Veritas

The date was December 1, 1997. Two executives from “Moody’s Investors’ Services” flew in from New York to meet with Genesee County officials regarding the request for an upgraded bond rating. Treasurer Dan Kildee had asked for the upgrade, and had put together a presentation illustrating the County’s recently found fiscal health, based almost entirely on the growth of residential development.
As luck would have it, just 5 days prior to the meeting GM officially announced the long anticipated closing of Buick City.
In historically normal times, panic would have set in. But this presentation was based on growth outside, not inside the heart of Genesee County. The fact was, despite the loss of some 40,000 General Motors’ jobs already, Genesee County’s unemployment rate was at its lowest level since local data had been available. And the day long presentation was set to focus on the recent growth in housing, an incredible rise in area residents employed beyond the county’s borders, current and projected new development and our proximity to the job creation centers of Southeast Michigan.
The two execs spent their day in “Flint,” and soon came a short term bond upgrade, followed by a long term upgrade and promise of more.
The Flint area’s economic condition during the ‘90s appears almost paradoxical. Plant closings, strikes and Michael Moore get the national headlines, but jobs are plentiful, incomes rise, home values soar as starts explode. To best illustrate the ‘90s, look at the following data:
· Unemployment has held in the low 5% range despite the “loss” of 47,000 GM jobs.
· Median household income rose from $36,000 in 1990 to $51,700 in the second quarter of ‘99; a 44% increase, while the cost of living rose barely 27%.
· The median existing home price increased 83.6%, more than double the 37.6% national average. New housing starts for single family and condo units soared from some 700 units annually to the 1,750 range.
There's really no paradox. In reality, Flint was just consumed by a growing by a thriving Metropolis, centered roughly twenty miles from the county’s Southeast border.
Two critical studies during the decade clearly display why the local economy has prospered so well. First, in 1991, American Demographics Magazine noted that the Metro Detroit area would add 286,000 jobs between 1990 and 2010. However, during the same period, the population would only grow by some 111,000 people.
Then, last month, a Brookings Institute report provided even more dramatic data as it clearly showed how far removed Metropolitan Detroit jobs are from the city itself.
The Brookings’ study of the 92 largest cities and their suburbs found that Detroit ranked dead last in its share of employment. Only 14.3% of the area’s jobs were in the city in 1996, causing one of the report’s writers to call Oakland County Southeast Michigan’s “Economic Capital.”
The employment data for Metro-Detroit and Metro-Flint clearly reflect on the residential growth patterns of Genesee County. Prior to 1986, new housing activity in the Flint area was quite evenly split, at least from a directional perspective. Then, as activity began to recover from the early ‘80s recession, the southern third of the county received a substantially greater portion, with more than half in communities with easy access to the Detroit area.
During that same period, the number of area residents working in counties south of Genesee rose from 3,900 to 13,500. Then, by 1997 that number likely grew to 21,000, as housing starts in the south soared above the 1,000 level.
Although the growth to the southern part of the county is most evident, area residents are actually commuting in all directions. Thousands of GM employees who lost local jobs transferred to Lansing, a trend that appears to be intensifying, and families from Saginaw County found the Clio area convenient and attractive. In all, the total number of commuters rose from 7,500 in 1980, to some 32,000 today.
But it’s the merge with Metro Detroit that’s been the major source of Genesee County’s economic renaissance, with the only price being the apparent loss of our “Flint” identity. Of course, one might ask if the loss of identification with labor strife, auto plant closings, Michael Moore, and Autoworld, is really much of a price at all?

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Proposal “A” Made Michigan #1 State home values grew the most since ‘94

It’s somewhat amazing that decade ending stories in the news media have barely given it lip service, but the passage of property tax relief in 1994 was likely the most important change in Michigan during the final one-fifth of the twentieth century. Despite the soaring stock market and nine year economic expansion, nothing has had as dramatic an impact on the economic well being of Michigan homeowners than the ultimate effects of Proposal “A”.
Last week the Office of Federal Housing Enterprise Oversight (OFHEO) released its third quarter House Price Index (HPI) showing that, over the past five years, housing in Michigan appreciated faster than housing in any other state; by far! From 1994 to 1999, Michigan home values grew by 42.7%, more than 4% faster than second place Colorado, and nearly 8% faster than Minnesota and Massachusetts, the states tied for third. Furthermore, Michigan’s rate of growth was nearly 19% above the national average.
Unlike most measures of home values, the HPI is in no way distorted by increased activity in upscale housing markets. Instead of using recent real estate sales as a whole, the HPI takes its measure from Fannie Mae and Freddie Mac data on resales and refinancings of the same property over the past nineteen years.
During those nineteen years, Michigan ranks 10th with appreciation of 150%, well beyond the national average of 130.9%. But its this top 10 ranking that shows just how critical Proposal A’s impact was.
Prior to the property tax reduction, Michigan’s home values were severely retarded due to the fact that Property taxes, which were double the national average, made the monthly cost of housing substantially more than in other communities across the nation. What resulted was that appreciation in the state lagged behind the rest of the nation by more than 26%.
From 1980 through 1993, as the value of the average home in America grew by 83.5%, the average Michigan home’s value rose by just 66%.
However, after Proposal “A” eliminated the property tax discrepancy in early ‘94, Michigan’s home values took off at a dramatic rate. Since that time, the value of the average home in Michigan grew by a whopping 50.6%, nearly double the national rate of 25.8%.
To put that in perspective, take a home purchased for $50,000 in 1980. By the end of 1993, the home would have been worth $91,750 if it had grown at the national rate. However, in Michigan, the home would have been worth just $83,000. However, by the end of the third quarter of ‘99, that same home in Michigan would likely have a value of $125,000, but the same home, from a national perspective, would likely be worth $115,450.
So, since the passage of Proposal “A,” the average Michigan home owner has seen his property value’s rate of growth climb from, 9.5% below the national average; to 8.3% above.

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Oh! How I hate to see the nineties go

The first article in this issue deals with the tremendous economic upturn this area’s celebrated during the ‘90s: from the 250% rise in new home building activity; to a 44% rise in household income, to an 85% rise in existing home values; to the unemployment’s decline of 50%. And, on page 4 we note the impact of Proposal “A” on the economic well being of Michigan families as state property has appreciated by more than double the national average since its passage.
However, despite the growth in an unprecedented economic expansion nearly 9 years old, I can’t help but think of the ‘90s as the decade when Tabloid journalism won out over the “legitimate” press. It’s a period that began with Bush and Saddam, then went totally “Tabloid.”
By ‘92 it was Bill Clinton and Gennifer Flowers dominating the news. Then we had Bill and Hillary; Charles and Diana; John and Lorena Bobbitt; followed by O.J. and Nicole; Bill and: Paula Jones; Monica Lewinsky; and Katherine Willey (with Princess Di and Dodi in between).
In fact, Simpson and Lewinsky literally dominated the news from June ‘94 to last spring’s impeachment. The New York Times and National Enquirer became indistinguishable; and we can’t tell when Peter Jennings fades and Hard Copy begins. So, from the last of the "legitimate" press, we wish you the happiest holiday season and continued health and prosperity in 2000.

Barry

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Critical Industry Issues' Update

U.S. auto sales fell dramatically last month, at least in comparison to October 1998, as the Big Three’s share of the market fell from 70.6% to just over 65%. Domestic car sales fell 7.3%, while truck sales were up 4.9%. Imports, on the other hand, experienced a 41% rise in cars and 18.8% rise in trucks.
Still, total U.S. vehicle sales remain on track to break the 17 million unit level for the year, breaking all previous sales records.

The Flint area’s only remaining home based auto-maker, Daimler/Chrysler, may be experiencing marital difficulties as it hits its first anniversary. As Business Week puts it, the partners decided “they’d be better off with separate bedrooms,” referring to the announcement of reorganization that gives more autonomy to the company’s U.S auto operations.
The company is experiencing marital difficulties as its stock is still depressed, despite the market, down 31% from its high.

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The Seinfeld Section (it’s still about Nothing ; in particular)

There was an interesting brief in the News regarding another problem being blamed on Sprawl. Titled “Cuddly But Lonely,” the note explains that “Urban sprawl’s been blamed for many evils such as traffic congestion and family breakdowns .......now, the Australian Parks and Wildlife Service wants to halt expansion of Brisbane’s suburbs on the grounds that it is spreading sexually transmitted diseases — among Koala Bears.”
We’ve heard stories about New Zealand sheep herders.... ..but Australian suburbanites?

On a related note, Genesee County Health Department officials are seeking additional fees from builders and developers to study the Australian situation and prevent its potential occurrence in Flint’s suburbs. They’re joined in their quest by the Sierra Club, with concerns, not only for Koala Bears, but Sprawls impact on Southeast Michigan’s eucalyptus tree population.

Regarding the Brookings’ Institute survey (see related article).Although the central city of Detroit has the lowest percent of total metro area jobs (14.4%) of all the 92 cities surveyed, Grand Rapids experienced the third highest disparity during the years of the study (‘93-’96). While the Grand Rapids suburbs gained more than 65,000 jobs during the period, a 22.6% increase, the central city lost 11,000, a 7.9% decline.
So, during the three year period the city’s share of local employment fell from 33% to 27%. At that rate, it should be approaching Flint and Detroit levels by 2003. Do you think that’s why so many Western Michiganians have joined the anti-sprawl movement? Some of us have found it amazing the way that West side Republicans, who had previously been the allies of the development industry, suddenly changed their collective perspectives when "AMWAY" investments were threatened by a potential Grand Rapids decline.

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Association News Update 1999 Christmas Party had Hypnotic Hold

When do association members get the standing ovation and roars of laughter usually reserved for the most successful performers? Those in attendance at the ‘99 Christmas Party know the answer: When they’re under the hypnotic trance of Jim Hoke!
Last week’s celebration of the 1990s was highlighted by Hoke’s Therapeutic Comedy which had much of the audience standing (except for the ones on the floor laughing so hard) in total amazement for the final half hour of what grew into a 90 minute performance. But the real stars of the evening were the six members and guests who became the subjects of his hypnotic suggestion.
The 1999 event is one that will become BAMF legend as word spread so fast that by last Friday there were several calls to retain Hoke for upcoming functions.
Of course, the party also included a phenomenal dinner, an hors d'oeuvre buffet that was "out of this world," a hosted bar which was open for over ninety minutes, rather than the usual hour, and the continuous music of DJ Dan Mata throughout the evening. There was even wine at the tables all night long, and wine goblets (with the BAMF logo) as a reminder of the event.
How could the association put on a party like this for just $10 per member and $25 per guest, when Christmas parties of the past were at $50 per person? It’s due to the generosity sponsors. First, there were the cocktail hour sponsors:

Bank One
Bank One Mortgage
Cislo Title
First American Title
GMAC Mortgage
Guaranty Title
Guardian Mortgage
Lawyers Title
Metropolitan Title
Old Kent Bank
Republic Bank
The State Bank

Then there was the table wine, sponsored by Greco Title. And finally, there were so many extras in entertainment, decor and giveaway items that were made possible by what we warmly call a Holiday grant from Hill Steel and Building Supply.

At the Party, outgoing President Lisa Sears presented 3 special association appreciation awards for special service to the association and the home building industry. The recipients of these awards were Doug Graham Jr, (James Lumber) for his commitment to membership recruitment and his support for association and industry promotional activities; Vic Lukasavitz (Gould Engineering), for his activities in recruitment and his efforts and leadership on Land Development issues ; and Rodney Rajala for his activities on the state level epitomized by his efforts in the “Land Use” arena.

The annual meeting to set the parameters for the annual Parade of Homes events will be held at the Association office on January 20 (Thursday) at 3 p.m. We’ll be finalizing dates, hours, and any additional items that are brought up at that meeting. All members are welcome but only builders planning on entering the Parades can vote.

At its December meeting, the BAMF Board of Directors voted to reinstate the Home Builders Council....this will also take up part of the discussion at the Parade meeting, and we’ll likely announce the first council meeting prior to January 12th.

Don’t forget, the 2000 Table Top exhibits are set for February 9th, and we’re moving them to Bonaparte’s in the Great Lakes Tech Center so we can accommodate more exhibitors. To reserve a table, call the office.

Economic Update: Inflation tame; so what’s the problem?

With all the nation’s price data showing no signs of inflation and productivity numbers at the “exceptional” level, one would hope that a favorable Consumer Price Index report this morning would send Bonds higher and interest rates downward. So, as the CPI’s 0.1% rise came across the wires this morning, mild by any standard and below analysts expectations, the market took off in the opposite direction and thirty year treasury yields soared from 6.20% to 6.27% in just a matter of minutes. Why?
Well, while the Labor Department was releasing the CPI, the Commerce Department announced that Retail Sales had climbed 0.9% in October, eighty percent above expectations. And that’s what sent shivers down the backs of Bond traders.
So, unlike expectations for lower mortgage rates, don’t anticipate much relief this week.

Auto Sales
There was exceptionally good news for Michigan in the retail sales report as automobile sales rose 2.4%. As auto sales make up approximately 1/4 of total retail sales, it appears that their rise was responsible for 2/3 of the overall increase.

Inflation
The Consumer Price report came in just as this page was being written, so we don’t have complete details. However, the 0.1% rise was well in line with recent data, and the core rate, excluding food and energy, didn’t rise at all.
Prior to the CPI report we found that Wholesale prices were up just 0.2%, while the core rate, like the consumer level, was unchanged. Even the upwardly revised price deflator of the tied to the Gross Domestic Product report had prices rising at just a 1.1% rate during the third quarter.
Still, if there is any cause for concern, it’s evident in import prices, which have been on the rise consistently since Asia began its recovery. Prices on imports rose 0.5% last month, and are up 5.5% from a year ago. However, one must recall that import prices were continuously declining during the previous year.

Economic Growth
At the end of November the Commerce Department said the economy grew at a faster than expected, 5.5% pace during the third quarter. That was up from an earlier estimate of 4.8%. (Economists expected a revision to 5%)
Again, the primary reason for the revision related to consumer spending, which was up 4.6% rather than the expected 4.3%, and inventories, which were up more than 20% from the preliminary report.
The GDP gains were accompanied by strong growth in corporate profits, driven by strong earnings abroad.

Productivity
Import prices may be on the rise, but the other primary factor in holding inflation in check is surging. Offsetting labor cost fears in a tight job market, worker productivity rose at its highest rate in 7 years, up 4.9% during the third quarter, bringing an actual decline in unit labor costs.

Housing Industry/Mortgage Market Update

The trend of Genesee County’s leadership in regional housing growth continued through October as Housing Consultant’s data showed the Flint area up more than 55%, while the Southeast Michigan region, as a whole, was slightly below 1998’s levels. Still, most of the area’s rise related to the upturn in rental units however, single family and condo units were still up 21%.
Perhaps the most significant of data on owner occupied units is the fact that the largest building companies have been increasing their collective shares of activity, both locally and across the region. Throughout Southeast Michigan, the ten largest companies have seen their total share rise from 12.4% to 18.2% over the past four years. And locally, we’ve experienced a dramatic rise in the market share by companies that have come to Genesee County since 1996. Their collective share has risen from roughly 7% that year, to 34% in 1999.

Sales of existing homes fell for the fourth consecutive month during October according to the monthly report by the National Association of Realtors. The Realtors said that sales fell 6.6% to an annual rate of 4.79 million units, down from 5.13 million in September. However, even with the declines of recent months, it’s almost assured that 1999 will become the fourth consecutive year that existing homes set a sales record as they will break the 5 million unit barrier for the first time.

October was a much better month for new home sales however, as Commerce Department figures showed a surge of 16.3%. The month’s rate of sales, 986,000, set a new record and represented the biggest one month rise since April of 1993. The data surprised analysts who anticipated a decline due to the higher interest rates of the past few months.

Michigan has led the nation in existing home appreciation for the past five years as actual home values have risen 42.7%, well above second place Colorado. For the full report,

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