Wednesday, January 19, 2011

Homebuilders economist warns against government regulation at Grand Rapids summit

By Cami Reister/ Grand Rapids Press 

GRAND RAPIDS — Be thoughtful. Be careful. Beware the unintended consequences.

That is the mantra of Elliot F. Eisenberg, an economist with the National Association of Homebuilders who addressed a crowd of about 140 builders, suppliers and others attending the West Michigan Home & Building Summit on Tuesday.

Eisenberg, speaking at the Prince Conference Center at Calvin College, was cautioning about the negative effects of the often well-intentioned regulation that comes from all layers of government.

“You have to think of the behavioral consequences that occur when you change the rules of the game,” he said. “Most laws that are passed aren’t thought through all that carefully.”

Eisenberg listed four cities with affordable median home prices — Atlanta, Greenville, S.C., Houston and Oklahoma City — and compared them to four cities with median prices far above that: Boston, Boulder, Colo., Burlington, Vt., and Seattle. “What’s the difference?” he asked. “Regulation has turned these cities into places that became exceptionally unfriendly to builders.”

Eisenberg worked the room during his speech, requiring audience participation and spurring frequent laughter with his examples that drew on NFL overtime rules, meth labs, LoJacks, The Club, drunken driving, saving the whales and AIDS prevention.

The bottom line in every example was to focus on three things before regulation is passed: market forces, the intended outcome and externalities. If that happens: “We could solve a lot of the world’s problems,” he said.
Matt Garrison, owner of Ridgeline Reconstruction, said he enjoyed Eisenberg’s talk.

“I’m pro-regulation because it creates some barriers, it keeps some of the riffraff out,” Garrison said. “But it does create some problems of lessening the potential for clients.”

Lee Schwartz, executive vice president of the Michigan Association of Home Builders, said they face troubles from three layers of regulation: local, state and especially federal, where agencies push regulation on the states.

And even though President Obama wrote an opinion piece for the Wall Street Journal published Tuesday announcing an executive order mandating a government-wide review of regulations to remove unnecessary obstacles to job creation, Schwartz was not hopeful.

“I’ve seen it before,” he said. “It doesn’t matter who the president is. ... Changing the culture within those agencies, that’s really difficult.”

Dale Shugars, executive vice president of the Home & Building Association of Greater Grand Rapids, which organized the summit, said he wished someone had shared Eisenberg’s logic when he was serving in the state Legislature.

“The unintended consequences of policy is something you really have to be careful of,” Shugars said. “Probably Congress should take a look at that.”

Wednesday, November 24, 2010

Grand Rapids ranks as one of most affordable U.S. cities for home buying

Published: Tuesday, November 23, 2010, 10:54 AM Updated: Tuesday, November 23, 2010, 11:40 AM

An industry report ranks Grand Rapids as the nation's third most affordable city in which to buy a home.

The National Association of Home Builders / Wells Fargo Housing Opportunity Index lists Grand Rapids behind Indianapolis and Youngstown, Ohio, with an "affordability score" of 90.4 percent, based on a city's median home price (for Grand Rapids, $101,000) and median income ($62,100). In other words, 90.4 percent of the city's for-sale homes are considered affordable.

CNN Money's analysis confuses Grand Rapids' geography slightly, but manages to paint a general picture:

This central Michigan city has had a few lives. Its first claim to fame was as the "Furniture City." Grand Rapids furniture -- particularly the oak tables, chairs and cabinets -- graced the interiors of homes both grand and modest.

Once the great hardwood forests of northern Michigan petered out, the town turned to the auto industry for sustenance. Today, it's health care and consumer goods manufacturing.

Anyway, Grand Rapids jumps two spots from the same report last year, when the median home price in the city was $103,000.

Friday, October 29, 2010

New housing starts in Muskegon area edging up

Dave Alexander/ Muskegon Chronicle

Amid the gloomy economic news, many might be surprised to learn that new houses are under construction in Muskegon and northwest Ottawa counties.


It appears local new home construction has bottomed out and is beginning to rebound. The surviving West Michigan home builders have restructured while others have gone bankrupt, out of business or both.


No company tells the survival story in the new home construction industry better than Eastbrook Homes of Grand Rapids. One of West Michigan’s leading home builders has gone from a peak of 350 housing units built in 2005 to an estimated 170 this year. Company employment has dropped from a high of 72 to 31 today.


Eastbrook continues building houses with construction under way in the Churchill Woods subdivision in Norton Shores and the Hathaway Lake subdivision in north Ottawa County’s Crockery Township. It leads Lakeshore home builders with 33 starts so far this year, according to Grand Rapids-based Builder Track.


“We remain here because we like it and believe that West Michigan will be back,” President Mick McGraw said of the company’s continued investment along the Lakeshore.


Norton Shores has been the leader in new home starts in Muskegon County the past two decades. The city peaked at 166 new housing units in 2001 and had 70 units as recently as 2007.


City construction permit records show the bottom fell out of new home building in 2009 with only nine new housing units. So far this year as of Sept. 1, the city issued 10 permits with another five pending, city officials said.


Eastbrook homes has focused its Muskegon County strategy on Norton Shores. The company entered the Muskegon market in 2002 with the development of Windflower Bay on the north shore of Little Black Lake.


Eastbrook has survived because it was not strapped with debt for unsold subdivisions or homes built on “speculation,” company officials said. The company with 43 years of building homes in West Michigan — constructing more than 8,000 over the decades — entered the mortgage market meltdown in 2008 without owing creditors, McGraw said.


The enviable cash position the company enjoys has allowed it to add to its holdings in Muskegon County. Eastbrook Homes has been opportunistic in Norton Shores by being in position to purchase a deeply discounted development that stalled in the face of the Great Recession.


“Now we have an opportunity to invest and have chances to look for good opportunities,” McGraw said of making investments on a cash-only basis. Eastbrook continues to pursue a waterfront development on White Lake on the former Whitehall Leather Co. tannery site that is now undergoing environmental cleanup.


In August, Eastbrook announced it purchased Churchill Woods subdivision on Henry Street south of Porter Road in Norton Shores. Churchill Woods will be sold by Nexes Realty and Bill Carlston, a leading residential real estate agent and subdivision developer in Muskegon.


Jim Rummelt of Den Ketelaar Plumbing Inc. in Grand Rapids works on installing cross-linked polyethylene tubing as part of the construction of a home in the Hathaway Lake subdivision in Crockery Township.

Carlston and local developer Jeff Jacobs began the Churchill Woods development in 2006 and had an agreement to sell all 44 lots to Bosgraf Homes of Holland. The subdivision began but the builder ran smack into the real estate crash, Carlston said.


Eastbrook purchased Churchill Woods from a bank and in another case signed an exclusive agreement to develop the 49-lot Berryfield subdivision in Norton Shores for Community Shores Bank. Community Shores ended up with Berryfield at the corner of Martin and Farr roads after the developer put in the roads and utilities but was unable to build a single house due to the economy.


“They have always worked with their own cash,” Carlston said of Eastbrook’s survival through the Great Recession. “They have had strong financials and not had to go to the bank.”


Carlston estimated that more than 50 builders were constructing homes in Muskegon County during the peak building years but that number has been cut to a dozen. Those that survived also are building, according to Clayton Darrow of ABC Supply Co. in Muskegon, 2285 Roberts


The wholesale supplier of building supplies and materials has seen many of its contractor customers go into home remodeling. Others have gone from building 20-30 homes a year to 2-3, Darrow said.


“I think we hit bottom a couple of months ago,” he said of the local home construction market. “Everyone has gone back to the basics as many owners are swinging their own hammers.”


Eastbrook’s Bob Sorensen — vice president of sales and marketing — said the company’s semi-custom home lineup has changed in these economic times. Value-oriented home designs that he called “simple elegance” is what have become comfortable to clients.


“The show-off space is gone,” Sorensen said of large, seldom-used formal dining rooms. The overall square-footage of homes has declined with the average prices, he said of a company with a marketing tagline of “always more home for the money.”



Houses in the Churchill Woods subdivision in Norton Shores.

A two-bedroom, 1,250-square-foot ranch condominium in Windflower Bay is priced at less than $140,000, while a three-bedroom 1,500-square-foot single-family home in Pine Meadows off Filmore Street south of Grand Haven begins at less than $185,000, according to Eastbrook’s website.


The buyers in this depressed real estate market tend to be growing families or those moving into West Michigan due to a new job, McGraw said. Retirees and empty-nesters continue to be interested in new homes but selling their existing one can be an obstacle, he said.


“Our biggest challenge in this kind of a market is selling what they already have,” Carlston said.


Home prices are being depressed by a large amount of bank-owned properties on the market due to the large numbers of mortgage foreclosures, Carlston said. Nearly half of all of the homes sold in Muskegon are owned by a bank, he estimated.

Thursday, October 21, 2010

Housing starts up unexpectedly in September

Great Article...

Housing starts up, but market still uncertain.

Please respond to me with your thoughts as well!








http://www.msnbc.msn.com/id/39737692/ns/business-real_estate/

Tuesday, October 5, 2010

Here's 5 more reasons to buy a new home now!

by Steve Harney blog post July 27, 2010

Homeownership almost seems like a dirty word in today’s society. People are blogging, tweeting and facebooking their belief that buying a home is just plain stupid. I respect their opinion on the issue though I totally disagree. Why?

This might be the best time to buy a home in American real estate history.

Some might think I’m crazy. Cynics might think that I am saying this because I still hold a real estate license (though I have not listed nor sold a home in ten years). My reason for saying it is actually quite simple. Owning a home makes more sense than not owning a home for the vast majority of families in this country. Let me give you five reasons why.

1. Real Estate is a Great Long Term Investment

Don’t take my word on this. This is what Mike Mandel, former chief economist at BusinessWeek and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say:

We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real estate has still greatly outperformed the stock market over the past ten years.

Below is his chart actually showing the difference between real estate and the stock market.



2. A Home Is a Better Place to Raise a Family

Don’t take my word on this. When Fannie Mae asked current renters for the major reason to buy a house in their National Housing Survey 2010, these were the answers renters gave (they could pick multiple answers):

  • 78% said it was a good place to raise children
  • 75% said because they would feel safe
  • 70% said because you have control of your own space

3. A Home Creates a Sense of Community

Don’t take my word on this. The Federal Reserve Bank of New York just published a paper The Homeownership Gap. The paper explained:

Because owners have a financial interest in their property, they have incentives to take measures that will maintain or increase the value of that property. Some of these measures—such as fixing a leaky roof—are closely related to the house itself. Others, such as investing resources in the betterment of the neighborhood and the community, have broader beneficial effects on the local area, creating what economists call “positive externalities.”

4. It’s Cheaper to Own Than Rent in Many Parts of the Country

Don’t take my word on this. Housing Wire just reported on a Credit Suisse study:

While a segment of the renting population continues to rent, many are looking to dip their toes in the homeownership waters. Credit Suisse said the percentage of median household income needed to pay the mortgage on a median priced home is at a 30-year low… Low mortgage rates and property values makes homeownership more attractive than renting for many. In many markets — including Washington DC, California’s Inland Empire, Las Vegas and Phoenix — paying for a mortgage is less expensive than renting.

And here is a graph from the study:


5. The People Who Do Buy a Home Don’t Regret It

Don’t take my word on this. Probably the best people to ask if buying a home makes sense are the people who currently own homes. A recent national poll commissioned by Bankrate.com found:

Ninety percent of homeowners say they don’t regret buying their home despite a nationwide tsunami of foreclosures, short sales and loan modifications.

It’s a great long term investment. It’s a great place to raise a family. It gives you a greater sense of community. It’s less expensive than renting. People who currently own have no regrets. Buying a home seems like a no brainer to me.

Thursday, September 16, 2010

10 reasons to buy a home now... don't miss out!

10 Reasons to Buy a Home

Enough with the doom and gloom about homeownership. Brett Arends explains why owning a home is a good thing.

The Wall Street Journal, By Brett Arends

September 16, 2010

Enough with the doom and gloom about homeownership.

Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make your rich?"

But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.

3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.

5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.

6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.

8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slumpin western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.