Battle over States’
Ability to violate Federal law will continue in the ‘99-’00 Supreme Court
term
Back in July we wrote of the danger in the final decisions of the U.S. Supreme
Court in its 1998-99 term, which dramatically enhanced the rights of states
to ignore the protections of Federal statutes. Although the June rulings didn’t
directly affect the housing industry, the fact that they were written at a
time that NAHB’s primary goal was to enhance access to the courts on property
rights violations, showed how fragile our ability to seek judicial relief
is likely to be.
The June rulings upheld Maine’s right to violate federal overtime pay provisions
and allowed Florida to violate federal trademark and patent law, all under
the federalist theme of sovereignty. Each decision was made on a 5-4 vote,
with the solid conservative block of Rehnquist, Sca-lia and Thomas being joined
by O’Conner and Kennedy, showing beyond doubt that this “conservative” judiciary
doesn’t really care if governmental units violate individual rights, as long
as it’s not the Federal Government.
The June rulings are particularly troubling since, in the ‘99-2000 term, the
court will be hearing cases involving “pre-emption,” thereby questioning
IF and WHEN federal statutes override a state’s rules and/or laws.
The pre-emption issue is already a politically charged one, as the nation’s
business community, led by the Chamber of Commerce, is in a fight with its
traditional allies (the Republican majority) over a bill that would specifically
require legislators to point out when a bill is “intended to pre-empt state
law,” according to the Wall Street Journal. If the bill passes, business
feels it will be far more difficult for Washington to supersede overly restrictive
state rules and statutes.
One pre-emption case to be heard in the new term involves Honda Motor Company,
which is being sued for not having air bags in a car at a time federal law
made them (air bags) optional. Though D.C., where it was filed, didn’t have
a law requiring air bags, the suit claims the car was defective because it
didn’t have them.
If federal law doesn’t pre-empt this suit, the repercussions regarding product
liability would be far reaching.
A second case regarding pre-emption questions if the State of Washington overstepped
its authority with its rules on oil-tanker regulations that conflict with
U.S. Coast Guard rules. The Washington case has critical repercussions for
international commerce, and the U.S. is a plaintiff as well as the Association
of Tanker Owners, which may justify pre-emption in the minds of some of the
justices who have recently supported states’ rights at all costs.
However, in recalling Justice Kennedy’s words in last term’s Maine case, “it
does not follow that the national becomes the ultimate, preferred mechanism
for expressing the people's will," it's obvious that the doctrine of
pre-emption is on the defensive. The national median household income during
the second quarter was $47,800, while the median price of existing homes sold
was $138,000. Based on the analysis of 710,000 homes sold, the nationwide
score was 67, meaning two-thirds of all sales were affordable by half of all
American households.
Although local median income is well above the national average and median
home prices are way below, the Flint area’s score was barely above the nation’s
at 73.2, making it 92nd out of the 184 markets.
The Midwest continued as the most affordable region, with 13 markets in the
nation’s top 25. However, “Flint” was 31st of the thirty-nine metro areas
in the region and the other Southeast Michigan communities (Detroit and Ann
Arbor) were 38th and 39th respectively.
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Time for a builder/developer President?
It’s hard to believe that the current Presidential race won’t be decided
for another 13 months. After all, it’s been dominating the news since last
winter. However, thanks the Reform Party’s $12 million in federal campaign
funds, the process for the first election of the 21st Century is, at least,
entertaining.
By now nearly everyone has heard about Reform Governor Jesse Ventura’s
“Playboy” interview where he called organized religion “a sham.” But Ventura
did something else recently that may be far more important: He made it rather
evident that he’s now supporting New York developer Donald Trump for the party’s
nomination. And Trump, like Ventura, is making it clear that he sees the Reform
Party as Centrist, rather than being dominated by extremist wings like the
major parties.
“The Donald?” Absolutely, and here’s why! In an op. ed. piece last week he
wrote, “having prevailed over a severe (government created) crisis in my own
industry, I know the tough decisions a chief executive has to make.” Those
of us who remember his Congressional testimony in the early ‘90s know he was
writing about the effect of the elimination of passive loss deductions
on commercial real estate values from 1987 through ‘92. And, the “tough decision”
was Clinton’s repeal of the 1986 Tax Bill in 1993.
Unlike the traditional candidates, Trump understands the inherent danger in
psychotic, though politically attractive, tax proposals and, he lacks the
political baggage that prevents him from opposing them.
Barry
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Critical Business & Industry News
A Business Week article in early September suggests the U.S.
Forest Service is retreating from its historic policy of selling off timber.
The article points to the current director of the service, Michael Dombeck,
who oversees the management of 192 million acres of government owned forest.
It states that, historically the agency “has tended the forests as a cash
crop.”
But since Dombeck took over in 1997, he’s held “the annual timber harvest
to about one-third of the totals typical in the 1980s.” A graph accompanying
the article shows that the annual timber cut on Forest Service land fell from
around 12.5 billion board feet in 1988, to barely more than 3 billion last
year.
A spokesman for the timber industry accuses Dombeck of attempting to “end
forestry on public lands,” claiming it will cost jobs in his industry.....
and that’s not even taking into consideration its effect on lumber dependent
industries.
The UAW and Daimler Chrysler reached an agreement on a national contract
as we were going to press. Although details haven’t been released as of 1:00
p.m., all reports suggest that the new national contract will be the “richest”
in many years.
It’s been reported that GM opened its offer with a 2% wage increase plus a
$500 lump sum payment the first year, 3% the second, and a $1,500 lump sum
payment the third year. It also proposed job security that would practically
guarantee life-time employment for workers with 10 years seniority. Daimler
Chrysler’s offer was reported as similar.
What was expected to be a sticking point was the intent to offset the lifetime
job guarantee with flexibility in shifting parts making jobs to suppliers.
The UAW was asking for help in organizing those suppliers. It will be interesting
to see how it was resolved.
The ripple effect of the Farm Crisis could well cost the taxpayers
even more than we’ve been reporting. A recent report found that the Farm Banking
industry, after experiencing tremendous profits during much of this decade,
is now facing severe problems. More farmers are delinquent on their loans,
and the farmland used for collateral is plunging in value. In fact, 15% of
the USDA’s $10.6 billion in loans are currently delinquent. And, the agency's
issuance of new loans is up more than 36% over the past year.
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The Seinfeld
Section (it’s still about Nothing ; in particular)
What do Kellogg's, Dupont and home builder Michael Holigan
have in common? By next February, all fans of the fastest growing sport in
America will know. Because, when the 2000 NASCAR racing season opens at Daytona,
Hendrick Motorsports’ number 25 Chevy Monte Carlo will change its colors from
the Budweiser maroon to the blue and white “Nobody Knows Homes Like
Holigan.”
Dallas Builder Michael Holigan becomes the first home builder sponsor
of a major sports franchise. And, for non-racing fans, we do mean major!
Hendrick Motorsports’ 2 leading drivers, Jeff Gordon and Terry Labonte, have
won the NASCAR championship each of the past four years, and Holigan’s sponsorship
of the third Hendrick car will cost $30 million.
So, why would a builder who has been in the business for less than ten years
jump into such a costly promotion? How about Brand Name Franchising?
Holigan wants to become the first “nationwide home builder in the U.S.” by
franchising his company’s name around the nation. He already has sixteen franchisees,
and plans a big push next year with plans to “entertain 4,000 builders” at
NASCAR events. Furthermore, he’s got a Web site which will offer roughly a
quarter million home products by the end of 1999, along with information on
everything from online mortgages to comparisons of school districts. So, as
Holigan told the Winston Cup Scene, a weekly newspaper focusing on
NASCAR’s top division, “When we talk about building a brand ........ there’s
nothing better than NASCAR. What better way to tell consumers what this Web
site’s all about than with a NASCAR Winston Cup team?”
Of course, Holigan’s sponsorship could be short lived. After all, once
we eliminate the tobacco, beer and burger advertising for health reasons,
the FTC can turn its attention to housing as promoting the evils of sprawl.
Remember Iran’s 1979 Islamic Revolution that ousted the Shah for his
promotion of Western ideas? Well, it was refreshing to find out that, two
decades later, a “great-great-grandaughter” of a 19th Century Shah reached
the epitome of western decadence.
Sarah Shahi, a direct descendant of Fath Ali Shah, has become
one of this season’s Dallas Cowboy Cheerleaders. We hope she avoid’s post
game parties with Erik Williams and Michael Irvin or we’ll never hear the
end of it.
Now, a bit closer to home, we may be seeing the beginning of Poltergeist
IV in South east Michigan (near Monroe). The first day of excavation for
Riveredge Estates, a planned subdivision, uncovered skeletal remains. Turns
out that the site is suspected of being a church cemetery where many of Monroe’s
French settlers are buried. The question now is, should the bones be buried
on the same site or somewhere else?
Our suggestion? Play them where they lie. It’s a perfect opportunity for a
theme single site Parade....in fact, they can open 10-31-00
with a Cabernet and Brie party in honor of the neighbors.
“I have wrinkles now! Nobody thinks I’m 25 anymore! Ken Starr should
pay for a face lift!” Monica Lewinsky was complaining about the effects of
her long ordeal....But what about the rest of her?
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Association News Update
The final Parade of Homes of the millenium opened with excellent
traffic on Saturday, despite dreary weather and the fact that two local, undefeated,
football teams had television kickoffs at the identical moment. The 22 participating
models in the Flushing, Swartz Creek, Fenton, Grand Blanc, Davison and Burton
areas will be open through October 17th, noon to six on weekends and 4:00
p.m. to 7:00 p.m. on Thursdays and Fridays.
Parade awards' judging was held last Thursday, with the following winners:
Prism (< 1,680 sq. ft.) Future Homes won for exterior; Andria E.
Auker for interior and Best of Show; in the Paragon (1,680 to 2,000 sq.
ft.) division, Vantage Homes won exterior; Fireside Home Co.
for interior & “show”; Pinnacle (> 2,400 sq. ft.), Fischhaber Builders
won interior; exterior & “show” went to CDP Custom Building.
The awards will be presented at the November 10th General Membership meeting.
For the first time, this parade is on line....check it out at www.bamfhome.com.
Well, it’s October, so it’s time to think about association leadership
for the year 2000 and beyond. This afternoon the Past Presidents’ of BAMF
met for the primary purpose of nominating directors for the terms that end
this year and choose a slate of officers. The results of the meeting are as
follows: For the 4 Builder vacancies the nominees are current directors
Steve Lissner, Andria Auker-Foy and Jeff Doyle. Mark Nemer was nominated as
a new director.
For the two “associate” vacancies the Past Presidents nominated the 2 incumbents
with expiring terms, Vic Luka-savitz and Bob Vance. Keith Kirby, Dan Fralick,
Larry Corbett, Doug Graham, Ron Harrold, Gil Cramer and Dave Johnson have
terms running through 2000.
Now, for the officer slate:
President - Steve Lissner 1st
V.P. - Andria Auker-Foy
Treasurer - Larry Corbett
Secretary - Jeff Doyle
Bob Vance will be 2nd V.P.
Next week’s General Membership meeting promises to be filled with
fun........we’ve booked Comedian/Magician/”Amusionist” Al the Only, we’ll
give details on the Christmas Party, plans for the biggest exhibitors night
yet, and perhaps an upbeat update on last month's land use forum!
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Economic Update: You’d think
they’d lighten up by now
The end of last week showed just how emotional investors remain, particularly
since October has so many bad memories. On Thursday the Commerce Department
said 2nd quarter Gross Domestic Product was the lowest for any quarter in
four years. The markets responded most favorably as the Dow Jones average
soared 150 points and long term bond yields fell a tenth of a point. However,
on the same day, the department also announced that sales of new homes were
at a near all time high.
The following morning the Purchasing Management index showed unexpected manufacturing
strength and Commerce reported a stronger than anticipated rise in personal
income and spending.
The Friday reports, coupled with the home sales’ figures, were more than investors
could handle. The result? Stocks plummeted over 100 points (before recovering
in the late afternoon) and interest rates went higher than they had opened
Thursday.
Why the panic? Just gettin’ ready for Tuesday’s Federal Reserve meeting!
So, this afternoon the Fed kept rates the same. However, they let it be known
that there is strong sentiment for tightening. So, while stocks and bonds
were doing well earlier in the day, they fell apart in the late afternoon.
Gross Domestic Product
The economy grew at a seemingly paltry 1.6% rate in the second quarter, according
to the Commerce Department’s final revision. The original estimate had second
quarter growth at 1.9%, and the first revision reduced it to 1.8%, where most
econo-mists thought it would remain. Furthermore, the implicit price deflator,
a key indication of inflation, was revised downward to an annual rate of 1.3%,
well below economists’ expectations.
Manufacturing Activity
Manufacturing activity was much higher than expected in September according
to the monthly report issued by the National Association of Purchasing Management.
The purchasing managers’ index rose to 57.8, way beyond analysts’ expectations
of 54.3. Any rating over 50 means the manufacturing sector is growing, and
last month represented the 8th consecutive report above 50. The index’s price
component, unfortunately, was up 7.8 points (12.9 points for the past 2 months),
which added to market concerns.
Income and Spending
Personal income rose 0.5 percent, while spending took a jump of 0.9 percent,
to an annual rate of $6.25 trillion in August, both exceeding analysts’ expectations
and sending the aforementioned fears through the markets. Furthermore, the
Commerce Department said the savings rate, already worse than anemic, was
negative 1.5%, worse than the minus 1.3% in July.
Leading Indicators
The Conference Board's index of leading indicators fell 0.1% in August,
less than expected. Despite the slight drop, the indications are that the
expansion will continue to record length.
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Housing Industry/Mortgage Market Update
Housing starts and new home sales, both, beat expectations in August
despite continuing concerns about rising interest rates. On September 17th
the Commerce Department reported that starts for the previous month rose to
an annual rate of 1.68 million units, a 0.4% gain, but on the heels of a 3.9%
rise from June to July. For both months, analysts expected starts to fall
under the pressure of continuing higher mortgage rates.
However, a stronger indication that interest rates are failing to slow down
the housing industry came last Thursday when the department reported that
sales of new single family homes jumped, in August, to their second highest
level on record. The number of sales hit an annual rate of 983,000 units,
nearly 3% above July’s adjusted rate of 955,000.
Sales rose in all sections of the nation, with the exception of the south,
with the Northeast (+ 16.9%) and the Midwest (+ 15.2%) leading the way.
Also, showing a significant number of lower priced buyers, the median price
fell $6,200, to $150,800.
NAHB’s September Housing Market Index (HMI) rose for the first time
in 3 months as conditions for new home sales remain strong, despite the, overly
mentioned, fear of higher interest rates along with the continued concerns
of labor and materials’ shortages.
After two months of decline, the HMI experienced a 1 point gain in September,
indicating that builders remain highly optimistic regarding the near future.
As we note each month, the HMI is derived from surveys of Builders around
the nation as to their feelings about current sales, sales expectations for
the coming six months, and traffic of prospective buyers. Any number over
50 means more builders rate conditions as good than poor.
All three indexes rose last month, with current sales at 80 and expected sales
over the next six months at 83. Traffic of prospective buyers was up 3 points,
but remains just barely above the mid-point level at 54.
Genesee County’s housing activity has finally drawn the rest of Southeast
Michigan above it’s 1998 level. Through August, the region’s permit activity
is up 1.3% over last year’s level, according to Housing Consultants of Clarkston.
The region’s total permits authorized is up by 218 units for the year, however
only Genesee (+ 574) and Macomb (+ 307) counties have shown any rise. And
Genesee County’s activity is up a whopping 51% from the first eight months
of last year, primarily due to more than 300 rental units authorized (none
were authorized in ‘98). Still, local single family activity is up a solid
22.7%.
Mortgage rates fell at the national level last week, with the average
30 year rate at 7.7 percent with 1 point. The average rate in the North Central
region was at 7.72% with 0.7 points.
The weekly report on local rates was omitted from Sunday’s Free Press,
so we don’t have them beyond September 24th, when they fell to 7.37%, with
most major lenders quoting 7.5% or 7.375% with 2 points.
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