   There was considerable apprehension at the Builders’ Association office in the days just prior to the opening of the fall Parade of Homes. The news media was firing off a continuous barrage of terrorism and economic concerns, while realtors were reporting little or no traffic at open houses during weekends following September 11th. So, the morning of October 8th the association staff made a point of talking to Parade participants from each of the 4 primary areas where the event was taking place.
   In each case, they were told that that first weekend’s traffic was good to excellent, while the mood of the public seemed, at least, upbeat, and interested in taking advantage of historically low mortgage rates (in fact, a couple of sales were made off Saturday’s traffic).
   The following Monday, similar questions were asked, but this time, with far less apprehension. But the answers were equally as surprising, since we were told traffic was up dramatically from week one.
   Although we’re still not considered in a proverbial “comfort zone,” the subsequent reports from Housing Consultants, and the U.S. Department of Commerce as well, suggest that the market likely returned to normal shortly after the initial shock of the attacks. As starts were up across the nation, permit activity more than held its own in Southeast Michigan. Nationally, September single family starts were up, while locally, single family and condo activity edged a bit closer to 2000’s level.
   At the end of August, the region was down 5.4% from last year. By the end of last month, it was just 5.3% below ‘00’s level.
   Genesee County continues to lead the region, now up 16.2% from ‘00, and Washtenaw County’s now up 11%. Furthermore, Lapeer County’s activity took a big jump during the month, taking it from 6.2% below last year to 3.9% above.
   When we include rentals, the Flint area is still running 33.8% ahead of last year, with Grand Blanc Township more than doubling last year’s 3rd quarter total at 444 units, up from 178 for the first nine months of 2000. Another municipality showing exceptional growth for the year is Davison Township, up 59% with no multi-family rental, while Mundy Township is up 39.5%.
   The biggest falloff across the metropolitan area continues in Macomb County, with single family and condo activity down 22.7%, and total activity down 20.6%.

Business News & Issues

  As attractive as mortgage rates appear, nothing can top the automobile financing rates that are likely leading auto industry sales to a record October. After the first ten days of the month, a Ford sales analyst called the months’ activity “eye popping,” suggesting to a Wall Street Journal reporter that a 17 million unit rate for October may look like “chump change before we’re finished.” And the online auto seller “carsdirect.com” reported sales up 29% for the 1st week, in comparison with the 1st (before the attack) week of September.
   Although 0% financing is playing a major role in people flocking to showrooms and buying on the spot, it’s apparently not the only factor. Honda, for example, offering few incentives, said sales for the first ten days were outpacing its record sales of October 2000. And BMW is expecting to set a record for the year, based on its strong sales this month, despite not adding any new incentives since Sept. 11th.
   However, there are a number of analysts who believe people are jumping at this opportunity if they had any plans to buy a vehicle in the reasonably near future, meaning that when the incentive comes off, there will be a sharp downturn in demand that could set the industry back even further than pre attack figures would have suggested.

As you can see in the housing starts’ note on this page, building activity doesn’t appear to have been severely affected by the attack. However, sales’ data won’t be coming in until next week, so we don’t know if there was even a small blip in buying. We do know that the national home search website HomeGain.com reported that requests for real estate agents fell 15% from 9/11 to 10/8, however, requests did rise in the final weeks of the period. And, the Mortgage Bankers reported its index of mortgage applications fell 12% the first week of October, but still suggests rates of 4.9 million units per year.

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Most Important Parade: Ever!

   Over the past three weeks I’ve spent far too much time reflecting on the events of September 11th, because everything we’re involved with has been dramatically affected by the attacks’ collective impact. As noted on page 2, nearly every economist believes we’re in a recession because of them. And, the focus of the nation as a whole still seems directed toward the events of that day and the upcoming response, whenever it materializes.
   What’s been most trying, however, was preparing for the fall Parade of Homes. This is the first event in seventeen years when optimism is replaced by uncertainty. It may seem hard to believe considering we were only building around 500 homes countywide at the time, but during each parade since 1984 the local housing industry was on an upswing. And, quite frankly, that applied to this parade, at least prior to the second week of September.
   We also have to wonder how the public will respond to an event designed to promote the best in American lifestyles which, in reality, was the real target of the terrorists?
   Last night (Thursday) on the ABC News, Peter Jennings reported that more than 40% of Americans are still depressed from the attacks. But that’s down substantially from 70% a week earlier, which indicates the American psyche is healing quite rapidly.
   So, as we look forward to tomorrow’s parade opening, and the subsequent fifteen days, we may well be getting a good idea as to what we can expect in the near future.
   As is written throughout this issue, the housing industry was exceptionally strong at the local, state and national levels through the month of August. Furthermore, mortgage rates are down about 3/4 of a point since that time. So, there’s good reason to believe that reports of a soft market since September 11th could easily be of a temporary nature.
   That’s why we’ll be monitoring this Parade closely each weekend. It could well be an indicator as to how the market is responding to the shockof September 11.

Barry

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Taxation and Finance ---- Charitable Donations and Tax Deductibility

   n response to the recent tragic events, many people and companies have implemented relief measures in order to help out in any way possible. In this time of national crisis, it is important to remember that these donated items, while providing useful items to those in need, are also deductible on your tax return. Your donated items qualify for a tax deduction if you follow a few simple rules.
* You must be able to itemize your deductions on Schedule A of your tax return in order to get the tax benefit of donating items to charity. Don't let the fact that you can't itemize stop you from donating used items to charity. If you don't itemize your deductions, you can still clean your closets and donate to charity - you just won't see a tax benefit.
* To qualify for a tax deduction, you must donate the items to a charity that is recognized as such by the IRS. Typically the group to which you make the donation will both re-sell the items and give the proceeds to programs for needy people, or they will donate the items directly to the needy.
Places like the Salvation Army, Goodwill, and various veterans' groups are obvious choices and these groups are often willing to come to your door to pick up donated items. Churches, schools, libraries, and hospitals are other good outlets for your donations. If you are uncertain if your donation to a particular group qualifies as tax deductible, just ask. Members of the group will know if the group is able to authorize tax deductions.
* Document your donated items. It is a pain, but take the time to make a list of all the items you donate. You don't have to be terribly precise: "One red shirt, one blue shirt, two yellow shirts," is a bit of overkill when "Four shirts" will do. But "Three bags full" is not specific enough.
* Get a signed receipt from the charitable organization to which you donate. The receipt should include the name and address of the organization, the date of the donation, a general description of the items donated (here's where "three bags full" is an appropriate description, as is "clothing and books," "4 boxes of household items," and so on). Also, the receipt should contain a statement that you received nothing in exchange for your donation. The IRS requires that you obtain a receipt if the value of the items you donate is $250 or more. Even if the value is less than $250, it still is wise to keep a receipt for your records. The receipt and your list of items stay with you - they do not get attached to your tax return.
* The final step in the donation process is valuing your donation. Figure out how much the donation is worth so you'll know how much you can take as a tax deduction. Used items are rarely worth as much as you expect. Cast off items face a heavy markdown in the resale market. Even items you purchased new and never used are going to be marked down to resale prices in a second-hand store. Your donation value is the price the items will fetch in the resale market. Garage sale prices are fair indication of the amount you can deduct. Visit indicators of the amount you can deduct. Visit resale shops, like those run by the Salvation Army and other groups, to get a good idea of the worth of your items.
   There are geographic differences when it comes to pricing items for resale. For example, second hand shops in larger metropolitan areas may charge more for items than those in rural areas. Also, the quality of your items should be considered when making a valuation. A threadbare sweater will be worth far less than a new looking fluffy sweater. Pants with a tear will be outpriced by those that are intact.
   In addition, your tax advisor should be able to provide you with information relevant to valuing your donated goods.

R, P & T

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Anti-Sprawl issues take ‘back seat’ to economics

There’s been a noticeable concern across the nation regarding falling tax revenues, not only at the federal level, but at the state and local levels as well. Falling governmental receipts had been a focal point for the past several months, but have received considerably more attention since last month’s terrorist attacks as the already slowing economy was considered to have clearly fallen into recession.
   One interesting consequence of the resulting budgetary concerns has been, what the Wall Street Journal calls, “reshaping of the debate over controlling development.” Noting “fears of recession trump urban-sprawl issues,” a WSJ feature focused on growth management issues losing their luster as the primary concerns of fast growing states.
   For example, it tells of Arizona, where “controlling growth has consistently ranked among the top concerns in pubic opinion polls, the issue has all but lost its urgency in the wake of rap-idly deteriorating revenues and a projected budget shortfall of $1.6 billion.” And, in Colorado (which had population growth of 30% during the last decade), where growth’s impact “domi-nated politics for more than a year, growth control measures were to top the agenda in a special legislative session set to end last week. But those issues were immediately overshadowed by news of projections for a $264 million revenue shortfall.” (Note: both states had Sierra Club initiated growth boundary referendums in 2000).
   The article explains, “growth management is clearly moving down on states’ priority lists as the economy moves up.” Pointing again to Colorado, it quoted a Denver based Political Consultant who said that, up until a few weeks ago, “anti-sprawl measures were certain to dominate next year’s state election.” But “no longer,” he said, noting that there’s been a turn of “180 degrees in a matter of weeks. We were debating growth,” he told the Journal, “but now we have to start worrying about jobs and economic development.”
   The article continued on to explain how Arizona’s environmentalists lost the initiative in trying to forge a consensus on their concerns and “even in Oregon (the poster child/state for anti-sprawl activists) the slow growth movement suffered a setback,” as voters passed a measure requiring state and local governments to compensate landowners for losses in property values due to regulatory restrictions.
   Most interesting is how elected officials seem to focus on sprawl when fighting it IS popular. However, at a time of fiscal crisis there appears to be a realization that development isn’t draining state budgets but, in fact, enhancing fiscal stability.

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

Hardly a short list of Suspects
Regarding the first of the “an-thrax” scares, were it not for the timing, it would almost be laughable as David Pecker (his real name), the CEO of American Media Inc, the publisher of six supermarket tabloids, said he thought his company was being “targeted.” Pecker was on the CNN “Larry King Live” show last Wednesday concerning the anthrax contamination at his company’s Boca Raton offices. At roughly the same time as his CNN appearance, Federal Officials announced a “criminal” investigation is underway.
Well, if they’re looking for motive, they don’t have a shortage of potential suspects, starting with Tom Cruise, and moving on to Nicole Kidman, Prince Charles, Oprah, and even New York’s Junior Senator.

Lawyers and War
   What they do to us domestically is bad enough, but less than a week into America’s military actions in Afghanistan, Lawyers are already screwing up the mission. Word came out over this past weekend that we had the Taliban leader in our sights, but the Judge Advocate General Officer (JAG) on duty said it was illegal to kill him ... so, an opportunity was missed.
   Interestingly enough, an article in one of the Detroit papers last week told of JAG recruitment at Ava Maria Law School (the school created by Dominos Pizza’s Tom Monaghan to develop a legion of Lawyers with morals). The article noted that lawyers are everywhere in the military, and even accompany special operations’ forces on critical missions (we would assume that would include arrest of terrorist leaders).
   Well, it’s rather obvious that we need to keep moral lawyers at home, and send the “usual” types to the front lines.

Baseball Truly Dead as America’s “Passtime”
Despite what relics like George Will may say on ABC Sunday morning, if you needed further evidence that Baseball is dead in America, look no further than the television ratings this past Monday.
With the world champion New York Yankees fighting their way back from elimination (down 2 to 0 in a five game series), Fox was broadcasting the decisive fifth game. At the same time, ABC’s “Monday Night Football” featured Dallas v. Washington, arguably the two worst teams in the National Football League in a game that football analysts had been mocking throughout the previous weekend. Well, ABC’s rating was 13% below its Monday night average, but still beat baseball by nearly 18%, or roughly 1.6 million households.

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Association News and Events -- BAMF 2002 elections; Parade Concludes

   The Association’s Past Presidents’ Council met this past Monday and nominated a slate of candidates for directors and officers in 2002. The elections will be held at the November 1st General Membership meeting. At that time, additional nominations can be taken from the floor on a motion and second by any “member” of the association.
   This year, there were eight vacancies, due to recent resignations from the board, along with expiring terms. To begin, “builders” Andria Auker, Steve Lissner and Mark Nemer were nominated to fill their own expiring (2 year) terms. However, there were two additional openings for “builders,” due to the resignations of Al Kurmas and Dave Johnson, as both had one year remaining. Nominated to fill those were Dave Crawford (HRC) & Randy Haney (American Associates).
   Bob Vance was nominated to fill the expiring "Associate" term he currently holds, while Scott Sharp (S & M Lumber) got the nomination for the other Associate vacancy. Current director Vic Lukasavitz, who also is the Chairman of the Land Development Council, was nominated as a subcontractor director.
   After making the Directors’ nominations, the former Presidents focused on Officers, and nominated the following:

President - Steve Edwards

1st Vice Pres. - Steve Lissner

Treasurer - Larry Corbett

Secretary - Mark Nemer

Bob Vance is currently in the middle of a two year term as 2nd Vice President.
As the Association By-laws dictate, we will first elect directors at the meeting, then follow with the Officers, at the November 1st General Membership meeting.

The Parade of Homes concludes this weekend and, as noted in the lead article, was an exceptionally important event this year as it alleviated some of the market concerns that rose up after September 11’s events. At the November 1 meeting, we will be presenting the “Parade Awards,” and we wish to congratulate the following winners.

Economic Update: Why “recession” should be short ...

   Two weeks ago, the focus of this column was directed toward the aftermath of the September 11th attacks on America, and their impact on the economy. As we noted at the time, nearly all professional analysts believe the events of that day drew the nation’s economy into a recessionary period, at that recovery wouldn’t likely come until the middle of 2002. However, there were a number of signals that a turn-a-round may come earlier than expected, based primarily on the need to replenish low inventories and low financing costs.
   Well, the more optimistic conclusion has been enhanced by even lower interest rates and booming auto sales. Even the early reports on last month’s housing activity, nationally and locally, shows little impact from September 11th. Even hotels have recovered much of the ground they lost immediately following the attacks. And, we’re finding an apparent bonus from lower energy prices that are increasing the purchasing power of weekly paychecks.
   But, perhaps more importantly, there’s also a relatively unique situation regarding the Federal Government’s capacity to stimulate the economy, which points to a mild, and ultimately short, recessionary period, barring further shocks to the nation.
   Even prior to September 11th, slower economic growth had many in Washington focusing on stimulative economic policy. In the past month, that focus has intensified dramatically. And, unlike in previous downturns, the federal fiscal balance allows for a myriad of governmental options, with minimal effect on the its financial stability. Last week, for example, the House Ways and Means Committee, on a strict party line vote, approved a $100 billion tax stimulus bill (too high for the Bush Administration) as a trial run. And, big spending programs are gaining strong support with Democrats, and some Republicans.
   But with cooler heads concerned about long term budgetary problems (in both the administration and Senate), a package of stimulus legislation that combining tax benefits and short term spending will likely run in the $70 billion range which, on top of the nearly $40 billion in tax rebates which are currently in process, should impact economic growth at a rate of more than 1% of GDP.

Economic Notes:
More on inventories: down 1.1% from August ‘00 to 8/01. However, they’d be down substantially more, were it not for a 0.6% rise in auto inventories (which are now selling at record rates) ... Retail sales plunged 2.4% in September, the biggest drop in nine years. However, as we noted 2 weeks ago, sales were already returning to normal levels within a week of Sept. 11. Also, they were only down 1.6% when excluding automobiles (which are now setting records) ... And, there was a surprising upturn in consumer sentiment according to the U-M October survey, which saw a nearly 2% rise from September (and nearly 10 percent above economists' forecasts).

Housing Industry Update

California’s new water
  California’s population’s growing at a rate of 600,000 people per year. And, the state already has, by far, the least affordable housing in America. So, what does the government do to remedy this housing crisis? It passes new legislation that limits housing development, by mandating that all developments with more than 500 homes show that “ample water” exists to support them.
   Governor Gray Davis lauded the bills at their signing, noting they provide a “foundation for developing state water policies to meet future water needs.”
   The measures, that go into effect January 1, require verification of “ample water” to obtain a construction permit, and require “planners” to assess water needs before issuing a permit. Sounds reasonable, but California’s water supply is so dependant on Sierra Nevada mountain runoff and Colorado River levels that its availability varies drastically from year to year. What doesn’t vary, though, is demand for housing. Perhaps Governor Davis should take note from Caesar, and use those new migrants to build an aqueduct.

Another farm payout
We’ve written so much about farm subsidies in the past few issues, we couldn’t resist this note from the Flint Journal last week: “Agricultural landowners can apply for a new program to pay them not to farm in Genesee, Lapeer and Shiawassee counties." The short article told of USDA plans to offer farmers the opportunity to take portions of their farms out of production for 15 years, in an attempt to cut down on chemical and sediment runoff from farm fields.
A call to the Genesee Conservation district office resulted in the opportunity for Farmer Simon to earn $54,000 to pull his land along the county drain out of production. But there was no benefit if he converted that land to housing ... Oh well.

Look Here for Previous Issues of Veritas

Parade shows little fallout from Sept. 11 Housing Consultants’ data suggest little impact from 9/11

Most Important Parade: Ever!

Taxation and Finance ---- Charitable Donations and Tax Deductibility

Anti-Sprawl issues take ‘back seat’ to economics

Association News and Events -- BAMF 2002 elections; Parade Concludes

**Parade shows little fallout from Sept. 11 Housing Consultants’ data suggest little impact from 9/11**