Veritas

   Through the third quarter of the year, new housing activity in the Metro-Flint area is running at its 2nd fastest pace in nearly three decades. However, it’s also running well below the, modern day, record pace set a year ago.
   Whether we look at U.S. Department of Commerce data, or the survey by Housing Consultants of Clarkston, total permits issued in Genesee County are down nearly 20% for the first nine months, while regional activity is off approximately 8.6%.
   What’s interesting about the 3rd quarter data is that, apparently, housing activity is rising in the rest of the state. According to the Commerce Department, Michigan starts are down just 965 units for the year, while “Detroit” area activity (including Flint and Ann Arbor) is off 1,862 units, nearly double the state’s decline.
   Nearly all counties in Metro Detroit are experiencing declining numbers, as only Livingston County showed any appreciable gain through the nine month period.
   However, there was one area at the southeast corner of the region that experienced a year to date rise of 40%. Monroe County, a recent addition to Housing Consultants coverage area, issued 828 permits since January, up from 593 in 1999. What’s fascinating about the area is that it’s been experiencing growth as a Toledo suburb since the mid 1990’s, likely attracting families tired of being labeled losers on the final Saturday of the Big Ten season.
   As is evident from the chart below, when we eliminate large multifamily buildings (primarily rental units), the drop in “Flint” area activity is far less severe. In fact, according to Department of Commerce data, the Genesee County section of the Metro Detroit area’s decline was just 130 units in comparison to 1999, which brings us to another item we’ve frequently noted since early summer: Holly Township.
   On the southern border of Genesee County, Holly continues to show the strongest rise of any Southeast Michigan municipality from ‘99 to ‘00, with housing activity up 576%. However, of its 121 permits, 79.3% are in Grand Blanc’s Woodfield Development, according to an analysis of Housing Consultants’ 3rd quarter report. The 96 units with Genesee County sewer, water, and zip code, would bring local housing activity up to 1,571, just 2.1% below ‘99’s level for buildings with 4 units or less.
   What becomes most evident in Flint area data comparisons, from last year to this, is the decline in non-rental housing activity within the 30% of the County’s area with convenient access to Metro-Detroit. Atlas, Davison, Fenton, Grand Blanc and Mundy Townships, along with the border areas of the City of Burton, were responsible for 65% of last year’s housing starts, totaling 1,340 single family and condo units for the year. And, when rental permits were included, the region’s share was even higher.
   This year, through the first 3 quarters, total housing activity in that section is running 31.5% below ‘99’s rate, and it makes up just 59.3% of the county’s total activity. And, in looking at Housing Consultants’ survey, it becomes evident that the 2000 decline is based, almost completely, within the borders of Grand Blanc & Fenton Townships, where activity is down a total of 400 units from 1999. A year ago, the two townships, plus the three cities within their boundaries, were responsible for 979 units through September, or 50% of all units authorized in Genesee County. So far in ‘00, they’ve issue permits for roughly 579 units, a decline of 41%, and make up just 37% of the county’s total.
   As noted in a number of recent reports, the west side of Genesee County continues to be the only area experiencing an upturn for the year. Clayton Township permits are up 57% to 55 for the year, while Swartz Creek is up 28%, to 41 units.
   Genesee Township, however, is showing the biggest gain in total permits, due to a 144 unit apartment complex authorized this past summer.

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County Leaders deserve reelection

   There’s been little question over the past decade that the relationship between Genesee County officials and the home building industry has been mutually beneficial. After more than a decade of budgetary red ink, in the early ‘90s county officials came to truly understand the value of housing to the total community, as their deficits disappeared and bond ratings reflected the growth.
   Unfortunately, there’s been a large turnover on the county board during the past few years, with only one commissioner remaining from the deficit days. It’s more important than ever, to keep stability in county offices.
   Four current commissioners are unchallenged next week (As was Bob Myers who passed away last Wednesday). It’s critically important that the following commissioners be returned to office:
1) Rick Hammel (Vienna, Flint & Mt. Morris Twps) has brought a tremendous sense of unity to the county as the current board chair. He understands that the county’s growth in housing is a leader to future economic development and is willing to speak out on its value.

2) John Gleason (Flushing, and the northern tier of townships) is the 2nd longest serving current member who has been supportive since his first election. His history of reeling in the county bureaucracy (when necessary), along with his understanding of the county’s transition from urban to suburban influences is needed as we approach the issue of restructuring county government.
3) Dave Robertson (Mundy, Atlas, Grand Blanc) has a decade of support for the home building industry behind him, as State Representative in 1991 and ‘92, subsequently as an MESC officer and aid to the Joint Legislative Committee on Administrative Rules, and more recently as the lone Republican on the county board.

4) Fred Shaltz (Fenton, Swartz Creek, Gaines, Argentine) is the longest serving member of the board and a former officer and director of BAMF.

County Wide Races
   Regarding County wide offices, four incumbents are unopposed, while two have challenges. Also, a new Drain Commissioner will be elected, as the incumbent was knocked off the ballot in the August primary.
   The three county wide races with opposition include those for Drain Commissioner, Sheriff and Prosecutor, with only the latter appearing seriously challenged.
   For Sheriff, Bob Pickell should easily win his first four year term, after being appointed to replace Joe Wilson. Pickell’s long history in law enforcement, along with his penchant for community service, gives him credibility with many diverse elements within the community. And, he’s consistently handled his position in an even handed manner (as was evident in his appearance before the association nearly two years ago), which has helped him remain relatively free from much of the personal animosity that’s been so evident in politics recently.

   The same goes for Drain Commission candidate Jeff Wright.
   In August’s primary, Wright won a hard earned victory over the current incumbent, Ken Hardin, who had been appointed, then subsequently elected. As Deputy Drain Commissioner, Wright was favored by a number of association members for appointment in ‘98. However, Hardin got the nod, and won the subsequent election that fall.
   In the primary, the association backed Hardin, based solely on his two years in office. We have every reason to believe that Jeff will be equally willing to work with the industry to solve problems and streamline the development process. That, along with his knowledge of drain systems and 23 years experience, makes Wright the “right choice” for the office.

   In his eight years as County Prosecutor, Art Busch has stepped on a number of toes. Now, as he faces an election for a third term, many of those toes are kicking back.
   Art’s highly visible feuds with Flint’s Mayor, its School Board, and Genesee Township businessman Tom Joubran, have made some interesting headlines. His appearance at the Million Mom march brought the ire of the NRA. And the mutual animosity between Busch and the Flint Journal keeps going and going like the energizer bunny (hopefully there can be rapprochement after the election).
   Still, when one looks at the prosecutorial record of Busch’s office, his leadership on law enforcement issues, and his commitment to the community, it’s difficult to find a valid reason to remove him from office.

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Vote ‘divide and conquer’: it’s our only hope

   Whether you like him or not, you’re most likely better off today than you were 8 years ago because of Bill Clinton’s presidency. Clinton made two critical moves in the first quarter of his tenure that created the climate that spurred the record growth and prosperity the nation subsequently experienced.
   First, he took advantage of a democratic majority to pass the tax bill of ‘93, without one GOP vote (although the Republican Federal Reserve Chair openly endorsed it). Included in that bill was a provision to reinstate passive loss deductions on commercial real estate.
   The bill’s higher taxes brought in greater revenues, while the passive loss reinstatement let commercial property to regain its value, thus averting a costly financial crisis that was threatening to drain billions from the federal budget.
   With favorable responses by the Fed and Wall Street, growth quickly jumped to 4% in 1994, and has remained near that rate ever since.
   So, with the economy on track, Clinton’s next move was something I’ll call the Presidential Preservation Act of ‘94, as he let his wife propose her version of “Universal Health Care,” giving Republicans the issue needed to gain a congressional majority.
   The GOP’s control of congress solved two critical problems for Clinton. First, he didn’t have to worry about his own party busting the budget with irresponsible spending proposals. And, he didn’t have to cater to the left wing of his party, because he became their line of defense.
   What transpired was divided government, keeping both parties extreme elements from creating mischief.
   Now, we’re approaching an election where both parties believe they can control the White House and congress. Don’t let it happen!
   The GOP has become as fiscally irresponsible as the Demo-crats. One pushes for gigantic tax cuts and big spending increases. The other wants big tax cuts and gigantic spending increases. Either party in control will bust the budget, and the reaction of Alan Greenspan and the financial markets will bring an abrupt end to our booming economy. Ticket splitters Unite!

Barry

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MA(GOP)HB Endorses Bush et. al.

   Breaking from its historical tradition of neutrality in presidential races, the Michigan Association of Home Builders (MAHB), not only endorsed George W. Bush, but has attempted to make his election a priority for the nation’s housing industry as a whole. At a recent NAHB Board of Directors meeting, Michigan was repelled in its attempt to obtain a national association endorsement, however, it was clearly representative of the majority opinion of the directors as a whole (as is evident below, even the NAHB’s President appears to lean toward the Bush/Cheney ticket).
   In his column for the October issue of “Michigan Builder,” the MAHB’s CEO, Lynn Egbert, presents a strong argument to vote for Bush, primarily based on legitimate concerns about Vice President Gore’s positions on environmental and regulatory issues. He also refers to planks in the Republican Party platform, claiming they “call for preserving the mortgage interest deduction” and other tax code measures “to encourage home ownership.”
   MAHB, and/or its Political arm, B-PAC, have also strongly endorsed Republican E. Spencer Abraham in his reelection bid for the U.S. Senate, along with GOP Congressional hopefuls, Mike Rogers in the 8th District (which includes the Southwest section of Genesee Co. and Livingston) and Chuck Yob in the 1st District (Northern Michigan).
   On the “non-partisan” Supreme Court ballot, the association’s endorsed the three incumbents, Stephan Markman, Cliff Taylor and Robert Young (for more on this race, look at 10/17 Veritas “Beyond Drugs and Education”), all nominees of the GOP.
   Unfortunately, no sitting Genesee County state legislator had a voting record worthy of MAHB endorsement ... but none of their GOP challengers are mounting serious enough campaigns to warrant support. However, if you vote in Livingston County, Judith Scranton (66th) and Paul DeWeese (67th) were endorsed, as was Ruth Johnson in North Oakland.
   The other major issue MAHB’s adamant on is ballot proposal “00-2,” which it calls “poison!”
   The measure would require a 2/3 majority of both houses of the Michigan legislature to enact a law that would preempt local authority. However, the actual constitutional amendment is so “broad and vague,” it could be disastrous in the future by extending minority control to nearly any issue (again, see 10/17 Veritas for full details).

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

   “GM now sells more graphic sex films every year than Larry Flynt, owner of the Hustler empire,” says a New York Times report on the acquittal of a Provo (UT) video store owner on obscenity charges. The story, also picked up by the Flint Journal last Monday, further noted that the other big distributors of sex include AT&T, Time Warner, Marriott and Hilton,” as well, but none of their corporate leaders were “willing to speak publicly” about the seedy side.
   Corporate leaders refusing to talk to the press? Sounds like enough to keep Michael Moore busy, at least until the next election.
   The article also told of New Frontier Media, which owns “some of the most popular porno Web properties,” does business with In Demand, the nation’s leading pay-per-view distributor, owned by AT&T, Time Warner” and 2 companies with extremely strong Flint area ties, Advance Newhouse and Comcast.” Makes one wonder if a local Newhouse property may someday be dubbed the “Flynt” Journal?

   New source for “B.S.?” A Veritas reader forwarded a couple of articles from the Montmorency County Tribune, (a community weekly that is definitely Beyond Seinfeld).
   The first told of a former building inspector who lost a lawsuit, then was ordered to pay nearly “$48,000, the cost to re-do work on two homes that had sub-standard work done under his inspection.” The county’s Housing Commission sued the inspector for “breach of contract, since his inspection work for them was a separate contract from his county work.”
   The inspector represented himself at the trial since the county refused to pay for his attorney. And, you know what they say about the client of a “lawyer” who represents himself!

   Finally, here’s a note from Bob Hirschfeld, a “cybersatir-ist” frequently quoted in the Wall Street Journal: “It’s hard to understand why Nader so strongly opposes Bush and Gore since he’s been such a big supporter of air bags.”

Association News and Events Christmas Party moves to Woodfield

   In 1998, the Association’s Board of Directors decided to dramatically alter the format of the annual Christmas Party and Installation of Officers. Rather than the historic, semi-formal, weekend affair, they moved it to Wednesday evening, upgraded the menu and entertainment, and eliminated the formality of the head table and tuxedos.
   But most of all, they turned the event into an expression of “thanks” to the members for their collective support throughout the year, by reducing the price to $10 per member, and $25 per guest.
   This year, the format continues, but the party gets better, as it moves to the Woodfield Golf Club (the site of the past 2 golf outings). The dinner and hors d’oeuvres (see flyer) will be similar to recent years, but for 2000, the “open bar” will run for three hours, rather than one, continuing through the comedy of Bill Hilldebrandt, set to run from 9:00 to roughly 9:30 p.m.
   The Party is set for Wednesday, December 13th, with open bar and hors d’oeuvres from six to 7:30 (the bar will close for approximately 1/2 hour during the Installation Program). By 8:00, the main course buffet line will be open, as will the bar.
   And, throughout the evening, DJ Dan Mata will provide the musing for your listening and dancing pleasure.
   Of course, reservations will be required, so call the association office now!

   Wednesday’s Meeting is the “annual” corporate meeting for 2000. We’ll “formally” elect the 2001 BAMF leadership; Republic Bank will present the Fall Parade awards; and we’re anticipating a visit from the County’s new Drain Commissioner, Jeff Wright, fresh from his expected victory the previous evening.
   We also expect to have an announcement regarding the first two meetings of 2001, including our 4th exhibitors’ night, which has quickly become one of our most successful, and best attended, events.
   Are gas prices getting you down? If so, take a look at the MAHB’s benefit program with Speedway, that saves participating members 3 cents per gallon ... one local company is saving roughly $120 monthly on the program ... we’ll have further details at the meeting Wednesday.

   Also from MAHB: The winter conference has moved to January (18-20) in Kalamazoo, with more exhibitors, workshops and speakers. Details will continue through the year’s end.

Special Election Note
Although she’s unopposed, we still want to remind all members living in Flint Township to be sure to vote for Membership Services Coordinator and Web Site editor, Tracey Tucker for Constable ... Remember what was said when we announced her candidacy! Previous holders of that office went on to become County Board Chair.

Economic Update: Q’3 GDP cools; but is slowdown imminent?

   Despite a 4.5% surge in personal consumer spending, economic growth plunged from a 5.6% annual rate in the 2nd quarter to an initial estimate of 2.7% in the third. Although many believe that third quarter figures will be revised upward, there remains little question that the rapid pace of 6% plus growth for the twelve months that ended June 30th has cooled, at least temporarily, to a level the Federal Reserve considers “sustainable,” without fueling inflation. So, as expected, the growth data was cheered by Wall Street, as the Dow index soared more than 200 points after Friday’s release.
   For the past two issues, this column has questioned the apparent exuberance (to use a Greenspanian phrase) of those who seem eager to claim victory over the economic expansion. While many analysts were pointing to lower production figures as evidence that the six Federal Reserve tightening moves were finally having the desired affect, we keep looking at the personal consumption data, housing sales, and consumer confidence, all at or near historical highs. And, there still seems to be an exceptional base for accelerated growth through the end of the year.
   On the day the Gross Domestic Product preliminary report was released, the Commerce Department also announced that orders for durable goods (products that will last at least three years like cars, computers and appliances) rose 1.8% in September, double the forecast of 0.9%. That was on the heels of a 3.5% rise in August.
   What’s notable about the durable goods’ data is that, during the third quarter, the GDP report said “durable goods purchases increased 7.5%” from July through Sep-tember, “in contrast to a 5% decline” during the previous three months.
   The significance of durable goods purchases and orders relates to the blame for the “deceleration” of 3rd quarter GDP being reflective of a “deceleration in inventory investment and nonresidential fixed investment,” along with a decline in Government spending. The rise in “durable” orders and purchases, particularly for consumer products, will likely trigger an upswing in business activity.
   Adding the upsurge in durable demand to the continued rise in disposable income (up $112 billion in Q’3) suggest anything but a long term slowing of growth.

Inflation Data Stays Good to Excellent
   Two weeks ago the consumer price report told us what we were expecting, that the index rose in response to higher prices for energy. In fact, what’s been a most volatile CPI, was up 0.5% in September, after falling 0.1% in August, mostly due to energy prices and the responses to them.
   However, the core rate of inflation, less food and energy, was up 0.3%. It’s been rising at 0.2% every month this year, with the exceptions of March and September.
   For the past 12 months, the CPI is up 3.8% (compared with 2.7% for all of ‘99), while the core rate is up 2.8% (compared to 1.9% in ‘99).
   However, the inflationary measure within the Gross Domestic Product report, which is closely watched by policymakers, was up at a more mild, 2.4% rate in the third quarter, while the core rate was at 1.9%.
   Equally important on the inflation front was the Government’s “Labor Cost” report showing little reason for concern on the effect the tight job market is having on inflation. In fact, the costs of labor rose at their smallest pace in a year, a strong indication that the tight market is not forcing businesses to shell out substantially more to keep and hire workers.
   During the quarter, benefits’ costs were up 1%, while wages rose 0.8%. So, though employers are paying more, worker productivity continues to moderate the effect on costs and prices.
   Year to year employment costs rose 4.3% through September, down slightly from the 4.4% between June ‘99 and June ‘00.
   As has been the case for the past year, the growth in compensation costs for construction workers outpaced the labor market as a whole. After matching the labor cost average for the quarters ending in December of ‘99 and March ‘00, construction labor costs rose 1.3% in each of the past two quarters, while the national av

Housing Industry News’ Update

   Mortgage rates fell steeply last week, according to the release of the Freddie Mac survey last Thursday. Thirty year fixed rates averaged 7.68 nationally, the lowest in 50 weeks, primarily in response two lower yields on treasury bonds.

   Though falling a modest 2.7 percent, existing home sales remained above the 5 million unit rate in September, nearly identical to Sept. 1999’s pace, showing little sign of any decline in consumer confidence or general downturn in the housing market.
   According to National Association of Realtors’ data, existing homes sold at a 5.14 million unit pace last month, and extremely healthy number which keeps the industry on track for its second consecutive 5 million plus year. The September figures, down from August when sales jumped at their highest rate in 14 months, were significant for a number of reasons. First of all, we found the week after their release that the rate of homeownership jumped to a new high of 67.7% by the end of summer. And, perhaps most important, as mortgage rates were supposedly threatening the industry during the late spring and summer months, home sales continued at an average pace of 5.085 million, throughout the 6 month period.
   In the Midwest, sales were off 3.8% from August, and 1.8% from September ‘99.
   The national median price for September was up 5.5% over the past year, to $141,800. The Midwest median price was at $127,300, up 5.2% from a year ago.

   Nationwide housing starts were virtually unchanged last month (in comparison to August) as growth in multi-family activity offset a modest 1.3% decline in the single family sector. Single family starts were at an annual rate of 1.23 million units for the month, keeping the industry on track for its second biggest year since ‘86.
   Over all, starts were at a 1.53 million unit level for the month, the same as the average for the third quarter as a whole. Furthermore, building permits rose slightly, causing NAHB to proclaim the likelihood that fourth quarter activity will be nearly identical to the previous three months. Starts were also down slightly (2.6%) in the Midwest which, along with the South, offset rising activity in the Northeast and West.

   And, with the continuation of solid starts and sales data, NAHB’s Housing Market Index (HMI) rose 2 points in October, with a reading of “63.” Although the survey of builders’ sentiment remains below its record levels of a year ago, we need to keep in mind that any score above 50 shows optimism; and sales expectations remained above 70.

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