by Glen Haege
Detroit News
If a rising tide lifts all boats, what does a falling tide do?
I went to hear David Seiders, chief economist for the National Association of Home Builders, at the Builder’s Industry Alliance of South East Michigan Economic Forecast Luncheon on Jan. 17.
From the local perspective, Seiders’ remarks could not be called a pep talk. In fact the only folks who thought the speech was positive were those who already had their U-Hauls loaded and were heading out of state.
As far as the homeowner is concerned, all the gloom and doom was not really bad news. When it comes to remodeling or buying a new home, the homeowner is going to be solidly in the driver’s seat for the next few years. Contractors will be anxious for business and willing to make an extra effort to please the customer. This gives the homeowner more power than he has had in years.
Seiders said that the national economic outlook was pretty good. The only things wrong with the economy were housing and automobile sales.
Home sales should reach rock bottom by the middle of the year and then start climbing back.
The housing market was overheated from 2003-2005. Housing inventory had been over-built by 500,000 units, and this overheated the economy. According to Seiders, the Federal Reserve actually looks at the present housing market as a good thing because it is slowing economic growth and setting the economy up for several years of positive growth.
Michigan isn’t as lucky
Seiders’ theme was “If you want to grow, go.” Apparently we’ve been losing jobs since before 2000 and job losses will continue.
Our outstanding housing market in 2002 and 2003 came in spite of a worsening employment picture, due to low mortgage rates and easy credit.
Ups and downs in housing and auto sales are usually cyclical. This time Michigan’s problems are structural and we can’t expect them to get much better until we have replaced the automobile industry as our main source of jobs.
Now for the good news: “Things can’t go down forever,” Seiders said. The affordability of our homes is very good and the slide in requests for single-family housing permits will be up 5 percent in 2008.
The Fed may actually ease interest rates about mid-year and the last election made Washington so disorganized that nothing will be happening in the fields of immigration and tax reform, regulation of Fannie Mae and Freddie Mac mortgage associations, and most other legislation that would require cooperation from both sides of the aisle in Congress.
Since the national economy is doing better than the state economy, the rest of the country will be buoying us up for a change.
Contractors say
More than 500 local contractors and building related suppliers were at the BIA luncheon. I talked to a number of them. Many said that business was down 25-45 percent. A number of them, however, reported that 2006 had been a good year and thought that 2007 would be even better.
Larry Jonas of Williams Panel Brick and Fireside Hearth & Home (734) 981-4700, www.williams panelbrick.com, said that retail business was excellent and that the company planned on starting decorative stone and panel brick installation seminars soon.
Tom Karry, Consella Dorken-Delta MS, (888) 4DELTA4, http://www.consellal-dorken.com/, said that his company’s high-end waterproofing products were making big in-roads because builders were looking for ways to differentiate themselves from the competition. Now, entire subdivisions are being waterproofed with the high-end product. This is great news for the consumer because Michigan builders have long opted for less expensive damp-proofing of basements.
David Compo, J.D., Compo ( http://www.jdcompo.com/), a second-generation builder of medium-to high-end homes, reported that 2006 had been the best year in the company’s history. When asked what his secret was, he said that the company had bundled services together to make things better and easier for the homebuyer. The market rewarded the company’s creativity with increased sales.
On a similar note, Dan Fritschen, author of “Remodel or Move: Make the Right Decision” (ABCD Publishing, www.re model ormove.com), did a survey of 5,000 homeowners last year. Participants had been in their homes an average of 8.5 years and expected to stay in them for 17 years.
Fifty percent wanted to add more rooms; 47 percent wanted to remodel their bathrooms and 55 percent wanted to remodel their kitchens. Also, 65 percent wanted do at least a portion of their remodeling work themselves and 32 percent said they planned to be their own remodeling contractors.
The demand is there, but the market has put homeowners in the driver’s seat. Take advantage of the opportunity.
