STATEMENT
of the
Honorable Nydia Velazquez, Chairwoman
House Committee on Small Business
“The State of the Nation’s Housing Sector: An Examination of the First Time Buyer’s Credit and Future Policies to Sustain a Recovery”
Wednesday, October 7, 2009, 1 p.m.

 

In the last few years, it has become increasingly clear that the health of our economy hinges on the state of the housing market. That’s why Congress has placed such an emphasis on recovery in that sector. Already, we’re seeing promising results. But our momentum remains fragile, and we need to be sure it is allowed to continue-- not just for the sake of homeowners, but for the sake of our economy and the small businesses that sustain it.

Housing is a small business driven industry. In fact, most mortgage brokers, realtors, home builders, home inspectors and architectural design firms are small ventures. For these businesses, recent industry upticks have gone a long way in restoring confidence and boosting the bottom line. In August, pending home sales rose 6.4%, marking seven straight months of improvement. Meanwhile, July home values climbed at their highest rate in almost four years.  But this progress is no pretext for complacency. Home values are still well below what they were three years ago, and industry businesses continue to face challenges like tightened credit and slowed consumer spending.

One year after the real estate bubble burst, the housing market is at something of a crossroads. While we’ve seen encouraging bright spots, small businesses in this industry are still struggling. This afternoon, we have an opportunity to evaluate the state of the housing sector, and the role that small firms are playing in its recovery. In doing so, we hope to pinpoint which policies are working, and where we still have work left to do.

Even today, you don’t need to look very far to see the impact of the housing crisis. In neighborhoods across the country, thousands of houses still sit empty. This glut in the market has dealt a heavy blow to virtually every firm in the industry, including small banks and lending institutions.  For these businesses, measures like the First-Time Home Buyer’s Credit have been a lifeline. That $8,000 incentive has galvanized consumers, sparking an increase in home purchases. Some experts predict it will generate an additional 350,000 sales before December, and are calling for its extension.

Increased home sales will be a key component in the housing recovery. But it won’t be the only means for revival. Entrepreneurs like electricians and efficiency contractors are already benefitting from measures that encourage green building. In a recent survey by the Air Conditioning Contractors of America, 75% of respondents said they had enjoyed improved sales as a result of Recovery Act tax credits. Increased incentives for “green” building could go a long way in continuing that growth, and are worth considering.

 For the first time in years, we are seeing stabilization in the housing market. In order to build on this emerging recovery, economists have suggested extensions for our most effective measures, some of which will soon expire. It’s important that we have a chance to examine these incentives, and determine their value moving forward. Meanwhile, we need to be certain that small firms have the capital they need to stay afloat. Loans to small businesses in the housing sector are down on most accounts. Efforts to get credit flowing again-- to both builders and buyers-- would mark an important step in addressing that issue.

While it’s clear that the housing market has come a long way, we’re not out of the woods just yet. Entrepreneurs ranging from realtors and appraisers to home builders and architects are still facing challenges. These are the men and women who not only comprise the foundation of American real estate, but also of our economy.  They will play a vital role in our nation’s recovery efforts, and it is critical that they have all the tools they need to incite a rebound.