory impediments to
the flow of credit needed by home builders. That measure currently has
80 cosponsors, and NAHB is seeking a companion bill in the Senate.

Of the minority of builders who sought AD&C loans in the third quarter,
few saw improvement in the lending climate over the previous quarter and
a significant share saw conditions continue to deteriorate.

Forty-eight percent of those polled said they had looked for financing
for single-family construction in the third quarter. 

Only 8 percent said the availability of financing for single-family
projects was getting better (compared to the previous quarter), 61
percent said it was unchanged and 31 percent reported it had worsened.

Survey respondents who indicated that lenders were clamping down further
on credit availability in the third quarter noted several ways in which
the tightening was occurring:

*	77 percent said lenders were reducing the amount they were
willing to lend. 
*	75 percent reported seeing the allowable loan-to-value ratio
being lowered. 
*	66 percent found lenders who were not making any new real estate
loans. 
*	63 percent said they encountered lenders who were requiring
personal guarantees or collateral not related to the project.

Lenders most often told builders they were tightening on loans because
the regulators were forcing them to do so.

Sixty-eight percent of those surveyed said they were given this reason
for restrictions on new AD&C loans and 52 percent heard it was the
reason for tightening on outstanding loans.

ABOUT NAHB: The National Association of Home Builders is a
Washington-based trade association representing more than 160,000
members involved in home building, remodeling, multifamily construction,
property management, subcontracting, design, housing finance, building
product manufacturing and other aspects of residential and light
commercial construction. NAHB is affiliated with 800 state and local
home builders associations around the country. NAHB's builder members
will construct about 80 percent of the new housing units projected for
this year. 

Follow us on Twitter at www.Twitter.com/NAHBMedia. 


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