Weekly update from the National Housing Conference
July 31, 2018
President's Message I By David M. Dworkin

Are we heading into a recession, and how would that impact the housing economy, which is just recovering from the worst housing crisis in generations? These questions are increasingly on the mind of housers, economists and policymakers in Washington. While there is no way to say for sure, there are two very important data points worth looking at and several key things to keep in mind.

First, housing prices have been rising steadily. That is not necessarily a bad thing and also not automatically an indication of an economic bubble. The most relevant rule here is that housing is all about location, location and location. In many markets, housing prices have remained relatively flat, and in others they have risen significantly, but in most they have recovered at a sustainable rate. Housing prices rise and fall over time, with flat periods in between. The home price bubble, clearly illustrated in the chart below, shows how some markets have risen and recovered faster than the national index (like Los Angeles, shown in red). But overall, we are at a natural end to a period of recovery that brings us roughly where we would be if the historic trend had not experienced the rapid escalation and fall that took place before and during the crash. Should housing prices level off, we will be experiencing a normal event that is part of a healthy market. And there’s no reason to believe that won’t be the case since the systemically irresponsible factors that extended and amplified the rise in housing prices in 2005-2007 have been largely eliminated from the system. 
The second important factor in predicting the future of housing prices is whether or not a recession is imminent. Recessions bring job loss– and the fear of job loss – which can harm housing values. There is some compelling evidence that a recession is likely, but by no means certain. One of the most accurate leading indicators of recession is a yield curve inversion. This is quite simply when short-term interest rates become higher than long-term rates – or inverted. The chart below shows the difference (or delta if you want to sound like an economist, which I’m not) between the 10-year Treasury bill and the 3-month Treasury bill. Why does this matter? U.S. Treasury bond prices are determined by the market of investors who buy them. Pricing becomes the economic equivalent of a political poll of investors rather than voters. When the delta between the 10-year and the 3-month becomes negative, a recession almost always follows, in part because investors believe it will and act accordingly. The chart below shows this since 1982, but the trend has been quite reliable for nearly 100 years. 
To guard against this cycle, the Federal Reserve Board (the Fed) manages the money supply by adjusting short term interest rates, among other ways . When the economy is slow, it lowers short-term rates and expands the money supply using other tools. When the economy is recovering, it raises rates. Raise rates too high, and the Fed can cause a recession, like it did several times during the Great Depression. Lower rates too much, and inflation can result.

This past year, we have seen several increases in interest rates as the economy has recovered. With the most recent increase, there are signs of slowing. The Fed is like a commercial airline pilot and the economy is the nervous passenger. The Fed wants the economy to have a smooth and steady takeoff and a gentle landing. Like in the mid and late 1990s. Take off too fast, and we can suddenly stall. Come down too fast, and we can crash. So yes, the yield curve is “flattening” but it is not inverted. If the Fed gets it right, we are more likely to have a soft landing followed by a gradual ascent. Hopefully that will be the case; but keep your seat belt buckled!

David M. Dworkin
President and CEO
News from Washington I By Kaitlyn Snyder &
Patrick Clifford
Congress passes NFIP, averts lapse during hurricane season

The Senate voted today to extend the National Flood Insurance Program (NFIP) until Nov. 30, 2018, the last official day of hurricane season. The Senate passed S. 1182 by a vote of 86-12 and the House passed it last week by a vote of 366-52. This video of the House debate on the extension provides insight into the politics of the issue. Congress voted to extend the program without making any of the necessary reforms to improve the program. The NFIP is about $25 billion in debt and desperately in need of updated flood-risk mapping and changing the incentive structures to preserve affordability while signaling risk and allow homeowners to better mitigate against risk. 
Senate passes THUD spending bill in minibus

As of Tuesday evening, the Senate is currently debating H.R.6147, which packages four FY 2019 spending bills: Interior, Environment, and Related Agencies; Financial Services and General Government; Transportation, Housing and Urban Development and Related Agencies; and Agriculture, Rural Development, Food and Drug Administration and Related Agencies. The House, which is out of session for August recess until Sept. 4, will need to act upon its return in order to avert a government shutdown. Funding for the federal government runs out on Sept. 30. 
Senate democrats send CRA letter to Comptroller Otting 

Last week, Sens. Sherrod Brown (D-Ohio), Catherine Cortez-Masto (D-Nev.), Doug Jones (D-Ala.), Bob Menendez (D-N.J.), Jack Reed (D-R.I.), Brian Schatz (D-Hawaii), Chris Van Hollen (D-Md.), Mark Warner (D-Va.) and Elizabeth Warren (D-Mass.) sent a letter to Comptroller of the Currency Joseph Otting, regarding OCC Bulletin 2018-17. The senators request that Comptroller of the Currency Joseph Otting rescind OCC Bulletin 2018-17, which they believe weakens enforcement of the Community Reinvestment Act. The senators request a response from Comptroller Otting by Friday, Aug. 3. 
CDFA conference on Opportunity Zones

The Council of Development Finance Agencies (CDFA) along with the Beeck Center for Social Impact and Innovation at Georgetown University is hosting a conference on Opportunity Zones on Sept. 5 and 6. “ Opportunity Zones: Maximizing Impact in Your Community” will bring together national experts for panel discussions, presentations and workshops focused on how communities can take advantage of Opportunity Zone designations, and how to identify and work with Opportunity Fund investors. Registration is required; for CDFA members the registration rate is $250, for non-CDFA members the registration rate is $305.The conference will be held in the Fisher Colloquium at Georgetown University. Register here.
House NMTC bill would authorize additional $500 million for rural areas

Last week, Rep. Jason Smith (R-Mo.) and Rep. Terri Sewell ( D-Ala.) introduced the Rural Jobs Act ( H.R. 6627), which would authorize an additional $500 million in New Markets Tax Credit (NMTC) allocation per year for 2018 and 2019 for certain rural areas. The new allocation would target Rural Jobs Zones, which are NMTC-eligible census tracts in rural communities that are eligible for the U.S. Department of Agriculture Business & Industry program. At least 25 percent of the new allocation would be prioritized for persistent poverty counties and high-migration rural counties.
LIHTC bill introduced in House

Last week, Rep. James Clyburn (D-S.C.) and Rep. Suzan DelBene (D-Wash.) introduced the Restoring Tax Credits for Affordable Housing Act ( H.R. 6542). The bill would increase the Low Income Housing Tax Credit (LIHTC) annual allocation as well as the credit percentage formula, helping to restore funding lost due to tax reform. 
Register for webinar on
FY 2019 funding for housing, community development

The Campaign for Housing and Community Development Funding is hosting a webinar on Aug. 6, 2-3 p.m. EDT to review the current status and outlook for the FY 2019 funding process. Speakers will discuss how advocates can effectively communicate with policymakers and the public about the need for increased federal investments in proven affordable housing and community development programs. Register here
Our Homes, Our Votes webinar series 

The Our Homes, Our Votes campaign is hosting a six-part webinar series on nonpartisan voter engagement. The remaining webinars will be held from 3-4 p.m. EDT on Aug. 7, Aug. 14 and Aug. 21. Register for all of the webinars here. The slides and recording from the first webinar, “Our Homes, Our Votes: An Introduction and an Exploration of Legal Considerations,” are available here. The slides and recording from the second webinar, “Building the Base: Voter Registration of Low Income Renters and Their Allies,” are available here. The slides and recording from the third webinar, “The Importance of Voter Lists! A Key Tool for Successful Mobilization,” will be available here.
HUD approves $1.5 billion disaster recovery plan for Puerto Rico

On July 30, HUD approved a $1.5 billion disaster relief plan to support Puerto Rico’s recovery efforts following Hurricanes Irma and Maria. The plan primarily focuses on the restoration of damaged and destroyed homes, businesses and infrastructure. Included in the proposal is $10 million in rental assistance for seniors and other vulnerable households, as well as up to $120,000 for each qualified homeowner to rebuild their home.
2018 HUD Secretary Design Award winners announced 

San Francisco’s Five88 Apartments and Portland’s Station 162 Apartments are the winners of the 2018 American Institute of Architects and HUD Secretary’s Housing and Community Design Award. The award recognizes development projects that create innovative architectural designs that respond to the “needs and constraints of affordable housing.” The Station 162 Apartments are specially designed to provide affordable independent living for persons with disabilities, while Five88 Apartments is an aesthetically appealing apartment complex built to enable low-income families to move closer to the city.  
The National Housing Conference has been defending the American Home since 1931. Everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.
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