The Kalona student remodel project turned out awesome.  Located at 721 6th Street in Kalona, there were nine students who worked on it all summer long with superstar instructor Tim Rouse out of Durant.  We were at the open house last Monday, which was well attended and swelling with community pride.

Time to Sign up for Tari Dailey Memorial Golf Outing – Only 11 Foursomes Thus Far!

It’s going to be a great day for our Tari Dailey outing at the Blue Top Ridge Golf Resort in Riverside on September 9.  We’re in need of players – we only have 11 teams so far.  You can sign your team up or be a  as a sponsor by clicking here.  Send Jay Iverson a logo so that signage can be made and also added to the website and future newsletters.

So far our sponsors include:

Presenting Sponsors:

Ferguson

ProFlo

Minka Group

Avallon

Dinner Sponsor:

Suburban Lumber Company

Beverage Sponsors

Bradley & Riley

HBA of Iowa City

Lumber Specialties

Hole Sponsors:

Cascade Manufacturing Co.

Edgestar

Furman Corporation

Jones Stephens

Lumber Specialties

Millennium Lighting

Park Harbor

Signature

Sueppel’s Siding & Remodeling

Builder Confidence Underwater After Falling for Eighth Consecutive Month

Builder confidence fell for the eighth straight month in August as elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges. In another sign that a declining housing market has failed to bottom out, builder confidence in the market for newly built single-family homes fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released last Monday.

“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “And in a troubling sign that consumers are now sitting on the sidelines due to higher housing costs, the August buyer traffic number in our builder survey was 32, the lowest level since April 2014 with the exception of the spring of 2020 when the pandemic first hit.”

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz. “The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011. However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months.”

Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations. The median price reduction was 5% for those reporting using such incentives. Meanwhile, 69% of builders reported higher interest rates as the reason behind falling housing demand, the top impact cited in the survey.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components posted declines in August and each fell to their lowest level since May 2020.  Current sales conditions dropped seven points to 57, sales expectations in the next six months declined two points to 47 and traffic of prospective buyers fell five points to 32.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63 and the West posted an 11-point decline to 51.

HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS (formerly housingeconomics.com).

Inflation Reduction Act of 2022 – More Burdens on Housing

When the U.S. House of Representatives passed the Inflation Reduction Act of 2022 last Friday, it will be a crippling blow to housing.  It failed to ease inflationary pressures on housing and contains troublesome new building and energy code requirements that could raise the cost of housing for home owners and renters. With Senate passage of the bill on Aug. 7, President Biden will sign the measure into law shortly.  It was all about the optics of handing the Biden Administration a “win” rather than constantly being accused of not accomplishing much.

In the days before the Senate approved the Inflation Reduction Act, NAHB Chairman Jerry Konter issued a strong rebuke of the bill because it contained several changes to the taxation of real estate and new code requirements that would exacerbate the nation’s housing affordability challenges. Konter urged Senate Democrats to rework the bill by eliminating these onerous provisions, and NAHB also sent a letter to Senate leaders that went into more detail expressing our opposition to the bill.

Working with Sen. Kyrsten Sinema (D-Ariz.), NAHB was able to obtain key changes to the bill as it relates to carried interest and how companies can deduct depreciated assets from taxes.  Although the bill does include positive provisions for housing, NAHB believes that overall the bad outweighs the good, despite the 11th hour changes to the legislation that NAHB helped to push through.

When the bill went to the House for consideration, NAHB still fought aggressively to improve the legislation and sent a letter to House Democratic and Republican leaders detailing our concerns and expressing our opposition.

“The legislation does nothing to address the housing supply crisis facing American families,” the letter to lawmakers stated. “Rather the bill will disincentivize multifamily construction, increase the cost of new homes through higher energy code requirements, and inflate labor costs.”

House Democrats refused to change the bill because it would mean sending it back to the Senate, where chances of passage would be jeopardized because of the 50-50 Democratic-Republican split in the upper chamber.

However, as the House was debating the bill, Financial Services Committee Chairwoman Maxine Waters (D-Calif.) took to the House floor and cited a key NAHB concern: “We can no longer afford to have housing as an afterthought, a ‘nice to have,’ or simply something that can wait until later,” Waters said. “It is foundational to the prosperity of families, key to a healthy economy, and crucial to fighting inflation. Yes, I’m disappointed. I’m going to vote for this bill because so many people are going to benefit in different ways, but I’m disappointed that housing does not show up in any way in this bill.”

New Codes Requirements
On the codes front, the legislation contains $1 billion in grants to pressure state and local governments to adopt more stringent energy code regulations. The practical effect will be to raise housing costs even further while doing very little to provide meaningful savings for residential homes and apartments.

Two-thirds of the funds, or $670 million, will be made available for the adoption of energy regulations for residential and commercial buildings that meet the zero energy provisions in the 2021 edition of the International Energy Conservation Code (IECC). These zero-energy targets are not appropriate for most jurisdictions and not cost-effective for consumers.

NAHB continues to push for a better strategy — where the Department of Energy takes the lead to help states advance the codes in a manner that best fits the needs of state and local governments.

A Victory on Carried Interest
In the tax arena, NAHB strongly supported the efforts of Sen. Sinema to kill an onerous provision on carried interest that would have affected existing real estate partnership agreements and the treatment of Section 1231 gains at a time when housing has entered an industry recession.

However, the bill includes structural changes to the Section 45L new energy efficient home tax credit, which provides builders a $2,000 tax credit on homes by meeting specific energy savings on homes built above the baseline IECC, that would effectively render the tax credit null and void for most builders.

Changing the rules to make ENERGY STAR the sole means to qualify for the 45L tax credit is counterproductive because it is a niche market that will never be widely adopted — less than 10% of single-family and multifamily units were certified in 2020.

On the positive side, the legislation includes long-term extensions for many other existing energy tax incentives, and $4.3 billion for the HOMES Rebate Program, an energy-efficient retrofit program.

Further, NAHB fought successfully to defeat a measure that would have extended the 3.8% Net Investment Income Tax (NIIT) to active investors, including NAHB members. The NIIT applies to capital gains and rental income, among other investment streams, and would have directly increased the cost of housing.

Discover How to Become a Successful Developer
Back by popular demand! Federation members can register for two dynamic land development courses as a bundle and save an extra 10%.  Becoming a land developer is not for the meek. But successful land development can substantially increase revenue and profit for smaller builders.  Register for both here.

Land Development: Getting Started, Business Management & Financing 
Tuesday, August 30, noon-3 pm CST; Instructor: Tom Stephani, CAPS, CGP, CGR, GMB, MIRM
Explore the land acquisition and development process and discover the crucial first steps to becoming a successful developer. This dynamic novice course will help you develop strategies for finding land development opportunities for small projects (2 – 50 lots) and discuss which business structure is best for your business. You’ll get a balanced perspective on what it takes to develop land and, more importantly, learn approaches to limit risk and maximize profits.  Register here.

Site Planning, Approvals & Construction
Thursday, September 1, noon-3 pm CST; Instructor: Tom Stephani, CAPS, CGP, CGR GMB, MIRM
Learn about the typical approval and final platting process through a governing authority. The instructor will help you take the next step to becoming a small volume land developer by exploring actual site planning and preliminary platting. During this live online course, you will discuss construction improvements and getting the property ready to sell or develop. The content level in this course is for individuals new to the land development process.  Register here.

   HBA of Iowa Executive Officer Jay Iverson (middle) was elected as president of the NAHB Executive Officers Council last week in Scottsdale.  Official duties take over at the International Builders Show in January.  From left to right – Secretary Mike Erdman (Salem, OR), Vice President Natalie Fryer (Fayetteville, NC), President Jay Iverson, Past Past President Bryce Johnson (Fargo, ND), and Past President Brian Miller (Northern KY).

Zillow Market Updates

More Seller Highlights from the Zillow Consumer Housing Trends Report

Mortgage Rates Increase as Markets Respond to Conflicting Economic Data

Dollar Devaluation

The softer than expected July inflation reading resulted in markets now expecting fewer Fed rate hikes than earlier predictions. As a result, the US dollar had a dreadful week, falling 1% against a trade-weighted index of developed country currencies. At the other end, the New Zealand and Australian dollars were both up over 2%. The Canadian dollar was up 1%, and the euro was up just slightly. – Elliot F. Eisenberg, Ph.D.

Container Costs

Before Covid-19, the cost to ship a 40ft container from Shanghai to the Port of LA had generally been slightly below $2,000. Soon after Covid-19 appeared, shipping costs doubled to $4,000, where they stayed through the first four months of 2021. They then increased explosively and by late 2021 the price peaked at slightly above $12,000. Since then, the price has steadily fallen and is now just below $7,000. – Elliot F. Eisenberg, Ph.D.

Wells Fargo Shrinking Mortgage Business
Wells Fargo & Co. once churned out one of every three home loans in the U.S. and for a time made the bank the most valuable in the nation, Bloomberg reported, but they’re scaling it down. Wells Fargo’s leadership is preparing a retreat that will probably start with the bank’s ties to outside mortgage firms that generated roughly a third of its $205 billion in new home loans last year.

Down the road, the bank’s third-party servicing business — which oversees billing and collections for some $700 billion in loans made by other lenders — will also shrink. One area Wells Fargo will likely examine is servicing of Federal Housing Administration loans.

Last month Wells Fargo reported a 53% year-over-year quarterly decline in net income, driven by lower mortgage originations amid increased interest rates. As reported in July by the Des Moines Register, Wells Fargo Home Mortgage has laid off about 200 employees from its West Des Moines operations since April.

   Nearly 300 executive officers of HBA’s gathered in Scottsdale this week for the Association Management Conference.  Why Arizona in August?  Low room rates.  It actually has been just fine since most of our meetings are inside.  Our sessions have been excellent and Iowa remains on the national stage for our successes.  The balloon pic was at a session for new executive officers and they had to write down something that they were going to take back to their organization, place it in the balloon, and then bounce them into the air as a group.  Participants then selected a ballon and a microphone was passed around where the contents of the balloon were read aloud.  The top left pic included our awesome Iowa team, from left to right, Jay Iverson (HBA of Iowa), Karyl Bohnsack (Iowa City), Mona Peiffer (Quad Cities), Dan Knoup (Des Moines), and Terri Schelm (Sioux City).

Urge Senate Judiciary Committee Chair Grassley to Oppose the FAIR Act

Arbitration has a long history of resolving issues between parties in a fair and equitable manner. In contrast, court litigation can be a costly and time-consuming effort. Litigation often takes years to work its way through the courts, and legal fees may take a third or more of any settlement or award. In contrast, employees and consumers have traditionally seen more successful outcomes as a result of arbitration, compared with those who take their disputes to court.

Unfortunately, the Forced Arbitration Injustice Repeal (FAIR) Act pending in the U.S. Senate would effectively ban most forms of arbitration for consumers and employees and upend the current arbitration system in favor of the class action trial bar.

Iowans cannot afford more added expenses in their daily lives during these inflationary times. We hope you can urge Senator Grassley to join us and oppose the FAIR Act.  Click here for a great op-ed that further details some concerns about the bill.

Contact our Iowa U.S. Congressional House Members Today

The Inflation Reduction Act does nothing to Reduce Inflation on Housing!  H.R. 5376, the Inflation Reduction Act of 2022, does nothing to address inflationary pressures on the housing industry. The bill will raise the cost of homes through increased energy code requirements.

Section 50131 of H.R. 5376 proposes federal grants to pressure state and local governments to update to a specific building code thereby preventing local jurisdictions from amending and updating editions in the code adoption process.

Make sure your Member of Congress knows the adoption of these provisions will exacerbate the current housing affordability crisis and limit energy choices for consumers.  This is really simple to do, just click here and follow the easy directions.

Housing Policy Resource from the National Association of Counties
Living and working in the communities they serve, county leaders across the country understand the local housing conditions and challenges faced within the community. As these challenges appear on the doorstep of county officials, local governments often face complex decisions to effect substantive change.
The housing policy matchmaker aspires to be a resource for local officials, providing information that assists in understanding the elements of local housing markets, identifying key challenges and providing resources on policies that might help enhance the local housing landscape.
Recognizing that local governments vary in their available resources, as well as legal powers,there is no single comprehensive strategy that works for all places. Rather, the tool provides a data-informed assessment, referring local officials to resources that support county leaders’ continued actions to improve the affordability, quality and supply of local housing stock.

Lung Cancer
The vast majority of Iowans who are at high risk of getting lung cancer aren’t getting potentially lifesaving early screenings, according to a new national survey released last week by the American Lung Association.  In Iowa and across the nation, lung cancer is the leading cause of cancer deaths. Survey data released Monday by the American Lung Association’s Lung Force initiative shows that only about 1 in 10 (11%) of Iowa residents at high risk for lung cancer have received a low-dose CT scan lung cancer screening — which they’re now eligible for under new federal guidelines. The survey also showed that most Americans were unaware the survival rate for lung cancer has increased by 30% in the past decade.
“One of the most impactful things we can do in Iowa is to raise awareness about lifesaving lung cancer screening,” said Kristina Hamilton, advocacy director for the Lung Association. “Lung cancer screening is key to early diagnosis, and early diagnosis saves lives.”
In Iowa, it is estimated that 2,530 people will be diagnosed with lung cancer in 2022, and 1,450 people will die from the disease. Additionally, the entire state of Iowa is considered to be a high-risk zone for radon, the second-leading cause of lung cancer. Radon, a naturally occurring radioactive gas that can accumulate in basements of homes, can be professionally mitigated.
The 2022 Lung Health Barometer surveyed 4,000 Americans nationwide about lung cancer. The national survey, now in its seventh year, examines awareness, attitudes and beliefs about lung cancer.
Key findings show that:

While awareness of lung cancer screening is still low, the United States has made significant progress to increase eligibility. Last year, the U.S. Preventive Services Task Force expanded the guidelines for screening to include individuals ages 50 to 80 years old who have a 20-year smoking history and currently smoke or have quit within the past 15 years. This nearly doubled the number of individuals eligible for screening and has the potential to save significantly more lives than previous guidelines.  More information about lung cancer screening can be found at SavedbytheScan.org.
Housing Economics July 2022
Housing Supply

Nationwide, the number of housing starts fell by 2.0% over the month of June 2022 to 1,559,000. Single-family starts fell by 8.1% to 982,000. Multifamily starts rose by 10.3% to 577,000. Over the past 12 months, total housing starts are down by 6.3%. Single-family starts are down by 15.7% but multifamily starts are up by 15.6%.

In the Midwest Region, which includes the state of Iowa, the number of housing starts fell by 7.7% over the month of June 2022 to 215,000. Single-family starts rose by 2.1% to 147,000. Multifamily starts fell by 23.6% to 68,000. Over the past 12 months, total housing starts are up by 8.6%. Single-family starts are up by 13.1% but multifamily starts are unchanged.

On a year-to-date basis, total permits over the past 12 months ending in June 2022 are down by 10.4% across the state of Iowa to 6,518. Single-family permits are down by 19.4% to 4,247 but multifamily permits are up by 13.0% to 2,271. In Des Moines-West Des Moines, IA, total permits year-to-date are down by 3.6% to 3,229. Single-family permits are down by 14.7% to 2,182 but multifamily permits are up by 32.2% to 1,047.

Employment

The United States added 6.2 million jobs over the past year, increasing by 4.2%. In the last month, 944.0 thousand jobs were gained, increasing by 0.6%.

The Midwest Region, which includes the state of Iowa, added 943.8 thousand jobs over the past year, increasing by 2.9%. In the last month, 202.8 thousand jobs were gained, increasing by 0.6%.

The state of Iowa added 43.6 thousand jobs over the past year, increasing by 2.8%. In the last month, 11.0 thousand jobs were gained, increasing by 0.7%.

Des Moines-West Des Moines, IA added 10,200 jobs over the past year, increasing by 2.7%. In the last month, 2.4 thousand jobs were gained, increasing by 0.6%.

House Prices

Nationwide, house prices grew by 3.7% over the first quarter of 2022 and over the past year house prices across the country rose by 19.4%. At its low, reached in the third quarter of 2011, house prices in the US were 18.3% below their second quarter of 2007 peak level. Currently, house prices are 52.4% above their boom-related peak level.

Across the West North Central Division, a component of the Midwest Region which includes the state of Iowa, house prices grew by 2.9% over the first quarter of 2022 and over the past year house prices in the Division rose by 16.1%. At its low, reached in the second quarter of 2011, house prices in the West North Central Division were 8.8% below their second quarter of 2007 peak level. Currently, house prices in the West North Central Division are 52.1% above their boom-related peak level.

Across the state of Iowa, house prices grew by 2.3% over the first quarter of 2022 and over the past year house prices in the state rose by 13.8%. At its low, reached in the second quarter of 2011, house prices in Iowa were 2.0% below their first quarter of 2009 peak level. Currently, house prices in Iowa are 48.2% above their boom-related peak level.

Across the area of Des Moines-West Des Moines, IA, house prices grew by 2.8% over the first quarter of 2022 and over the past year house prices in the metro area rose by 15.1%. At its low, reached in the second quarter of 2012, house prices in Des Moines-West Des Moines, IA were 6.3% below their first quarter of 2008 peak level. Currently, house prices in Des Moines-West Des Moines, IA are 47.0% above their peak level.

NAHB/Wells Fargo Housing Market Index

According to the NAHB/Wells Fargo Housing Market Index (HMI), sentiment among builders for the single-family housing market nationally fell by 12 points to 55 over the month of July 2022. Over the past year, the HMI fallen by 25 points from 80 in July 2021. Any value above 50 means more builders are seeing improvement rather than decline. The HMI fell to a low of 8 in January 2009.

Sentiment among builders for the single-family housing market in the Midwest Region, which includes the state of Iowa, fell by 6 points to 49 over the month of July 2022. Over the past year, builder sentiment in the Midwest Region has fallen by 21 points from 70 in July 2021. Builder confidence in the Midwest Region fell to a low of 6 in December 2008.

Zillow Housing Economics

The 2022 Consumer Housing Trends Report (CHTR) is super interesting and provides a snapshot of what housing consumers are thinking and doing in mid-2022. In this report, we take a deeper look at sellers (household decision makers who moved in the past year and sold their previous primary residence).

Mortgage Rates Drop on Slowing Economic Activity

Mortgage rates dropped significantly last week.  The Federal Reserve increased the federal funds target rate by 75 basis points at the July meeting, in line with market expectations. But comments from Fed Chair Powell after the meeting were interpreted by many investors as more dovish than prior communications.
In addition, several economic indicators pointed to slowing economic activity; GDP declined for the second quarter in a row, new home sales slowed, and consumer confidence dropped due to inflation and recession concerns.
Investors reacted by driving longer term rates – such as yields on 10-year treasuries and mortgage-backed securities– lower, predicting the Fed will have to slow down rate hikes and potentially ease rates sooner than previously expected. Primary mortgage rates fell in turn.