White House officials say we are ‘in a housing affordability crisis’: NAHB CEO

National Association of Home Builders CEO Jerry Howard joins Yahoo Finance Live to discuss the U.S. housing market, mortgage rates, and homebuilder sentiment.

Video Transcript

SEANA SMITH: Let's take a look at the housing market, because more weakness in real estate. Residential starts at dropping just over 4%-- 4.2% in October compared to a month ago. Building permits also declining, down 2.4%.

Here to tell us a little bit more about the reality that's happening right now in the real estate market, we want to bring in Jerry Howard, CEO of the National Association of Homebuilders. Jerry, it's been about a month since we last spoke with you. We also got mortgage rates out this morning, falling to 6.61%. I guess from the data points that we've gotten over the last couple of weeks, just what's your assessment of the housing market today?

JERRY HOWARD: Well, my assessment is based upon our members' assessment. We poll the members every month and our index declined again just this week, earlier this week, for the 12th month in a row. It's down to about 33, with 50 being a neutral market. So what the homebuilders across the country are saying is we're seeing some really tough times out there right now.

SEANA SMITH: Jerry, how much worse do you think it could potentially get?

JERRY HOWARD: Well, this is as bad as it's been since 2011. It did get into single-digits during the depth of the Great Recession. I don't think we're going to go anywhere near that. But I think it's not going to bounce back anytime soon either.

RACHELLE AKUFFO: And, Jerry, Rachelle here, what are the top concerns that your members have right now?

JERRY HOWARD: Hi, Rachelle. Yeah, the members are really concerned about a couple of things-- the cost of capital, not just mortgage rates. Remember, when the end consumer has to pay more, the builder's paying more for capital as well up upfront. The cost of capital and the availability of capital in the commercial banks seems to be tightening. And that's a real problem for our guys.

Likewise, we still have problems with the supply chain. We still have problems with regulations. And we still have problems with labor. So we're facing pretty much a perfect storm right now.

RACHELLE AKUFFO: And, Jerry, are there any regions that are faring better than others at the moment?

JERRY HOWARD: Yeah, we're still seeing pretty good demand in parts of Florida, in Central Ohio, and in parts of North Carolina. Also, within certain price points-- obviously, the custom whole market is still very strong because that's less sensitive to any of these things. People who are building high end custom homes can afford to pay whatever they want to pay.

And we're also seeing still some strength in the multifamily sector. Interestingly, we're seeing strength in the build-to-rent sector. Those are the areas that still remain pretty strong.

SEANA SMITH: Jerry, last time we spoke, you said, quote, "the failure of public policy makers to act to stem the tide of this housing recession was the main issue here when it comes to housing." We are now post-midterms. Have you had any recent conversations with the White House? And I guess are you a little bit more encouraged, maybe, with a new congress just in terms of what we could potentially see?

JERRY HOWARD: I actually was at the White House yesterday and I actually heard Secretary Fudge say that we are in a housing affordability crisis-- that they're recognizing that right now, I think, is crucial. I believe the White House will attack that from the low income perspective first, and then look at the mid-range market.

I think the new majority in the House, the Republicans, will look at the first-time homebuyer and the American dream. So I don't want to get too optimistic, but I believe there's possibly a path forward where we can get bipartisan agreement on housing policy and potentially solve the problems.

RACHELLE AKUFFO: How do we get there?

SEANA SMITH: What do you think the number one priority needs to be, Jerry?

JERRY HOWARD: Obviously, for the low income housing, you need to have more federal dollars spent. But for market rate housing, we need to fix the supply chain. And we need to find a way to keep capital costs down.

RACHELLE AKUFFO: And, Jerry, in terms of inventory, what are your main concerns at the moment?

JERRY HOWARD: Well, right now, inventory for newly built homes is about nine months, which isn't bad. But that's an artificial nine months. That's there because there's so little demand overall. Inventory for existing housing is only about three months.

So as soon as demand starts to pick up again, whenever that is, I'm afraid that we're not going to have enough inventory. We're going to be right back where we were. We've always said that we're at least a million housing units short since the Great Recession. And we haven't been able to make up that gap at all. So I'm still saying we're a million housing units short.

SEANA SMITH: Jerry, what is this all going to mean for pricing? Because Dallas Fed was out warning that prices of homes could fall another 20%. Do you think that's accurate? Could it potentially be even worse?

JERRY HOWARD: Well, we talked to the Dallas Fed people today and, actually, that was their sort of thought idea. Let's say they fell 20%, what else would happen? What would the other dominoes be? I don't believe they predict that. We predict that they could go down by about 10% more.

RACHELLE AKUFFO: And we've been seeing what's been happening with rent prices still going up, but at least not as fast as they were. How is that influencing-- you mentioned some of these build-to-rent construction as well-- how fast do you expect that to grow?

JERRY HOWARD: Well, if rents keep going up, then renters who want to be homeowners aren't able to save enough money to get into the housing market. And that becomes a problem. So we want to see rents get stabilized through the markets, not through government mandates. We'd like to see rent stabilized and the best way to do that is to make sure we have enough production.

SEANA SMITH: Jerry Howard, always great to have you. Great to have you in-studio this time. Thanks so much for joining us.

JERRY HOWARD: It's fun. Thank you.