Veritas

The first look at local housing activity for all of ‘99 came in this morning, with relatively no surprises. Housing Consultants’ year end data shows that every county in Southeast Michigan, except for Genesee, lagged behind their respective 1998 levels, as the region experienced a decline of 3.2%, which would have been doubled without Genesee County’s growth.
According to the Clarkston firm, which monitors building departments in the 8 county region, Genesee’s permit totals hit 2,453, with rental units responsible for 482. The single family and condo sector’s 1,971 units were definitely the highest the county has experienced since the early ‘70s, and continue the growth it’s been experiencing since the early ‘90s. Housing activity took a tremendous jump in 1994, following the passage of property tax relief in Proposal “A”, and continued its upward trend ever since, primarily due to the expansion of the Detroit area market.
Monthly reviews of Housing Consultants’ data shows the dramatic impact of that market as an ever increasing percentage of local permits are going to companies that are based in other counties.
Additional evidence of the Metro impact comes from the ever rising share of Flint area housing authorized within the borders of Grand Blanc and Fenton Townships. The 11% of the county’s area has seen its share of owner occupied housing activity rise from 28% in ‘96; to 30% in ‘97; to 34% in ‘98; and up to 43% last year. Furthermore, the southern 1/3 of the county saw its share soar from the 51% range, to roughly 65% in 1999.
Editor’s Note: A further analysis of activity will be coming in the next issue........also, look for the Flint Journal’s survey of permits this weekend.

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Downtown Ramada for Auction

Monday's announcement of the pending auction of the former Hyatt Regency serves as a reminder of the pitfalls of the insane government spending of the past, and how the U.S. is over $5 trillion in debt. In the early ‘80s, Flint’s salvation was tied to 3 projects financed with federal funds: The Hyatt at $31.5 million; Autoworld at $81.5; and the Water Street Pavilion ($29).
One was demolished, another sold for one dollar, and the third sold twice at a small fraction of its original cost. Of course, they were funded at a time when treasuries yielded approximately 11%, so what did these boondoggles really cost the American taxpayer?
Conceivably $630 million! At least if anyone’s holding 30 year treasury notes from 1980 that is! Not only did the government literally blow $142 million on the “holy trinity,” its debt cost the Treasury more than $16 million annually.
When these projects were proposed it was amazing how many “conservative” business men lauded the expenditures while casting disdain at those who saw through the emperors’ new clothes.
Unfortunately, the disastrous fiscal policy of the ‘80s may be on its way back, at least if one’s paying attention to the Bradley/Gore debates.

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Special interest beats another development

During the past couple of decades I’ve observed so many quality developments shot down by small, but extremely vocal, special interest groups, I’ve gotten to the point where I never expect reason to prevail in a contested local government issue. And, I’ve seldom been disappointed.
So, last Thursday night it was no surprise that the Grand Blanc Township Board overruled its Planning Commission, rejecting the proposed development for “Deer Park” that included K-Mart and Kohls, along with additional shops and restaurants. However, what was unique about this issue is that the primary opponents of the development spent $15,000 on a survey that suggested the Grand Blanc community was almost assuredly in favor of the development.
The land north of the GM plant between S.Saginaw and Dort Highway, zoned industrial, is home to some 22 deer. GM and the developer, Graimark-Walker, want it downzoned to commercial to accommodate the retail development, while the primary opponents want it to become a high tech, industrial park. Their survey asked “what development should be discouraged” on the site, and the answers were remarkably clear. The least desired use was its current zoning (35%) and the 3rd least desired was its current use (9.4%). Only 2.1% opposed a K-Mart, while 3% thought “commercial or retail” should be discouraged. But that wasn’t all. When asked what Grand Blanc lacks in comparison to the their “previous community,” 51% referred to shopping and 11% to entertainment. The only additional item that received more than 7% was friendlier people (10.3%). Furthermore, when asked what kind of development is most needed, 45% referred to shopping, restaurants and entertainment while only 3% said “industry.”
However, at last Thursday’s Township meeting, one of the leaders of Vision 2020, the group that commissioned the survey, argued that its results meant nothing, because anyone who attended the previous week’s meeting (when the results were unveiled) could tell that “the people” are against the proposal.
That’s right! Ignore the survey because it didn’t say what its sponsor wanted it too.
Throughout those twenty some years of seeing quality developments shot down because pressure groups claim to speak for the community as a whole, we’ve seldom had real evidence to discredit their allegations. This time we did! And they even provided the data that showed they were nothing more than a vocal minority, obstructing the will of the community because it doesn’t fit with their vision.
But it was still to no avail. When the final vote was taken, another needed development was shot down, and the community as a whole was th loser.

Barry

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Notes on Businesses and Industries Critical to Flint Area Home Building

Car sales may well be off a million units this year. That was the prediction of auto industry economists meeting in Detroit as this year’s International Auto Show was about to begin. However, a relatively mild decline from the record setting pace of 1999 is nothing to get down about.
Automakers sold 17.4 million cars and trucks last year, and no expects sales to fall below 16 million in 2000.
One point that was made by a number of analysts was the possible change in buying habits that could result from higher fuel prices. The influence of gas prices has been on a steady decline since the oil shortages of the 1970s, but Americans have been very cognizant of the impact of changes at the pump.

General Motors’ retailers announced the formation of an association in Michigan, primarily in response to growing numbers of grievances they’ve had with the nation’s number one automaker over the past several years. Some 200 of the state’s nearly 350 GM dealers have joined.
If you remember, the dealers and GM have been sparring, originally over advertising, then over a corporation plan to buy up some of its dealerships. This one could get sticky, particularly since dealers can build public support in their own communities and bring political pressure on GM in the state where it’s headquartered.

Flint’s most impressive industry may get a boost as former Detroit Piston Superstar, and current owner of the minor league Continental Basketball Association, Isiah Thomas, formally announced plans to bring a CBA team to the city next year. Now noted more for MSU’s “Flintstones” than Buicks, the city’s always had an abundance of basketball talent, and could probably put together a pick-up squad that would give most CBA teams a run for their money.
Actually, the CBA plays some pretty solid basketball and a number of its star players go on to successful NBA careers. So, this is one shot that could be a winner for Flint.

And finally, the downside to the fantastic economic growth of the ‘90s: The Worldwatch Institute says we’re heading toward environmental Armageddon because our economic trends are “bullish” but environmental trends disastrous. Apparently they failed to invest in internet stocks.
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The Seinfeld Section (it’s still about Nothing ; in particular)

Et tu Hollywood! Now even network TV is taking a shot at the President....this time from the left. In “West Wing,” the NBC drama show loosely based on the Clinton administration, President Bartlett, an apparent NEW Democrat, and his political advisors want to use the term, “the era of big government is over” in the State of the Union address. But Domestic Policy Chief, Toby Zeigler, portrayed as the administration’s conscience, convinces him that Government can do so much good and leads the President back to his liberal ideals.

The above note’s significance is evident when one observes the campaign to follow the president as the party’s nominee. Listening to Bill Bradley and Al Gore, it becomes obvious that, at least in Democrat politics, the era of big government is alive and well.
These guys are pandering so heavily to every Democrat special interest group, clearly going so far to the left, that they’re on the verge of undoing the semblance of fiscal responsibility that the Clinton administration brought to the Democrats.
From health care, to preschool programs, to free college, to city rebuilding, to farm welfare expenditures (particularly in Iowa), Gore’s and Bradley’s proposals would bust budgets faster than all the Republican tax cut proposals combined.
Amazingly, there is a candidate talking like a “New Democrat/Traditional Republican. His name is John McCain and he’s the only candidate of the major parties who talks about the near $6 trillion debt and the dangers of cutting taxes during an economic boom. Despite being contrary to current Republican dogma, his candidacy looks like a winner in New Hampshire, and he’s the only candidate currently positioned to win the general.....

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Association News Update Table Top Night; Builders’ Council; and more

Several new exhibitors are responsible for making the 3rd Annual Table Top exhibit night the biggest yet, taking advantage of the new opportunities available because of the move to a larger site. As we’ve announced since December, the 2000 event has been moved to Bonaparte’s in the Technology Center, (at Atherton and South Saginaw) and begins at 5:00 p.m. with light hors d’oeuvres, refreshments (beer, wine, soft drinks etc.) and the exhibits. The special buffet (burgers, hot dogs, pizza) opens at 6:30, as does the full service bar, and prize drawings begin.
As of today there are 31 tables reserved, and both six footers and eight footers remain available. Any company interested in participating should call the office at 603-2200.

In the January 4th issue we wrote about the reactivation of the Home Builders Council to unify efforts in response to the new industry challenges of the 2000s. Well, the first Council meeting is set for Thursday, February 17th, in the Association office at 3 o’clock. The agenda will include a number of topics, from collective marketing, to the labor shortage, to the declining number of building sites available to the small builder.
Furthermore, later this year it will be imperative that the council examine the new construction code which could be proposed for adoption later in the year.

Parade of Homes dates and additional details will have been set by the time you receive this issue (the meeting’s 1-20-00). We’re expecting to mail out all Parade contracts early next week to potential participants. If you’re planning on participating and don’t receive a contract next week and information sheet, give the association a call.
Also, Spring Housing Quarterly magazine advertising information will also go out next week, primarily to previous advertisers and new members.

The Manufactured Housing Institute (MHI) is offering local builders’ associations the opportunity to participate in an interactive telephone seminar on Tuesday, March 21st, at 2:30 in the afternoon. Topics include: Manufactured housing opportunities for builders/developers; the difference between the manufactured and site built process; and special challenges and benefits of using manufactured housing.
The seminar allows for questions, and includes written materials which we would distribute. And, we could offer it for a very mild price. If interested, give Barry a call at the association office.

Only one (April) sponsorship for General Membership meeting Social Hours remains open for the year. If you’re interested, call Laura at 810-603-2200.

Economic Update: Hot economy spooks market rates

Despite a season of tightening moves by the Federal Reserve, there’s little sign the economy has any intention of cooling. In fact, even factory orders, which had been on a three month decline, surged in November, indicating that demand for American manufactured products remained robust during the final quarter of last year.
Furthermore, while the labor market tightened even more, recent price data gave little cause for concern about inflation.
However, all is not rosy as market driven interest rates soared, as 30 year treasury yields rose from the 6.45% range to 6.75% (this morning’s opening, and the highest level since June ‘97) since the beginning of the year under fears of additional Federal Reserve action. And, although the higher rates of the past few months haven’t put a damper on interest sensitive sectors of the economy (like housing) to this point, there are legitimate concerns that their effect will soon be felt.

Jobs and Wages Soar
The nation’s unemployment rate remained at it’s near 30 year low of 4.1 percent last month, as the U.S. economy generated 315,000 new jobs in December, a full forty percent above analysts expectations. According to most analysts, the rise will assure another tightening move by the Federal Reserve when it meets again in February.
Still, job growth appeared to have slowed during 1999 as the economy created 2.7 million jobs, as compared to 2.9 million in ‘98.
However, the “Big Story” in the Labor Department report was the 6 cent per hour rise in the average wage, a 0.4% increase that was larger than expected. Since so much of December’s job creation related to temporary employment in the retail sector, with lower than average pay from an historical perspective, average earnings should have been restrained. However, the rise suggests that retailers were forced to pay more to entice holiday help.

Price Levels
None of December’s price reports indicate that inflation is becoming a problem. But there is evidence that some of the factors that have kept prices from rising during the past couple of years may be waning.
For example, import price levels, that fell 6.4% in 1998, were up 7% in ‘99. However, that was somewhat distorted since the rise was totally in response to higher petroleum prices. Excluding petroleum, the cost of imports was nearly identical to 1998.
The Consumer Price Index rose a mild 0.2% in December and 2.7% for all of last year. But except for oil prices, that too was extremely well behaved as the core rate of inflation for the year, minus the energy and food sectors, was just 1.9%, the lowest level in 34 years, and well below the 2.4% rise in 1998.
Wholesale prices were up 0.3% for the month, due also to energy, as the core rate’s rise was just 0.1%. 1999 was, however, the first year since 1996 that experienced a rise in the Producer Price index, up 3% for the year.

Factory Orders
Orders for U.S. manufactured goods in November rose 1.2% according to the Commerce Department, well above analysts’ expectations and representing the first rise in three months. The report pointed to inventory building as a preemptive move against Y2K problems, along with strong holiday sales expectations.
However, there was an apparent strengthening of overseas’ demand, particularly in the Far East, suggesting that, along with strong consumer activity, will lead the economy to a stronger than originally expected 4th quarter.

Housing Industry/Mortgage Market Update

Sales of new single family homes fell 7.1% during November to an annual rate of 865,000 units, well below analysts estimates. The decline was the largest in 23 months, according to the Commerce Department’s monthly sales data.
The immediate response to the report, suggesting that climbing mortgage rates were finally taking their toll on the extremely hot housing market, may have been premature. After all, the report came on the heels of the National Realtors’ data showing existing home sales up 6%, along with the fact that it followed a month when new home sales were up a solid 9%. Furthermore, NAHB reported its December Housing Market Index holding strong, with model traffic and expected sales running at exceptionally high levels. And, despite starts being down during November, permits were up, suggesting higher sales’ expectations down the road. The median price was up 5.3%, to $167,400.

Flint should have such problems! Last week Rochester’s City Council gave preliminary approval to an ordinance to place a three month moratorium on demolitions, in an attempt to give the city time to develop limits on “bigfoot” houses. (No, we’re not talking about keeping the abominable snowman out of the city.) Developers in some older suburbs, with solid real estate prices and few available lots, are buying up old houses, demolishing them, and putting up luxury models in their place. The trend increases property values, invigorates older neighborhoods and raises property taxes without causing an increase in governmental costs. So, who could object?
Well, some homeowners complain that the new homes overshadow their property, while others say they appear out of place in relation to the surrounding neighborhood, thus destroying its character.
This is the second time a similar situation has taken place as Birmingham was on the verge of passing an ordinance to stop building permits, but backed off when residents threatened legal action; .. a threat that’s also been clearly directed toward Rochester.

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