Veritas

Paced by a sudden burst of apartment activity, residential building permits in Genesee County soared to 2,649 units authorized last year, a rise of an incredible 47.5% over ‘98. An analysis of Housing Consultants’ year end report with the Flint Journal’s annual survey of local municipalities discovered that permits which authorized owner occupied housing (single family/condo) climbed to 2,059, the highest level since 1972, and 14.6% above a strong 1998.
However, it was the authorization of 590 rental units, a sector that was nonexistent in ‘98, that sent overall activity climbing at a rate that was comparable to the jump from 1993 to ‘94, when property tax reform spurred housing toward its current level.
The southern third of the county became significantly more dominant than in previous years as a number of large, regional building companies, intensified their local activities in both, the single and multi-family sectors. In the five communities situated within the borders of Grand Blanc and Fenton Townships (including the respective cities plus Linden), which takes up just eleven percent of the County’s total area, 41.6% of the single family and condo permits, and 43.8% of the total housing permits were issued. The same area had been responsible for 28% of the units authorized in 1996, rising steadily to 34% in ‘98.
However, when we look at the history of housing activity throughout that southern third, we can see just how significant last year’s dominance actually became.
In the last half of the 1980s, new housing in the sector of Genesee County that was south of Maple Ave. began to grow to the point that it was approaching half of all county permits. Since 1994 the six township area was consistently responsible for just over 50 percent of the total activity.
However, last year those numbers soared as the same area was responsible for 59.5 percent (1,226 units) of owner occupied permits in a dramatic upturn. Furthermore, 64.5 percent (1,708) of total units were authorized in the area as 83 percent (490 units) of the rental activity was located their.
Grand Blanc Township’s 393 owner occupied permits were the most issued by any single municipality. However, Fenton, Linden and the Township, combined for 451 permits, (681 including rentals) clearly making it the growth leader for the county as a whole. Mundy Township followed with 147 (327 with rentals).

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Briefs with local Housing Industry or Economic Impact

Southeast Michigan’s new growth industry has already had an exceptionally positive impact on one of the nation’s major corporations. The 4th quarter earnings’ report of Las Vegas based MGM Grand increased a whopping 88% over the same period in ‘98, due primarily to winning the race to open first in Detroit. MGM’s local casino contributed more than $100 million to the corporation’s 4th quarter revenue, which was nearly double the previous year’s figure of $215 million. Its president noted that the “result was predominantly a result of being in Detroit by ourselves.”
As followers of the gaming industry are aware, the phenomenal growth of new developments in Las Vegas over the past several years has diluted revenue on the strip. But the Motor City casinos appear ready to flourish.

Environmentalists filed a federal lawsuit in an attempt to block timber sales in Michigan’s Upper Peninsula’s Ottawa National Forest. The report in Saturday’s Journal said the suit accuses the U.S. Forest Service of “approving the logging with too little consideration of how it may harm the environment,” despite the fact that the Service followed all laws, regulations and policies, in approving the harvests.
A spokesman for the Michigan Association of Timbermen noted the “unfortunate” nature of a group “with one very narrow interest” blocking plans that were put together by “the Forest Service with help from many in the general public.” So, what else is new?

If you’re wondering why we’ve got a labor shortage, perhaps the year end “jobs” report may have some answers. Despite the closing of Buick City and the V-8 engine plant, Genesee County’s unemployment rate averaged 5.4% for all of 1999. And, as strong as that may be from an historical perspective, nearly all the surrounding areas have lower rates.
Over all, Michigan’s unemployment for the year was at 3.7%, down from 3.9% in ‘98, with 9 of its regional markets experiencing the lowest jobless rate since, at least, 1970.
And remember, a few years back we called 6% unemployment “full employment!”

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The “Era of Big Government” is Back! “Clinton III”; what’s all this about making cities more “liberal? “

Despite his slips on Al Gore’s Livability Agenda, calling it an attempt to make cities more “liberal,” those of us who could handle 90 minutes of campaign theatrics last Thursday saw Bill Clinton at his political best as he kicked off his campaign for a third term during the annual State of the Union. Third term? Doesn’t that violate the U.S. constitution, you ask? Not when the election is more important than physically holding the office.
Four years ago, after losing the house and senate to the GOP, Mr. Clinton became the consummate “New Democrat” at the state of the union when he announced the demise of “big government.” Now, with the economy’s health in unprecedented condition, and two years of Federal surpluses, the President honed his 2000 campaign kick-off message to his surrogate in waiting’s campaign.
So, in a clear attempt to turn his governing popularity into Al Gore’s vision of America, Mr. Clinton called for an apple for every teacher, a donut for every cop, a bone for every dog, and a bigger portfolio for every doctor. In reality, not only did he call for massive spending increases on the popular education and health care issues, Clinton proposed greater spending on everything from agriculture to cities;

Barry

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The Seinfeld Section (it’s still about Nothing ; in particular)

Dubbed the “bill only a bookie would love,” Congress is dealing with National Collegiate Athletic Association (NCAA) sponsored legislation that would ban legal betting on college sports. The bill would threaten a $690 million annual take in Nevada. Obviously the NCAA doesn’t want anyone (including the athletes they abuse for big dollars) to profit from the endeavors that earn their members billions. Of course, they did find 2 Sponsors for the legislation.
Is it any wonder that the great Oklahoma Linebacker/Philosopher, and low budget film star, Brian Bosworth, referred to the organization as National Communists Against Athletes?

Of course, sports wagering isn’t the only thing the Senate’s wasting time with. Its Banking Committee actually held hearings on the reappointment of Alan Greenspan to a 4th term as Federal Reserve Chair. Though Mr. Greenspan’s re-annointment is expected tomorrow, one Senator is supposedly working diligently to find 10 votes against confirmation, to make a point ...... Now, can you imagine a senator facing a contested reelection after voting against Greenspan?

On a related note, after endorsing George W. Bush, former Representative, HUD Secretary and GOP Presidential Candidate Jack Kemp quipped he’d be a great candidate for Federal Reserve Chairman, to which Bush retorted, “Have you ever heard of Chad?” Suggesting an obscure ambassadorship for the former quarterback who suffered more concussions than Steve Young and Troy Aikman combined, must have had a calming effect on the Bond market which rallied the following day...

Al Gore’s initiative to make cities more “liberal.” Honest mistake or Freudian slip?
When Bill Clinton turned to the Vice President’s anti-sprawl “livability agenda” late in last Thursday’s State of the Union address, and twice replaced “livable” with “liberal,” the laughter was deafening. But in light of the evening’s tone, as the president uncharacteristically proposed spending on top of spending for a full 90 minutes, one has to wonder if he just had too much Gore 2000 liberalism on the brain?

And how about all those self serving commercials on public affairs’ programs, calling for more health care spending by the Health Insurance Association of America and Citizens for Better Medical.

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Association News Update Table Top Night Exhibitors Nearly Double
New site enhances Wednesday’s event; also, Parade set

When the Builders Association set its first “Table Top” exhibit night back in 1998, it was only attempting to make up for its limited number of General Membership Sponsorship opportunities. However, the response to the inaugural evening was so strong, it immediately became evident that it would become an annual event each winter. Then, when it had to turn away members because of limited space at the normal meeting site, it was only a matter of time until we moved to larger surroundings....well, that time is now!
This year ‘s February meeting moves to Bonaparte’s restaurant in the Great Lakes’ Tech Center (S. Saginaw and Atherton Rd) in Flint, where at least forty exhibits (as of today) will be on display. And, it will open at 5:00 p.m. with the exhibits, beer, wine, soft drinks, coffee and light hors d’oeuvres, rather than the usual time.
The special buffet dinner will be set up at 6:30, with burgers, hot dogs, pizza, salads, etc., along with an open full service hosted bar. Also, prize drawings will begin at that time. And, its scheduled to conclude near 8:00 p.m.
Attendence will be handled like a normal General Membership meeting (meal is free to association members, $15 for additional representatives from the same company).
Due to the size of the room at Bonaparte’s, we could easily handle fifty booths so, if a member is interested in exhibiting, and hasn’t reserved a table, he or she should call the association office immediately....
Set up begins at 2:00 p.m.; Six foot tables cost $150; eight footers are $200.

Parade of Homes Set
The Spring Parade of Homes returns to its traditional Mothers’ Day weekend opening in 2000, running from Saturday, May 13th through Sunday, May 28th. Hours will remain at noon to six on weekends, 5:00 p.m. to 8:00 p.m. weekdays (Wednesday, Thursday and Friday).
Entry fees for the event also remain the same ($2,500 per entry) with the first deadline for registration set for February 21st. After that date, the cost rises to $2,700, with the final deadline set at March 10th.
Parade applications, along with the rules and regulations, were mailed to builders on January 21st....if you didn’t receive one, and plan on participating, call the association office asap....

Housing Quarterly magazine advertising reservations were mailed out last week, primarily to previous advertisers and new members. The magazine will be published in early May, and will be mailed to 2,400 to 3,500 (depending on the number needed for the parade) households on May 5th. The HQ final deadline is April 1st (however, the availability of full color ads will likely be gone well before).

The home builders council meeting is now set for Monday, February 21st, at 3 p.m. This will be an extremely important meeting for builders and we urge you to reserve the date....look for details at the Table Top night and in the February 15th Veritas.

Economic Update: Economy hotter than ever ; record nears

As the economy approaches a new record for the longest expansion in history, growth shows no signs of letting up.
In the past two weeks we found that Consumer Sentiment is at an all time high; spending continued to grow in the fourth quarter; and Gross Domestic Product soared in the final quarter of the year, at a rate that was likely beyond the upgraded 3rd quarter rate of 5.7%.
However, there was one negative in last week’s reports that may have a negative effect on the immediate future. Inflation, or at least the perception of higher prices, may be just around the corner.
Last Friday the Labor Department announced that labor costs rose 1.1% in the 4th quarter, while the Commerce Department’s GDP price deflator rose at a 2% annual rate, which was roughly 33% faster than forecasters anticipated. Since both gauges are closely watched by Alan Greenspan, Friday’s reports sent shivers down the stock markets’ collective spines as fears of more drastic action by the Fed may be imminent. The markets, already braced for a quarter percent rise, plummeted under fears of a larger increase.
Interestingly enough, the bond market rallied after the reports. But, bond yields were already so high, an additional rise at the Fed would likely have little impact.

Gross Domestic Product
The first estimate of fourth quarter growth by the Commerce Department suggests the U.S. economy grew at its fastest pace of the year, 5.8 percent, greater than the expected rate of 5.5% and the strongest since the final period of 1998.
If the fourth quarter growth holds through its two revisions, it will mean that the economy grew at a 4% rate, well above targets. Despite the solid report, we must remember that 4% would be lower than in ‘97 (4.5%) and ‘98 (4.3%), and those years were hit by a declining world wide economy (and even a long term shut down of GM, in ‘98). So, in reality, four percent growth does not mean the economy’s growing too fast. Still, the GDP report, coupled with the labor costs and inflation reports (see below) intensified inflation concerns.

Inflationary Pressures
The fact that Labor costs rose at an annual rate of 1.1 percent, above analysts expectations, during the fourth quarter, coupled with the report on the GDP price deflator previously mentioned, gives reason for caution regarding the potential heating up of inflation. However, despite an extremely tight labor market, wages and salaries rose quite mildly (at a 0.9% rate) during the period.
What caused the biggest concern was a 1.3% rise in benefit costs, fueled by soaring health care rates, as anyone who received their Blue Cross rate increase can attest to. So, perhaps the Federal Reserve shouldn’t get too carried away.

Consumer Confidence
Confidence rose to a record high in January, suggesting the continuation of consumer driven economic growth.

Housing Industry News Update

Will prices be leveling off in Southeast Michigan? They will, at least according to Case Shiller Weiss, the Cambridge (MA) economic research firm which prepares a quarterly Home Price Forecast for the Wall Street Journal. The firm expects real estate price gains to “cool” across the nation, then notes the following about “Detroit:” It “lost jobs in manufacturing, keeping employment gains to 1.6% last year.” With the auto industry unlikely to improve this year, it will “put an end to the decade of strong appreciation for home prices—expect gains of 4.4% for the next twelve months, with homes reaching a $161,100 median.” Regarding prices nationwide, the report maintains that a continuation of the robust stock market would keep house prices rising moderately however, if the “stock market takes a serious tumble in 2000, home-price increases would slow fairly quickly.”

Sales of existing single family homes dipped in December, but remain at historically high levels. So says the National Association of Realtors (NAR) in their year end report, which showed a total of 5.2 million resales for ‘99, the fourth consecutive year that sales set an annual record. Also, the association noted that despite the 1.4% slip in last month’s sales, inventory was at an all time low, with just a 3.7 months’ supply.
The median price of an existing home was up 4.5% above December ‘98, at $134,300. (In the Midwest the price was at $121,900, a 6.2% rise.)
The NAR is forecasting 4.89 million sales for 2000, and project median prices to rise just 2.1%. It also expects new home sales to fall 5.2%, with the median price rising to $167,300, a 5.6% increase.

NAHB’s Housing Market Index, derived from its monthly survey of member builders, fell one point in January, but still remained at historically high levels. The Present sales category was up slightly, while expected sales and traffic of prospective buyers fell four and five points respectively. Still, the HMI’s 71 level was higher than at any time prior to late 1998.

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