New builder trade group?

It’s been a rocky year for new home builders, that’s pretty common knowledge. But did you know that beyond the struggling balance sheets there has been a battle brewing between mega builders and small builders?

It all started this spring when according to wsj:

“The bigger builders had been lobbying Congress to apply current losses against profits made five years ago, instead of two years. Jerry Howard, the [National Association of Home Builder's] chief executive, incensed the large builders by penning a letter to House Speaker Nancy Pelosi expressing concern that the giants could dump land and houses for artificially low prices, potentially disadvantaging the smaller players.”

Since the battle began, the large builders got their way and won a five year carryback (not to mention they’ll get massive tax refunds like Pulte who is expected to see a $450M+ tax refund this year) and small builders now fear product shedding with no recourse. The NAHB who was the main lobbyist and protector of builders is quickly becoming what I would call the NASHB (National Association of Small Home Builders) or INAHB (Independent National Association of Home Builders) while the large builders (led by Pulte insiders) have formed an alternative for big builders, Leading Builders of America.

The NAHB has “a lot of smaller home builders,” said Brent Anderson, vice president of investor relations with Meritage Homes, which belongs to both groups. “They don’t necessarily have the same concerns, objectives, etc. of the large public or private home builders. … Trying to get a consensus among everyone from little mom-and-pop builders to a [top builder] Pulte, that’s a gargantuan task.”

What does this mean and what happens now?

So that makes sense- big builders and small builders have different DNA, but what does this mean for the state of builders? It means there’s a lot of behind the scenes politics and we may see some adversity in pricing between builders even in the same neighborhood. As with any group that forms out of frustration with their association, they will be loud and have more energy… anger and a need to prove something are amazing fuel for business.

“Whether they decide to remain together under one association or form two or more is up to them – that part doesn’t really affect my business or home buyers,” said Loudon County Realtor, Danilo Bogdanovic. How do you think the carryback and a new association will change the new construction sales in your practice?