Iowa D.C. Legislative Visits a Tremendous Success
Despite the shootings yesterday, we had an awesome day with all of our Iowa senators and representatives. We were part of 800 builders and remodelers from across the nation for the annual NAHB Legislative Conference in Washington D.C.
We had a really full of meetings with elected officials and their staff, to call on Congress to make housing and homeownership a national priority and to support policies that will keep the housing recovery moving forward.
“Today, builders from coast-to-coast are sending a loud and clear message to members of Congress that a strong housing market is critical to spur job growth and create a vibrant, dynamic economy,” said NAHB Chairman Granger MacDonald. Among the topics that were covered:
- Regulatory reform
- Labor shortage
- A predictable, affordable national flood insurance program
- Housing finance
- Tax reform, including protecting incentives for homeownership
- Promoting cost-effective energy codes
- Securing a supply of softwood lumber
- Improving the Low-Income Housing Tax credit to help meet the nation’s acute need for affordable rental homes.
The day began with a briefing where V.P. Pence was slated to speak, but at the last minute cancelled out because of the shootings. Rep. Peter Roskam (R-Ill.), who sits on the House Ways and Means Committee, spoke to builders before they met with their lawmakers and said that this year there is “a real opportunity to do something about tax reform.”
House Republicans are working on a tax reform blueprint that would generate economic growth, simplify the tax code, stop erosion of the U.S. tax base so that it is no longer more attractive for U.S. corporations to go overseas, and provide permanency to the tax code to deliver certainty to the business community, Roskam said.
It’s the first year since 2013 that NAHB has held its annual Legislative Conference in Washington, D.C. During the past three years, as part of a nationwide effort to “bring housing home,” builders across the country met with their federal lawmakers in their home districts.
Mike Rowe Sponsorships
We’re really excited about bringing Mike Rowe to Central Iowa on September 28 and we’re seeking sponsors for the event. It’s an expensive project. Check out the sponsorship packages and contracts:
Interest Rate Hikes
The Federal Reserve’s monetary policy committee announced two moves yesterday with implications for housing. Neither represented a surprise for markets.
First, the Federal Open Market Committee (FOMC) announced the second rate increase for the short-term federal funds rate for 2017, raising the target rate to a 1% to 1.25% range. While the Fed continues to raise short-term rates, the current stance of monetary policy is accommodative given ongoing low rates of inflation. The FOMC has stated that in the medium-term, the committee’s objective for inflation is 2%.
The second policy announcement with housing market implications was the Fed’s plan for balance sheet reduction. As part of monetary actions enacted after the Great Recession, quantitative easing involved the Fed purchasing Treasuries and agency debt and mortgage-backed securities (MBS) as a means to hold down long-term interest rates. These holdings include approximately $1.8 trillion in MBS. Reducing holdings of MBS are expected to increase mortgage interest rates slightly, but the Fed’s announced plan will make these effects minor.
The announced policy sticks to the Fed’s plan to make this process “gradual and predictable.” The Fed will begin balance sheet reduction by decreasing reinvestment of principal payments. This will occur by only making future reinvestments in excess of defined caps. For MBS, this monthly cap will start at $4 billion. The monthly cap will then increase in $4 billion steps in three-month intervals until rising to a $20 billion cap. The FOMC anticipates an incomplete reduction of the balance sheet, this leaving some share of current holdings in place. No specific date was announced for the beginning of this proposed policy, although a reasonable guess would be the end of 2017.
The Fed also stated its preference for the federal funds rate as its primary tool of monetary policy. However, the FOMC stated that it would utilize balance sheet expansion if economic conditions warranted additional stimulus and if reductions in the federal funds rate were insufficient for a future economic downturn.
Overall, the Fed’s announcement offered no surprises and represent a commitment to monetary policy normalization. The wild card concerning future Fed actions is the degree to which a low unemployment rate will spur growth in inflation.
Straight out of the 1934 Montgomery Ward Catalog – just a little change financially since then.