Credit Crunch Hits NAHB Show Home

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(News Source: National Association of Homebuilders)

(WASHINGTON, DC) -- The New American Home 2010, a model of innovation in energy and resource efficiency, has now become a high profile model of restrictive lending practices by a banking industry that is choking off the supply of credit for residential construction.

As Las Vegas builder Domanico Custom Homes works tirelessly to complete the home in time for its debut in January at the 2010 International Builders' Show (IBS), the company must now contend with lenders who have cut off the supply of capital for even the best projects. The builder of one of the most heavily visited and widely covered show homes in the world is having trouble getting the financing needed to finish the project.

The 2010 home is being built to the new National Green Building Standard and will be a near net-zero-energy home. It serves as a laboratory that will help shape the building practices used by thousands of those who seek to produce energy efficient homes. However, Domanico Custom Homes has not been able to find a bank that will finance the final draw needed to complete the home, even though it is 60 percent finished.

"Instead of being a showcase for innovative new products and green building technologies, The New American Home 2010 has become a showcase of excessively restrictive lending practices and failed regulatory oversight," said Joe Robson, Chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. "We've been hearing from builders across the country that banks are cutting way back on loans for construction, and this is a prime example."

NAHB is calling on banking regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that has emerged as a major impediment to the housing recovery. Lenders are refusing loans for viable new housing projects and cutting off funding or calling performing outstanding loans, producing unnecessary foreclosures and losses on AD&C loans.

"The banking regulators need to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes," Robson said. "The New American Home 2010 is a great home from a program that has a long history of sound performance and good returns. If the builder of this home has trouble getting a loan, then you know the system is not working."

The home was designed by the architecture firm KTGY Group of Irvine, Calif. Much smaller than other recent homes in the series, the 6,000 square foot desert-contemporary home is a model of space efficiency in residential design. The architects have also incorporated many universal design features into the home.

Adam Knecht, general manager at Domanico Custom Homes, said he understands the lenders' perspective.

"Banks are just not lending because Las Vegas has been a tough market," Knecht said. "But this is a beautiful home in a great location and it is the state-of-the-art in green building. The New American Home is seen by thousands of people - millions if you include feature articles in newspapers and magazines. We're not going to have trouble selling this home.

"If there is an investor out there looking for a good lending opportunity, I would love to hear from them," Knecht said.

The home's green building features include APEX block construction for exterior walls, a solar hot water system with gas backup, several types of insulation for different parts of the house, and photovoltaic cells. It also includes a greywater recycling system, tankless hot water heaters, high-efficiency furnaces, and "intelligent" fireplaces. It even has a green roof system to cover part of the patio.

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