June 25, 2003

Inside Veritas -
Article 1 - Habitat House Dedicated; Case Family Become Homeowners
Article 2 - “Metro Home Sales Sputter”
Article 3 - “Mein Kampf” Dogma Evident In Sprawl; Smoking Attacks
Article 4 - Taxation and Finance - ‘03 Tax Bill — Breaks for Individuals
Article 5 - Sewer and Water Update
Association News Update From Laura
Economic Update - Employment, Employment; Employment
BS: Still about Nothing in particular
Housing Industry Update

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Habitat House Dedicated; Case Family Become Homeowners

   Last Tuesday (June 17), the Genesee County Habitat for Humanity Chapter held the dedication ceremony for its 30th new home. What was different with this house is that it was sponsored by the Builders Association of Metro-Flint, who had several members and staff at the presentation.
   The nearly 1,100 square foot ranch is on Nichols Ave. in Grand Blanc Township (just north of the Twp. Hall), was built, primarily, with donations of materials and labor from association members, and non member “friends.”
   The home will be the “habitat” for Janine Case who, along with her 2 children, were welcomed to the community. As you can see with the list of contributors, a number of individuals and businesses made this home possible. But it was the leadership of one, that made it a reality. And that “one” is 2002 BAMF President Steve Edwards, who reminds us that, before homes were perceived as jobs and tax base, they were seen as shelter for humanity.

Rev. Maz B Hayden presents Janine Case with a house warming gift (Bible) while daughter Cija (15) and so Marty (14) look on.	'02 President Steve Edwards and Treasurer Larry Corbett (who's also on the "Habitat" board)	Dan Fralick (Fralick & Sons) and Jim Staley (Precision Plumbing)

Presentation's over: The home is officially the habitat of the Case family.

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“Metro Home Sales Sputter”

  Normally we’d look at Monday’s (6/23) Detroit News headline (above) and rip it for putting a false negative on the regional real estate industry. Then, we’d tear down the arguments on a point by point basis.
   However, this article has considerable merit, as it makes some important points, that reflect on the health of the industry. Although the primary point of the article was the danger to the local economy if the market slows for an “extended period,” it focused on some important data that indicate real cause for concern.
   First and foremost, it notes sales of existing homes are running 5% below last year’s level, while listings are up a whopping 14%. Then it says that “midpriced homes—those priced be-tween $200,000 and $400,000— are taking the biggest hit.” The reason? “In part, because many dual-income families are reluctant to make major financial commitments given corporate layoffs and cutbacks.”
   The article also notes that median prices are up just 2% in the past year, to $161,900 (which is more a reflection on the market being geared to lower priced housing). However, that is in line with the actual rise in value of real estate, as measured by the House Price Index of the OFHEO — front page article — which shows the rise in value of an actual home in the Metro-Detroit area was 2.75% since the first quarter of ‘02.
   Still, the article noted that moderate priced homes are still selling well, as today’s low mortgage rates have a greater impact when attracting “first time buyers.”
   But, what’s troubling, is the impact of employment concerns, which is something that’s evident throughout the "Detroit" market, extending all the way to Southern Genesee County.

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“Mein Kampf” Dogma Evident In Sprawl; Smoking Attacks

  Yesterday’s Flint Journal’s front page had articles that I found surprisingly related. The first concerned Genesee County’s Health Department’s final solution to the “smoking problem,” followed by one linking “Sprawl to Obesity.”
   I’ve realized for some time that the assault on smoking had become a property rights issue much like the assault on sprawl. After all, when the government tells a business owner that he or she loses the right to engage in a perfectly legal activity on his own property, what else can we call it but an assault?
   But anti-smoking zealots, like their anti-sprawl counterparts, are operating under a premise that their goals are “good” for the public. And, in this politically apathetic society, with political correctness running amok, it’s easy for zealots to make their issues appear “popular.”
   Some 78 years ago, it was written that “all great movements are popular movements. They are the volcanic eruptions of human passions and emotions, stirred into activity by the ruthless Goddess of Distress.”
   So, it’s hardly a surprise when Jennifer Granholm plays “Goddess of Distress,” with her “Our land and how WE use it” speech to the Land Use Leadership Council, which was actually calling for control over private property.
   Nor is it a surprise when a County Health Officer can use anti-smoking zealousness to gain support for usurping private property rights.
   After all, the writer of the 78 year old quote (above) also wrote, “the art of leadership consists in consolidating the attention of the people against a single adversary.” His name is Adolph Hitler, and his philosophy is quite adaptable to 21st Century America.

Barry

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Taxation and Finance ---- ‘03 Tax Bill — Breaks for Individuals

   Even though President Bush had been determined in his requests that Congress pass tax relief in 2003, it's hard to believe that we’re already looking at a new tax law again -- the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA '03). Given the fact that two major tax reform laws passed in the last two years and Congressional Democrats and Republicans seemed miles apart on more tax cuts, a third tax cut appeared impossible. Although President Bush did not get his entire wish list, JGTRRA'03 provides approximately $350 billion in tax relief--amounting to the 3rd largest tax cut in history.
   Although the timing may have come as surprise, it is a pleasant surprise that will give you and your family more disposable income this year and give you a smaller bill when tax time rolls around next year.
   As an individual taxpayer, the new tax law benefits you by:
* Lowering the rate at which you must pay taxes on both earned income and investment income, including income from capital gains and stock dividends;
* Providing relief from the alternative minimum tax;
* Providing greater marriage penalty relief; and/or Increasing the child tax credit, and providing a rebate check in ‘03 in the amount of the increase in the credit ($400 per child).
All of these benefits are temporary and many expire in ‘05. However, a future Congress could make them permanent. Many of these benefits are retroactive to January 1, 2003. Here's a more indepth summary of each of the benefits the new law will provide:
**Lowering marginal rates.
The tax law Congress passed in ‘01 put in place a phase-in of decreasing tax rates beginning in 2001 and ending in 2010. The rates scheduled to be effective for ‘03 were 10, 15, 27, 35, and 38.6 percent. JGTRRA '03 accelerates the rates that were not supposed to be effective until 2006. The new rates for 2003 (retroactive to January 1, 2003) are 10, 15, 25, 33, and 35 percent.
The new rates allow you to adjust the amount you have withheld from your paycheck to reflect both the retroactive and the prospective benefits of the tax rate. This measure alone will provide you with more money which you can choose to either spend or save. In fact, you could get a double break by taking this money at year’s end and investing it in an IRA or a SEP (if you are a sole proprietor).
**Expansion of 10% marginal rate. In addition to the across-the-board lowering of the marginal rates, JGTRRA'03 expands the outer income limits of the 10 percent tax rate in 2003 and 2004. The outer limit for the 10 percent rate for single taxpayers increases from $6,000 to $7,000. For married taxpayers filing joint returns, the outer limit for the 10 percent rate increases from $12,000 to $14,000.
**Increase child tax credit. JGTRRA'03 increases the child credit from $600 to $1,000 for ‘03 and ‘04. It also promises that those with eligible children will receive a rebate check in the amount of the increase in the credit ($400) in 2003. In 2005, the credit will fall to $700.
**Marriage penalty relief. Relief was enacted under the ‘01 bill, but had a delayed and phased-in effective date. JGTRRA'03 immediately increases the standard deduction for married couples filing joint returns to twice the standard deduction for single taxpayers for ‘03 and ‘04. In 2005, the standard deduction for joint filers drops to 174% of the single taxpayer standard deduction. Additionally, the new law accelerates expansion of the income range for the 15% tax rate for joint filers.
**AMT relief. For ‘03 and ‘04, JGTRRA'03 provides additional relief from the alternative minimum tax (AMT) by increasing the AMT exemption for married couples filing jointly and surviving spouses to $58,000 and for single filers to $40,250. Nevertheless, the principal reason for this relief is to balance out the tax benefits in that otherwise would subject many more taxpayers to the AMT. It does not solve the underlying problem that pushes a greater number of middle class taxpayers into the AMT each year. The immediate solution continues to lie in tax planning.
**Capital gains. For transactions occurring on or after May 6, 2003 through 2008, the capital gains tax rate is lowered from 20 to 15 percent. For transactions on or after May 6, 2002 through December 31, 2007, the capital gains rate is lowered from 10 to five percent for individuals in the lower tax brackets. The five percent rate falls to zero in ‘08. Certain capital assets, however, remain subject to the top capital gains rate of 28 percent.
**Stock dividends. For 2003-2008, the tax rate on qualified stock dividends is 15% for most taxpayers. For taxpayers in the 10 and 15 percent brackets, the tax rate on stock dividends for 2003-2007 is five percent, with the rate falling to zero in ‘08. However, major questions are developing over what corporate distributions will be considered "dividends" qualifying for the reduced rates. Many taxpayers, both corporations and their shareholders, will need to follow a set of complex rules under the new law in order to be safe.
**Going forward: To make the most of the new law, time is of the essence. Given the retroactive nature of most of the tax cuts, along with the temporary effective dates, many pitfalls exist for individuals who do not have a plan to follow. Contact your professional tax advisor to determine the effect of these changes on your individual situation.

R, P & T

Sewer and Water Update (from previous issue)

   As we reported the "8 month nightmare could soon be over"...then, as we posted at www.bamfhome.com last week, the County Board supported the Drain Commission's bonds for the Western Trunk line. So, it's just a matter of time until the moratorium's officially over. It could come as early as this week...so, check the website for updates!

Beyond Seinfeld: It’s still about "Nothing" in particular

Mass Mailers Beware: Who’s on that Mailing List?

  Several years back, a well known Free Press columnist with a strongly liberal orientation mocked a letter he received from a would be GOP presidential candidate. Why was he on the list? He was male, and in a Republican leaning zip code.
   Well, Veritas, the Builders Association and Barry are on an incredible number of lists, and some mailings are every bit as amazing. And, yesterday, there was an especially fascinating one from the American Advertising Federation, warning of the imminent “threat to Pharmaceutical advertising.”
   Now, for the past year, we’ve focused on rising health care costs in, at least, one article each month, and have frequently noted the disparity in prescription drug costs in the U.S., as compared to Europe (the claim was, we’re subsidizing European Socialism). And, we have often referred to the soaring expenditures on the most heavily advertised drugs, while making fun of their disclaimers (which almost always feature “may cause diarrhea”). So, could any “threat” to drug advertising be bad?
   Well, probably ... but the real question is, where will the “liberal” media come down on an issue that means revenue? It’s obviously “good” public policy, but has questionable philosophical issues, and even first amendment issues.
   Of course, the “liberal” media has a history of disdain for Fifth Amendment (property rights) issues ... So, do you think they'll follow suit on the "First?"

"Seinfeld" Briefs:

   In the June 3 issue, we told of our surprise that GOP legislator Mike Bishop got punched out on Mackinac Island, after 2:00 a.m. The shock, we noted, was that “we haven’t seen a Republican out after bars closed since the early ‘80s. (except for Patterson),” in reference to Oakland Co. Executive L. Brooks.
   Well, we were surprised that evening to find that Patterson was stopped for erratic driving, and many were questioning if this latest episode would bring about his political demise ... so, like the drug company disclaimers, we must say, no member of the Veritas staff was at the June 2nd golf outing with Brooks, and the note was merely coincidental. But, regarding his “political demise,” we have to ask, doesn’t competence count for anything?
# # #
   Have you ever noticed how everyone loves to declare “victory?” Yesterday’s Supreme Court ruling on U-M’s admission policies was a great example. The court allowed their “affirmative action” process to assure “diversity” at the law school, but shot down it’s undergraduate 20 point minority bonus. So, both sides were all over the TV screens claiming victory in principle. Go figure.

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Association News and Events by Laura

  

Reservations Now Available For the Builders’ Association’s Annual Golf Outing Tuesday, August 5th; at Woodfield’s “Captain’s Club” Four Person Scramble — 10:00 a.m. Shot Gun Start
As announced, we began taking tee reservations on June 2, as this annual event moves back to Woodfield for 2003.    Golf, cart, lunch, dinner, beverage carts, open kegs, numerous contests and prizes — still $100 per golfer. Limited to 36 foursomes (144 golfers) ... so act quickly so you won’t be left out! We’ve sold out six consecutive years.	Hole Sponsorships: As always, hole sponsorships include a contest with a prize at each sponsored hole. Cost is $100 if sponsor brings the prize; $150 if association buys the prize. Also, beverage sponsorships are available.    Call 810-603-2200 for reservations! Note: At the April 30 General membership meeting, John McMurray forecasted perfect weather for August 5, with the breeze always at your back!

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Economic Update: Employment, Employment; Employment

   Well, over the past couple of weeks, we found that housing starts remained strong, the index of leading economic indicators had a tremendous rise, inflation remained nearly non-existent, and we even experienced a mini stock market rally. But the report with the most impact on the overall confidence of the American consumer highlighted fears of an economic upturn without jobs.
   During the month of May the economy lost 17,000 jobs, far less than the anticipated loss of 39,000. But despite the better than expected data, the jobless rate rose to 6.1%, the highest in almost nine years (since July ‘94).
   Then, on the heels of the Labor Department’s May report, came release of a survey by “Manpower,” finding 2/3 of the nation’s employers don’t expect to hire any additional workers, while 9% plan to eliminate jobs during the 3rd quarter.
   The survey prompted an Associated Press article to proclaim this as the “worst job market since the early 1990s.” The survey further noted that “education and nondurable goods manufacturing sectors are facing the biggest impact, with the lowest employment levels in 20 years” (as frequently noted in this section, manufacturing jobs have been on a steady decline since mid 2000).
   And, with all this, comes the report in the Wall Street Journal regarding Medical costs, showing how workers have continued to pay more. Workers contributions to health care premiums have more than tripled since 1988, while out of pocket expenses for health care are up 26% since ‘95 ... and, what’s more, we’re finding that health care will be the major union focus in negotiations .... a situation that may make major companies even more reluctant to begin hiring large numbers of workers.

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Housing Industry Update - State Appreciation Near U.S. Lowest

   In 2000, Michigan ranked #8 on the Office of Federal Housing Enterprise Oversight’s (OFHEO) first quarter House Price Index (HPI) This year, the state ranks #46. And, for the 5 years leading up to ‘00, the state was a clear #1. For the past five years it’s ranks #18.
   From the first quarter of 1995 to the same quarter in ‘00, the state’s HPI was 60% above the nation’s. But since the start of ‘98, it’s 14.5% below.
   During that same period, “Flint” went from #20 (45% above the U.S. average) to #115 (28% below) of the 220 metro area rankings. And, both “Flint” and Michigan saw their five year HPIs fall 31% and 25%, despite plunging mortgage rates making homes significantly cheaper to own.
   Why? Primarily two reasons. First, Michigan’s home values got their affordability boost (the equivalent of today’s mortgage rates) from the property tax cut in ‘94. Prior to that point, Michigan’s prices were artificially low because payments, due to tax rates that were double the national average, were as high as those for homes that cost significantly more in most states. Now, the economy’s weaker in the state than across the nation as a whole, so the low interest rates have solidified prices, but there hasn’t been the surge that’s been experienced in the more populated areas of the country, particularly the coasts.
   Another factor, however, that hasn’t been looked at to any great extent, is the property tax freeze’s impact. A homeowner could have a home with a value of $200,000 and a “taxable” value of $140,000. If he moves to another home, he pays taxes at the new home’s price. But, if he’d refinance, he can take advantage of the low rates, keep the equity and, maintain payments at the restrained property tax rates.
   The point is, when it comes to purchasing a home, unlocking tax rates can offset the reduce the impact of low mortgage rates.

Housing Starts Rise in May

   Builders across America began work on 1.788 million units last month, up 6.1% over the April revision, as single family activity was up 1.5%, to 1.378 million. For the year, single family activity’s been averaging 1.391 million units, which is 2.4% above 2002’s year end record setting total.

Local Activity Strong in May

   After lagging through the early part of the year, building permits picked up in the Flint area last month. According to Housing Consultants’ report, Genesee County’s numbers for single family and condominium permits for the first five months of ‘03 are nearly identical to the same period last year.
   However, across the eight county region of Southeast Michigan, activity’s off by 2.5%, primarily due to a 15.2% decline in Macomb County. While the region is down by 206 units, Macomb is off 279 from its 2002 numbers.

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