October 8, 2004

Inside Veritas -
Article 1 - Strong September Auto Sales Tempered by Incentives; Share
Article 2 - Appeal of a Code Ruling
Article 3 - BAMF Director Nominations
Article 4 - Taxation and Finance - IRS Rules: Child Tax Credit
Article 5 - MAHB Warns on Coming Energy Code
Association News Update From Laura
Economic Update - Manufacturing/Economic Growth
BS: Still about Nothing in particular
Housing Industry Update
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Strong September Auto Sales Tempered by Incentives; Share

 On the surface, GM had a phenomenal month in September, with sales up 24.9% over Sept. ‘03, and its largest share of the domestic market in recent memory. However, tempering GM’s incredible data was the fact that it was brought about by incentives totaling as much as $6,000 per unit.
More critical is the fact that after 3 quarters of activity, GM, and the rest of the U.S. industry, continue to lose their share of the domestic market. Despite the exceptional sales activity in September, “Big 3” sales are down 1%, to 59.1% for ‘04. Japan’s, on the other hand, have seen their collective share rise 1.2% (to 30.2).
While GM is down slightly, and Chrysler actually up 0.3%, Ford’s sales have plummeted and it now has 19.7% of the market. Toyota’s now up to 12.1%, nearly 1% above its rate in ‘03, while Nissan’s gained a full percent, for the second consecutive year. And, Toyota’s just 2.2% short of becoming #3 in U.S. sales. It was 2.8% below Chrysler a year ago.

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Appeal of a Code Ruling

In a discussion of the current (2003) building code, the question of grounds to appeal a decision by the enforcing authority was raised. Obviously, one can appeal to the “Board of Appeals” if the code is incorrectly interpreted or, if its provisions shouldn’t apply in a particular incident. However, what several builders weren’t aware of is that an “equal or better form of construction” can be substituted for a provision of the code. Of course, the burden of showing a form to be “equal or better” is on the builder who files the appeal.

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   BAMF Director Nominations

  With no November meeting scheduled, we need to elect directors and officers for 2005 in October. So, the following nominees will be up for formal election to the board on October 20th:
Builders
Dave Crawford
Randy Haney
Keith Kirby
Steve Steffey
Associate
Doug Graham
Subcontractor
Dan Fralick
Financial Institution
Larry Corbett
Officers:
President — Dave Crawford
1st V. P. — Steve Steffey
Treasurer — Larry Corbett
Secretary — Ted Macksey
(2nd V.P. Bob Vance is in the midst of a 2 year term)

**Any Member of the Builders Association of Metro-Flint can be nominated for a position (providing he/she meets qualification) with a nomination and second from the floor.
Note: Dave Keene; Scott Sharp; Mark Nemer; Macksey; Vance have one year remaining in their current terms.

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Taxation and Finance ---- IRS Rules: Child Tax Credit

  In order to claim a child tax credit, you must have an eligible child who is your child by birth, your step-child, other descendant, or eligible foster child. Your qualifying child must have been under the age of 17 at the close of the tax year. For example, for the 2004 tax year, your child must be under the age of 17 as of December 31, 2004.
For 2003 and 2004, the credit is $1,000 per child each year. (The 2001 tax legislation had not scheduled the child tax credit to increase to the $1,000 level until 2010, but Congress in May 2003 accelerated the $1,000 amount to apply immediately for this year and next. In 2003, most taxpayers received the $400 increase from a $600 to a $1,000 credit in the form of a refund check sent in July-August of 2003.) For 2005 - ‘08, however, the credit will drop to $700, unless raised again by Congress.
The child tax credit reduces the tax on income dollar-for-dollar and, therefore, is considerably more valuable than a tax deduction. For those low-income taxpayers without enough tax liability to cover the $1,000 per child credit, a portion of the credit is refundable. High-income taxpayers, however, may find themselves excluded from the benefit of the credit because of an adjusted gross income (AGI) cap placed on taxpayers eligible for the credit.
Married taxpayers who file jointly and who have an annual modified adjusted gross income of more than $110,000 lose $50 of the credit for every $1,000 above $110,000. Likewise, single taxpayers with annual modified adjusted gross income above $75,000 lose $50 credit for every $1,000 above $75,000.

Single Business Tax Health Care Benefits’ Costs’ Deductions

As you may know, Michigan recently passed legislation that allows a portion of any payments made for Michigan resident employee health benefit plans to be removed from the single business tax base. As a result of this development, your Michigan single business tax liability may decrease.
The deduction is equal to a phased-in percentage of the amount of payments you make under health and welfare or noninsured benefit plans, as well as any payments you make for administration fees for such plans, according to the following schedule:

R, P & T

MAHB Warns on Coming Energy Code

“GET THOSE PERMITS NOW!" .......... "As we've warned in the past, the state intends to mandate the International Energy Conservation Code beginning January 1st, to replace the Michigan Uniform Energy Code.

When this goes into effect, wall insulation requirements will jump from R-13 to R-21; roof/ceiling requirements will climb from R-30 to R-49; Windows will go from R-1.9 to R-2.85; and R-11 insulation will be required on all basement walls.

The 'Granholm energy code' will be challenged in court, as MAHB will file suit on January 3rd. IF YOU ARE BUILDING DURING THE FIRST QUARTER OF '05, THE MAHB IS ADVISING YOU TO PULL ALL YOUR NECESSARY PERMITS BEFORE DECEMBER 31st, 2004. THIS WILL ALLOW YOU TO BUILD UNDER THE CURRENT CODE WHILE THE LAWSUIT IS BEFORE THE COURT."

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

 Capitol Hill: New Set for the “Simple Life?”

If you missed this in Housing Quarterly: Chris Wallace, on Fox “News Sunday,” said it was news you won’t hear anywhere else. And, judging by the show’s local ratings, it must still be “News” to just about everyone the county.
On September 19th Chris (not to be confused with his father Mike, of ‘60 Minutes’ fame) reported that the network’s entertainment division had contacted the offices of Senator Rick Santorum (R-Pa) and House Speaker Dennis Hastert about placing it’s “reality” stars, Paris Hilton and Nicole Richie, as interns in congressional offices.
While the 2 Republicans reportedly rejected the idea,we can’t help but think there’s clearly a place on Capital “Hill” for the talents of the “Simple Life” duo who, in previous episodes, survived life in rural Arkansas, and during a trip from Florida, back home to Beverly Hills, merely on wit, intellect and charm. No credit cards; no money!
They begged, borrowed, and deceived their way through the first two series’, building the perfect resume for Washington. “Simple Life: Capitol Hill!” It should be the ultimate reality adventure.

"Seinfeld" Briefs:

More people may get their news from Peter Jennings (ABC) than “from any other source,” but it’s Jon Stewart’s anchor desk that educates American’s best. In a recent survey, viewers of Stewart’s “Daily Show” (11 pm on Comedy Central) tested better than viewers of Leno and Letterman on a six question political quiz .. and, viewers of all three shows tested better than the general public.
While 60% of Stewart’s audience answered all questions correctly, only 42% of those who read newspapers (and 40% of those who watch network news) regularly aced the test. “Comedy Central: where more people SHOULD get their news than from any other source.”
# # #
Well, sprawl may be bad for your health, but gambling makes senior citizens healthy. While the Rand Corporation blamed sprawl for health problems (a recent Flint Journal article), a Yale study discovered that “older gamblers seem healthier than non gamblers.” In a survey of 2,400 people, Yale found that gamblers 65 and older were in better health than their non gaming peers (and amazingly, there’s smoke in them there casinos).

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Association News and Events by Laura

  

New Members' Applications Received Filpansick Contracting, Inc. Charles Filpansick Sponsor: William Teep Rowe Incorporated James J. Fink Sponsor: Larry Corbett Loyer Builders Andrew Loyer Sponsor: Tim Glavin   Membership Meeting Wednesday, October 20th at Bonaparte’s Drinks & hors d’oeuvres at 6:00 p.m. Program begins at roughly 7:20 p.m. Sponsored by James Lumber The agenda for this meeting includes a presentation by Yeo & Yeo: “Is your business vulnerable to Fraud?” We’ll also elect directors for ‘05 ... And, regarding the helmets on page 1? Though the meeting’s 10 days before the “Big Game,” anyone wearing U-M or MSU clothing, will be entered in a special drawing for a gift certificate from the Great Divide

GENERAL MEMBERSHIP MEETING By the time you receive this issue, the Fall Parade will be off and running. The area’s been bombarded with television ads and it’s difficult to drive local expressways without running across Parade billboards at least twice on each trip. Between the phone calls, people coming in to pick up Housing Quarterly magazines, and web site traffic that’s exploded since Wednesday (over 7,000 page views in the first two days alone), we know that interest in new homes remains strong, and anticipate an exceptional event. Remember, the Parade runs through October 24th. Take the opportunity to see your industry at its best. # # # Regarding Housing Quarterly: If anyone wants extra copies to distribute at their business, we’ll have plenty at the General Membership Meeting. If you can’t make it Wednesday, you can stop by the association office. # # # We noted how traffic at the web site’s been exceptional with the Parade promotion on. What we haven’t noted in recent issues has been that normal traffic (exclusive of May and Oct. parade months) has more than doubled in the past year, and we’re receiving around 800 hits and 450 page views each day. You may want to take advantage of the increased traffic...for starters, if you have a web site and you’re not linked to bamfhome.com, call Tracey and ask about linking to us.

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Economic Update: Manufacturing/Economic Growth

The nation’s manufacturing sector has been showing steady growth in nearly every month since late 2001. However, that growth never resulted in, even the slightest, upturn in sector jobs until this past March. In reality, despite the continued recovery, manufacturing lost 1.4 million jobs from the end of ‘01 to early ‘04 (3.8 million since the end of 2000).
So, it’s somewhat significant that the sector has been experiencing a slight upturn in employment this year, slightly over 100,000 jobs from January to August. But what seemed to go unnoticed with last month’s report was something equally significant: It was the first time since August 2000 that manufacturing jobs were more plentiful than they were 12 months earlier.
Which brings us to September’s manufacturing activity report from the Institute for Supply Management, showing that the sector was continuing to grow, though not as fast as in recent months. The Purchasing Management Index fell to 58.5 (any number above 50 means the sector’s growing), a slight decline from July and August. But, its employment index jumped to 58.1, up solidly from August when it fell to 55.7, representing the 11th consecutive month of growth (after 37 consecutive months of decline). As we noted this past spring, several months of a positive ISM employment index is expected to show up in the Government’s jobs’ data. And, it finally began to materialize in spring.
With the exception of a small blip in June, manufacturing jobs have been on a steady rise for six months, and sector jobs are up roughly 80,000 for the year, despite a small decline last month.
However, the ISM also makes a point that historical data suggest the economy should be growing faster than its recent rate. According to the Institute, “the average index through September (61.5%) corresponds to a 6.8% rise in real Gross Domestic Product.” Yet GDP rose 4.5% in the first quarter, while the second quarter was recently upgraded to 3.3%.
So, why isn’t economic growth in line? Well, it’s quite obvious that manufacturing (while critical in Michigan) doesn’t have the “historical” impact in the 21st Century. To put this in perspective, look at the nation’s employment.
In August ‘98, there were 17.6 million employed in manufacturing, making up 13.9% of the workforce. This summer’s 14.4 million manufacturing workers represented just 10.98% of U.S. Jobs. During the same period, actual construction jobs climbed 0.7 million, and now represents 5.3% of the nation’s jobs, nearly half of manufacturing’s numbers. In ‘98, constructions numbers were just 35% of manufacturing’s.
So, as with so many aspects of the economy, manufacturing has become far less relevant in recent years. Unfortunately, that’s just not necessarily true in Michigan, particularly in the southeast region.
The economy grew faster in the second quarter than originally estimated, as Gross Domestic Product was revised upward late last month. A downward revision in imports and upward revisions to inventories and exports were primarily responsible for bringing the economic growth from the originally reported 2.8 percent to 3.3% (1st quarter GDP was at 4.5%). As consumer spending rose a mild 1.6%, business spending was up a solid 12.5%, and inventories jumped by $61 billion (the $3.4 billion above the original estimate was responsible for a 0.78% upward movement in the GDP), which was 52% higher than in the first quarter.
# # #
The Census Bureau reported that the number of Americans living in poverty rose to 35.9 million in ‘03, up 1.3 million from 2002, and now makes up 12.5% of the nation’s population. It also reported the number of Americans without Health Insurance jumped 3.2% during the year, meaning that 45 million Americans are without coverage.

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Housing Activity Update: Notable List on Metro Home Prices

  We write so much about record breaking sales and starts’ levels in this column, it actually reminds’ us of the proverbial “bro-ken record.” And, there’s little change in that verbiage this month, as starts were near 1.7 million, new home sales at nearly the 1.2 million unit level, and existing sales remained at a level above 6.5 million in August, all well above 2003’s record setting pace.
But before we get into housing data, we want to make note of a “Money” feature on Coldwell Banker’s House Price Comparison Index, examining 300 metro markets.
Coldwell looked for a 2,200 square foot home (4br; 2.5 baths) in a neighborhood that’s “typical for corporate middle-man-agement transferees.” They found a variance in prices from $1.7 million in La Jolla, CA, to $130,300 in Minot (ND), with the latter being more surprising than the former. But what caught our eye were the variances in Michigan, that ran from $340,000 in Ann Arbor, to $145,000 in Cadillac.
While Metro Detroit’s price hit $282,480 and Auburn Hills/Lake Orion was at $260,166, the rest of the notable areas in southern Michigan (Jackson, Lansing & “Metro Flint/Grand Blanc) were between $236,150 & $240,500.
The real surprise was Grand Rapids, where the price for the “typical” home in question was only $199,700. In other words, eastern and central lower Michigan’s realistic housing costs are roughly 22% above the primary western metro area. Furthermore, the Tri-Cities came in at $219,500, 10% higher than Grand Rapids’.

Housing Starts

Through August, builders began construction on 1.3 million new homes, up 10.4% from last year’s level. However, 1.1 million were single family, which is up 12.3% from 2003’s record breaking start.
As evident in the chart at the left, activity’s been running in the 1.6 million unit range since the beginning of the year, practically assuring the third consecutive single family record.
Locally, we find single family/condo activity up 11.2% in Southeast Michigan, while the Flint area’s up 3.7%, according to Housing Consultants. While Grand Blanc Township continues its top spot in the county at 200 units, the Festoon area (city, twp. & Linden) are at 279, clear-ly the strongest 36 sq. miles in the area.

Home Sales

As you can see to the left, new homes continue selling above their record pace. Y-T-D, sales are up 82,000 units, or 10.8%.
The rate of existing home sales remained above 6.5 million for the 5th consecutive month (over 6 million for 14 months). They’ll assuredly break the 6.1 million record set last year.
On another note, the median price ($190,100) fell for the 2nd consecutive month.

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