The new president of the National Association of Home Builders finds himself in an unenviable position.
Barely ensconsed in office, Merrill Butler is trying to weather two credit-tightening moves by the Federal Reserve Board, actions which the Fed's chairman expects and concedes will lead to "horrendous" interest rates.
The Feb. 15 boost in the Fed's discount rate to member banks -- up one percent to a record and ominous 13 percent -- may not be a knockout blow for housing construction this year but it sure will smart and will result, Butler declared in these losses:
800,000 housing units will not be built, out of 2 million needed annually to meet the nation's basic shelter needs.
1.2 million jobs will be lost for lack of work.
$2.3 billion in wages will not be paid.
$5.6 billion in tax revenues will not be collected.
"That," Butler asserted, "is equivalent to letting four Chrysler Corp.'s go bankrupt."
Butler, whose home building operations emanate from Irvine and Fresno in California and Phoenix, doesn't like what he sees ahead: possibly the steepest drop in private housing production and home sales in three decades.
That could happen, in the wake of the Oct. 6, 1979, and Feb. 15, 1980, credit squeezes by the Fed, Butler warned.
His allusion to the federal government's guaranteed aid for a Chrysler bail-out -- $1.5 billion if the car maker raises about $2 billion on its own -- is certainly appropriate. A builder could argue that Congress is holding hands with and virtually nationalizing Chrysler while the housing industry, as in past recessions and times of dire national economic ailments, becomes the biggest victim and affect the largest number of people.
Perhaps the most telling effect of inflation on a family's ability to buy a home lies in the increase of the monthly payment on an average-priced home since last fall.
The industry had not adjusted to the "tremendous shock of the first round of credit tightening imposed last October," Butler said, when the newest move came along and forced monthly payments up by as much as 25 percent.
"New housing construction had declined to an annual rate of less than 1.5 million units, and sales are off as much as 50 percent in some areas of the country."
"Mortgage interest rates as well as rates on construction loans are now expected to rise to new heights, further slowing sales and new construction, increasing the rate of business failures among home builders and other small businessmen and eventually generating more inflation in housing," Butler predicted.