Veritas

   In the past year we’ve often referred to the 5 townships in the south and east sections of Genesee County (plus the city of Burton’s border areas) as hosting 60% of area new housing activity. So, it was hardly a surprise when local census data was released last month showing the collective population growth in the featured communities was more than 3 times greater than the county as a whole. The combined gain of 18,385 residents took the total population of the 10 municipalities in that area to 137,494, more than 10% above the city of Flint’s, and up to 31.5% of the county’s total. In the previous census, the ten municipalities collectively represented 27.7% of the county’s total population.
   According to Census data, a total of 16,933 new housing units were built during the ‘90s, but the county’s population just grew by a mere 5,682. So, for nearly every three new homes that were added to the tax roles, there was just one new resident added to the county.
   Resulting from this phenomenon has been a tremendous financial benefit to local units of government, particularly Genesee County, who’ve experienced soaring tax revenues without the necessitating comparable new expenditures. As is evident on the chart on page 1, a number of communities experiencing significant growth in their residential tax base had gains in population below one resident per new home. And the few that experienced a substantial rise in population, were mostly the communities with the highest price levels, and ultimately the largest rising tax base.
   For the past 15 years the Grand Blanc and Fenton areas led the county in new housing activity as the communities respective proximity to Detroit’s suburbs drew families north, supplementing a growing market originating locally.
   The population within the borders of Fenton Township jumped 26.3% during the decade, adding 5,497 residents, and Grand Blanc added 4,917 (14.8%).
   Combined, the two communities now represent 13.8% of Genesee County’s total population. 10 years earlier, they made up just 12.5%.
   To illustrate the impact of the combined growth, we can compare the two communities with the city of Flint. In 1990, Fenton and Grand Blanc’s combined population of 54,066 was 38.4% of the city’s. Now, under the current census, that figure’s soared to 51.6%.
   Although Fenton and Grand Blanc may show growth in the largest numbers, their neighbors Argentine and Atlas were the fastest by percentage. Argentine grew by 1,870 residents for a whopping 40.2 percent rise; while Atlas saw it’s population soar by 30.7 percent.
   Flint’s loss of 15,818 residents continues the trend of the city’s declining impact on Genesee County. It’s share of the county’s population, which was more than 50% in the 1960s, is down to 28.6% and falling. At 11.2%, Flint’s decline was the most visible in the county. However, it was not the only community losing population. What may be more significant is the data showing the city, along with the 4 townships it’s cut out from, losing a combined 15,056 residents.
   Flint’s area came out of the surrounding townships, Flint, Mt. Morris, Genesee and Burton. Of these municipalities, 3 combined for a net loss of 1,929 residents. That’s what makes Burton’s growth of 2,691 residents extraordinary.
   When census data is studied by Urban academics, they should focus attention on the city on Flint’s eastern border. As most close-in suburbs experience many of the problems faced by big cities, Burton has found a way to grow consistently with surrounding suburbs, rather than decline with the urban core.
   Two years ago we noted how its housing starts grew from 13.8 units annually in the 80s, to an average of 138 during the final half of the ‘90s. And told how its assessed property value soared 65% from 1990 to ‘98, to $545 million.
   While most older cities complain about declining population, and the loss of funding and political influence, Burton holds its head high in the knowledge that its efforts in the ‘90s reversed a 20 year decline and brought about a dramatic rise in population of 9.7%.

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Business News & Issues

   A few issues back, we noted that Toyota was looking at becoming the #3 American auto maker by the end of the decade. To do so, they’re going to have to appeal to a younger market, which they can’t even do back home. In Japan they’ve experienced a decline on their 20 something share from 45% to 30% over the past 14 years. And, they’re making little impact in the younger American market, since the average age of a U.S. Toyota buyer is 47 (love that Camry).
   So, the company’s looking at rolling out a large number of new models, aimed at youth, first in Japan, then possibly create a whole new brand, from the youth oriented cars, in America.

   Perhaps Toyota’s thoughts about a “new brand” stems from GM’s experience at its Oldsmobile division. No matter how hard the #1 automaker tried, it could not resurrect an attraction to the Oldsmobile name.
   There was little question that the highly regarded designs of the Alero, Aurora and Intrigue won plaudits from the automotive press. They definitely were “not your father’s Oldsmobiles,” and look like the “new generation” they were designed for.
   The problem is, it didn’t translate into sales, so the company basically gave up on the Oldsmobile brand. As BusinessWeek put it, “A stale brand almost always trumps an innovative product sold under the same name.”

Until March, NFIB’s monthly survey of its members showed no relief from the tight labor market. Last month, however, the survey’s share of respondents reporting that job openings were hard to fill declined from 32% to 26%. If there’s anything to be taken from this, it’s the likelihood that the large layoffs at larger companies are finally beginning to have an effect on the labor market in small business.
However, filling vacancies with qualified workers continues to rank as NFIB members’ second biggest problem .... And, it’s at a time that 27% of their business owners plan to expand employment (only 5% plan to cut jobs).

   Fiscal stability’s in jeopardy in the nation’s states, and perhaps the Federation as well. A couple of months ago we wrote of the growing fiscal crisis in Texas. More recently we read reports of a potential education funding problem in Michigan, as sales tax revenues plummet and income tax withholding subsides. Subsequently we read about several other states (most notably Tennessee) with serious sales tax declines. Then, Arizona reported winter income tax receipts were 21% below 2000’s level, and New Jersey’s budget board warned state revenues may be $1 billion below the Governor’s forecast.
   Well, a note on the Wall Street Journal’s front page last Friday says “uncle Sam’s tax withholdings are sluggish, so the surplus is likely to fall short of the (projected) $281 billion for fiscal 2001.”
   This from a Congressional Budget Office that can project surpluses ten years into the future?

“Take my house—Please!” opened a Wall Street Journal feature about the problems wealthy homeowners have incurred while trying to sell their properties. They’re apparently giving away incentives ranging from a “Baby Grand piano”, to a “vintage Mercedes,” to a “pricey art collection,” to entice buyers, as it’s beginning to become difficult to unload pricey real estate. Why a Fort Lauderdale couldn’t sell his home despite cutting the asking price by 29% (of course, who want’s to live in Ft. Lauderdale, let alone pay $12 million to do so?). The article noted that, “while the real estate market stays remarkably strong, there are some cracks in the luxury market, like:
¨ Greenwich (CT) where $1 -2 million properties sell like hot cakes, but brokers are nervous about Wall Street’s woes.
¨ Tiburon (CA) where homes in the $6 million range are hit hard.
¨ New York (10028); can’t afford a little something in the $2.5 to $8 million range? Don’t look here.”

   “Detroit’s inventory woes seem over,” according to a BusinessWeek article suggesting the auto industry is poised to “rev the economy.” It quotes economist James Glassman who says “after subtracting significantly from the economy in the past three quarter, vehicle producers are set to provide some healthy stimulus,” due to the recent reduction in industry’s inventory levels.
   Glassman noted that “in a typical cycle, stock levels can quickly turn excessive when sales slow, prompting sharp cutbacks in output to bring them into line with the lower demand. Once accomplished, producers must boost output and payrolls just to meet current demand, which he says is just “about to happen.”
   In February alone, auto industry inventory levels were slashed to a 67 day supply, from 90 days in January, and by the end of March, “automakers were planning to boost output by some 50% at an annual rate. That means, according to Glassman, that vehicle production should add 1.5% to the 2nd quarter growth rate, after subtracting a full point from the 1st quarter’s ... and that looks pretty good for second quarter GDP.

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Housing gets its due; but are “they” listening?

   In the “Economic Update” section of the April 2 Veritas was a note regarding housing’s impact on the current state of the U.S. economy, pointing to recent professional analysts’ statements crediting the industry for keeping the nation out of recession (normally, we’re credited with leading out of recession). The article quoted the most quotable of American economists, Mark Zandi, of Economy.com, who called housing the economy’s “bulletproof vest.”
   This issue’s column quotes St. Louis Federal Reserve President William Poole, who told a group of college students that the economy remained robust and a recession’s unlikely. His evidence? The current strength of the housing market “doesn’t fit a traditional recession scenario.”
   The evidence continues to mount. Everything we say about the impact of housing on the economy, be it national or local, is at least accurate, and perhaps understated. Yet housing remains the one critical industry that’s attacked more than aided.
   We can spend billions to bail out an ailing auto maker. Or billions annually to preserve the myth of the family farm; then additional dollars to keep the farm out of a productive industry’s hands. But for that productive industry that relates to some 4 million jobs, comes nothing but disdain for it’s environmental and alleged economic drain on local resources.
   We hope the nation’s leaders are listening to Mr. Zandi, Poole et. al. But somehow, we doubt if they are.

Barry

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

   Well, we made it through another “Earth Day,” and there were no reports of environmental terrorists (at least this side of Quebec) causing too many problems. However, there was the media, with a steady Sunday focus on arsenic levels, oil drilling in the Alaskan wilderness and off the Florida coast, carbon dioxide levels, global warming and even urban sprawl. Which brings us to ABC’s Sunday morning with Sam & Cokie (Sam wasn’t there).
   In the final segment where reporters and pundits discuss the issues of the day, George Will raised the issue of the environmental community’s preoccupation with Global Warming, then launched a series of scientific/environmental statements and headlines from the early and mid 1970s. And, what were they warning of? Preparation for the coming “ice age.”
   Then again, after the winter that’s hopefully concluded, perhaps those prophets of the ‘70s were on the right track.
   Then, of course, there’s Ron Dzwonkowski, Free Press editorial page editor, whose earth day message (from which we lifted the page 10 quote) called for making Michigan a “land-use model.” In his piece he lauded Portland (OR) for its growth boundaries noting all that city’s wonders from its high property values to its 25% population rise, “while its developed acreage grew by just 1.5%.” Of course, he forgot to tell that its lack of growth has caused an affordable housing crisis; its appreciation rate is far behind Detroit’s, as it’s stagnated as the housing shortage drove prices beyond income growth; or that its policies forced workers to find housing across the state line.
   But mostly Dzwonkowski doesn’t seem to understand that, with all the problems caused by growth boundaries, the benefit in comparison to “Detroit” is an average of 2.4 minutes shorter commute time.

From the home of ethanol comes “Breeze,” Iowa Senator Grassley’s bill to extend wind energy tax credits: Bipartisan Renewable Efficient Energy with Zero Effluent Act.

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Association News and Events: Meeting Takes on Greater Importance

The County’s Drain Commissioner, Jeff Wright, spoke on the new “capital improvement” charges on sewer and water taps at the April 11 General meeting, and clarified a number of misconceptions regarding sewer capacity and availability of tap-ins. Perhaps most important is the following: beginning May 1st (the date the county begins collecting $1,000 for sewer and water hook-ups), the Drain commission makes the decision on existing capacity, whether the municipality has available tap-ins, or not. In other words, those communities claiming to be out of available taps won’t be making the decision after May 1st.
Also, the commission is in the process of writing procedures which we’re expecting to have in the near future. If you have any questions, call Barry.

The parade is set to kick-off two weeks from this Saturday.All 42 entries are nearing completion (despite the rain), and the promotion begins with billboards the first week in May, as the TV spots open the week of May 6th. We’re emphasizing visual (TV and Billboards) this spring as we’ve changed the directional arrows to a brand new look.
Also, we’re looking at the first Housing Quarterly proof this morning ... look for the magazine’s mailing by May 7th.

The 2001 BAMF Directory is at the printer’s, and should be in the mail by week’s end.

Several members have taken advantage of the $500 cash back program. If you’re buying a GM truck or van in the near future, call for details.

Economic Update: Consumers are spending; but business?

   Talk about mixed signals! Retail sales fell, but so did inventories. Manufacturing remains week; but it picked up for the second consecutive month, while industrial production was strong. All after it was announced that Factory orders fell in February.
   On April 10th, four days after the announcement that the nation’s unemployment rate rose to its highest level in two years, two Federal Reserve Presidents, in separate speeches, told groups of college students that the U.S. economy was robust, and the chance of recession is no more than 25%. And, the odds are far better that growth will pick up in the final half of 2001. Then, one week later, the Federal Reserve issued a surprise 50 basis point cut in the Federal Funds’ rate.
   And, after GM, Ford and Chrysler reported weaker sales, analyst, we found it was the auto industry that led the rise in industrial production.

The Housing Factor
In the April 5th issue we wrote about housing as the economy’s “bulletproof vest,” noting how it’s been credited with keeping the economy from slipping into a recession as it’s the one sector that’s been apparently insulated from effects of the slowdown. Well, in his speech to students at a Tennessee community college, St. Louis Federal Reserve President William Poole’s agreed that growth for the first quarter was barely in the positive range, but noted that the current strength of the housing market “doesn’t fit a traditional recession scenario.”
As frequently noted, in the traditional scenario, housing begins to decline long before the rest of the economy. However, in the current cycle, housing had its best year when the expansion was in its eighth, and last year, along with forecasts for 2001, suggest there isn’t much slacking off. In fact, a recent forecast by the “Realtors” calls for record sales of new, single family homes.

Autos & Industrial Output
   In Poole’s speech, he pointed to quick depletion of vehicle inventories as a possible signal the economy’s poised to pick up steam. Well, a week after the speech came the Federal Reserve Board’s report that industrial production rose, unexpectedly, by 0.4% in March. The rise, which was the first since September, was led by the auto industry, which experienced a 7% jump in production as it restarted assembly lines due to lower inventories. Excluding autos, however, manufacturing output was down 0.1%.
   There’s little question that the manufacturing sector continues to contract. However, the index of the National Association of Purchasing Management rose for the second consecutive month in March, a somewhat positive signal, despite the fact that the data represented the eighth straight month of declining manufacturing activity. The index shows manufacturing’s decline since August, when its reading fell to 49.5 from 51.8 in July (a reading under 50 means manufacturing in contracting).
   From September ‘00 to January ‘01, the index was on a steady decline from 49.9 to 41.2. However, February’s rise to 41.9, followed by the March reading of 43.1.

Employment
   After four consecutive months of U.S. companies announcing more than 100,000 cuts in jobs, the March unemployment rate rose to 4.3%, its highest level in 20 months. For the month, the economy lost 86,000 jobs, after adding 400,000 during the first two months of the year.
   Despite the upturn in industrial production noted previously, the manufacturing sector lost some 81,000, bringing its total loss since June to 451,000.
   Shortly after the employment report came the Commerce Department’s announcement that retail sales fell 0.2% for March, while wholesale and retail price levels remained well behaved. The feeling is that these reports, along with U-M’s measure of consumer sentiment dropping again, led the Fed to issue its April 18th surprise cut.

Housing Industry Update

One year ARMs fell to their lowest level since August of ‘99 last Thursday, as Freddie Mac’s survey found the average rate for the week ending 4/20 was down to 6.08%. However, the average 30 year fixed rate rose for the fourth consecutive week, and is heading up again, since 10 year bond yields were above 5.2% by Thursday’s close.
The average fixed rate mortgage was 7.14%, ironically its highest level this year. The last time 30 year fixed rates were this high was late December, prior to the Federal Reserve’s first, of four, 50 basis point cuts in the Federal Funds’ rate.

Last week, we also received March’s survey of building departments from Housing Consultants, showing a decline in first quarter data for Southeast Michigan’s nine county area of 16.3% (20% excluding rentals). All counties experienced a drop in activity, with the exception of Washtenaw (+ 4.4%).
Genesee County was off just 2%, with 387 units, seven units below 2000’s first quarter, with most municipalities down moderately from last year. As has been the norm for nearly twenty years, Grand Blanc and Fenton Townships remained the county leaders, and were near their respective 2000 levels. The two townships that experienced the biggest rise over ‘00 were Vienna and Mundy.

CORRECTION! In the April 2nd issue, we told of legislation that would correct many deficiencies in the Builder complaint process (SB 351). At that time, we had information the bill had passed the senate. Unfortunately, it only came out of committee, and remains in the senate. (Update in next issue)

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