HBA President's Blog

HBA President's Blog: Maintaining the Integrity of the Competitive Process

2010-11-14T20:26:00.002-06:00

In today’s highly competitive market we are all looking for ways to expand our opportunities. Many of us are accepting a new reality -- we must bid more and more jobs in order to secure even one contract. We are painfully aware that buyers today are asking multiple builders to bid on their home construction project. Often times we discover that we are bidding against friends in the industry.

Recently, three of our HBA Board of Directors builder members discovered that we were bidding against one another for a large job. We also discovered that we were bidding against several non-HBA members. Our research further uncovered that at least one of those builders got his “tip” on this job from an employee of one of our associate members, and may have gained valuable contact information from another employee of an HBA associate member. Thanks to receiving proprietary information contained on documents submitted by other builders who had already been selected by the client to participate in the competitive process, this non-member builder contacted the out-of-state clients to enter into an already underway bidding process.

The HBA Board has authorized me to share this information to remind our members that ANY & ALL materials submitted for a bid are the confidential property of the builder submitting that information and should be treated accordingly. The Board also wishes to encourage businesses to examine the dynamic of environments with multiple salespeople in which a spirit of “survival of the fittest” can exist with such intensity that a salesperson would unethically obtain proprietary information to bring “their” builder into the bidding process on plans that they may come across, rather than miss out on the chance for a commission.

We trust that all of our members desire to follow the highest professional standards and we are confident that a simple reminder is the only course of action necessary. Please contact a board member or the HBA office with any comments or suggestions. We value your input and continued friendship.

Rusty MacLachlan
President, HBA Board of Directors

Attack on Housing

2010-09-29T15:26:00.000-05:00

The sobering theme of National Association of Home Builders Fall Board of Directors meetings last week in New York is that housing as we know it is under direct attack by the federal government. The Mortgage Interest Tax Deduction that millions of home buyers have counted on since 1913 is on the Congressional chopping block. The recently-signed Small Business Jobs and Credit Act saw AD&C (Acquisition, Development & Construction) finance relief pulled out in the 11th hour. That provision of the original bill would have eased credit restrictions that have crippled efforts to re-start the near dead housing industry (In 2009 we built the fewest number of homes in any one year since World War II - and 2010 is only marginally better).

Over the past 70 years, every recession that our nation has survived was led into recovery by the return of a robust housing market. Our current government leaders have made it clear that they do not support housing growth, and in fact are implementing federal policies to deter what they call “urban sprawl.” A recent article in Time Magazine (The Case Against Homeownership) predicts and supports a complete paradigm shift in our industry. Obama administration officials have made clear their belief that our society needs to move towards a larger population of high density, center city renters, and has promised to use regulatory pressures to “encourage” such change.

With increasingly tougher lending regulations, the projections are that large volume builders with publicly traded stock will increase their usage of this alternate source of revenue. That will allow them to circumvent the much of the need for more traditional funding methods. These large volume builders held a 22% market share when the recession began. Many are predicting their market share to be anywhere from 40% to 70% when recovery arrives.

Have I discouraged anyone? Made anyone angry? Well, the good news is that - here in the Midwest - we have more hope than most. What happens on both coasts need not become our fate here. The so-called “national housing market” varies widely from one part of the country to another. And, particularly in real estate, all markets are local. Nearly 70% of all foreclosures nationwide occurred in just 11 local housing markets (none of them right around here, by the way). NAHB Chief Economist David Crowe predicts that, nationally, we should see a slow but noticeable increase in housing starts in 2011. He cautions that we will not reach normal nationwide levels (like those in the early part of this decade - 1.5 to 1.7 million starts) until late 2013. Notably, he indicated that the middle states will rebound the quickest; and that some areas in the Midwest will be among the very first to bounce back.

The Greater Springfield Area appears poised to be one of those early recovery markets. Our own MarketGraphics data is telling us that new home inventories are now at shortage levels on many parts of the local market. And buyers are returning to the new home marketplace. Housing starts here are up over last year, indicating the worst may be behind us. And no less than Forbes.com recently listed Springfield, Missouri in its “Ten Best Places to Invest in Real Estate.”

Still, for better or worse, national economic realities and federal government actions affect us along everyone else. Be thankful that NAHB is our strong advocate in Washington, D.C., and rest assured that we are fighting tooth and nail to protect and promote the American Dream of Homeownership. Our NAHB leadership team has met three times this year with Federal Reserve Chairman Ben Bernacke, and held nearly 800 meetings with others in the Capital - and our push for AD&C relief (HR 6191) is gaining momentum in Congress. The battles are ongoing and we continue to need your support with your personal lobbing efforts with our Representatives and Senators in Washington. And we need your help to fund BUILD PAC to engage politically at the federal level. NAHB will continue to fight our battles on Capital Hill. We need to do our part politically to support those efforts.

With the mid term elections only weeks away we can send a strong message to Washington by helping to finance the campaigns of those who are support small business and free enterprise principles. Support those candidates understand that economic recovery depends on the return of our housing and construction industries – industries that even now are aching to grow. Your HBA membership and your involvement in the process has never been more valuable or more critically important to our future. Stand strong. Take action. VOTE on November 2.

Keeping the Faith.

God Bless,

Rusty MacLachlan

President's Blog: A Winning Season May Be Just Around the Corner

2010-09-19T15:25:00.004-05:00

“I’m just ready for all of this to be over.” Those words of pain have been uttered by many loyal St. Louis Cardinals fans recently. It’s become pretty obvious that our beloved team has given up. A quick look at the league standings only drive the point home. The team’s season is about to slide into the record books as officially over.

It can be a good thing, though, when the stats point to a negative season being officially finished. For example, our housing market slide appears to be over, as well. The internationally renowned financial magazine, Forbes, lists none other than Springfield, MO, as one of its top 10 housing markets for investors. We have made a list of front runners that includes Indianapolis, Denver, Colorado Springs, Nashville, and Austin, among others.

Forbes contends that real estate investment is gaining momentum. Overall, the housing slide has stabilized in some respects and those markets that were least volatile (prices never gained too quickly, and hence have not tumbled so severely,) are the markets Forbes finds are the safest bets for home investors. And let’s face it – all home buyers are essentially home investors.

The Forbes piece generated a fair amount of press around here this weekend. It is comforting validation from a credible source. But it shouldn’t shock those of us who have been carefully following the MarketGraphics reports and construction forecasts the HBA has offered during the last two years from data gurus like Joe Zanola and Edsel Charles. These guys have been studying housing stats for a long time. That’s why the HBA partnered with them in the first place: knowledge is power. MarketGraphics provides meaningful market data and analysis, the likes of which our area has never before seen. By bringing it to our market, the HBA is helping builders, developers and investors make better informed and ultimately more profitable decisions.

So, what has MarketGraphics analysis taught us along the way? While our market certainly has had its share of hard times, there are meaningful underlying advantages we have over most other markets. And that’s not just cheerleading. It is quantifiable. Those underlying advantages have led us to work through our once overbuilt new homes inventory more quickly, while most other markets still struggle with a glut of new (and now not-so-new) unsold homes. In fact, since May, we have actually experienced new home shortages in many price points throughout the Ozarks!

The Forbes article references many of those advantages in our market. But if you’ve been a part of our HBA/MarketGraphics forecasts and updates, they shouldn’t greatly surprise you: Markets with a stable job mix and population growth before the bust, and growing populations in the immediate future are factors that Forbes looked for in compiling their Top 10 list. Landing at #9 Springfield experienced 8% population growth from 2000 – 2005 and we expect another 7% growth over the next 5 years. Combine that with rising housing values, relatively low inventories, a growing job market (a CNNMoney.com study showed the fastest-growing county in Springfield’s Metro Area, Christian County, was ranked 12th in the nation among top counties for job growth,) and a low cost of living, (a recent CNBC special report “America’s Top States for Business 2010” ranked Missouri fifth in the nation for the cost of doing business.) And, as we all know, this is a beautiful and safe place to live. The Springfield area is one of the nation’s “sweet spots.”

Now, if someone would just tell the investors and lenders what a great opportunity there is here…wait…I think someone just did! Thank you Forbes.com!

The Cardinals season may be coming to a close, but it looks like a new winning season for us is just around the corner. Let’s “Play Ball”. Keeping the Faith!

God Bless

Rusty MacLachlan

Housing Conference Recap - Finding the New Normal

2010-05-16T22:30:00.000-05:00

The "good old days" of housing are gone for good. If you are waiting for the housing industry to get back to normal, you’re in for a surprise. It’s not going to happen. The old "normal" is gone, a new "normal" is evolving. Springfield’s 1st regional housing conference served as a road map for success in navigating the new normal.

Our growing population alone will drive the need for new homes, but the "Mega-Mansions" of recent years will not return. There will certainly always be large, even luxurious homes built, but that will be a rarity. Rising utility costs, increasing material expenses, and a “green” mentality of conservatism all point to a paradigm shift in the housing industry. In short, the homes we build are catching up with the shift the auto industry went through beginning in the 80’s. The end product will be similar: smaller, more efficient, with nicer amenities.

As much as I would love to give the Reader's Digest version of the conference, it would be impossible to include in one article. The speakers were all incredibly knowledgeable and on the cutting edge of our industry. We heard from Debra Bassert, an NAHB veteran who is Editor in Chief of Land Development magazine. Joe Zanola summarized an enormous volume of local statistics to clearly spell out the facts on lot development and new construction for our market, and in relation those to the other 21 states they track. (We are still at the top of the pack in reasons to be optimistic.) Other speakers led break out sessions that were relevant to those in attendance. The day was full of invaluable information -- for example, to download the most up-to-date new housing supply and demand chart for our six county area, click here.

Our keynote speaker Edsel Charles was far more than I expected. His credentials were impressive enough, but the more he “taught” us (he was clearly more than a polished speaker), the more all of those in attendance were aware that we were in the presence of a national housing giant. Mr. Charles was among the final four in President Obama’s hunt for a new Secretary of HUD, in spite of his Republican background. He is a former home builder, developer, and owner of a real estate company where he trained and employed nationally known radio host Dave Ramsey. The founder of MarketGraphics research group, Edsel Charles is mentor to 9 of the top 10 builders in the United States. His list of clients include municipalities, banks and builders that include David Weekly, Centex, Pulte and other nationally-known companies.

The road map for success was presented at the conference -- we are already planning for next year's event. The pitfalls were defined and the path to a different, yet exciting, future was clarified. And while attending this one event will not guarantee success, operating in the dark is not an option for those professionals who will be the leaders in the new "normal". I look forward to learning, adjusting, and moving forward with confidence into an exciting future in building the American Dream. I am still “keeping the faith.”

God Bless,

Rusty MacLachlan

Help for Builders, Remodelers & Developers - Cost of Doing Business Program

2009-11-22T19:44:00.000-06:00

BUILDER/REMODELER-ONLY BREAKFAST & PROGRAM ON DECEMBER 17
As builders, we know our industry is weathering difficult times and that the last couple of years have been challenging, to say the least. At this point home builders have a couple of options: We can sit around and complain about how bad it is; or we can take steps now to prepare ourselves and our companies to be ready when the building industry begins to hit its stride again. I am choosing to be proactive so that I am ready to hit the ground running when the houses start to go up again. And I’d like to offer you an opportunity to do the same.

The Home Builders Association of Greater Springfield has arranged to bring in Steve Hays, a CPA with RubinBrown LLP, out of St. Louis, to come and visit with local home builders about financial management issues unique to our profession. Steve is a nationally-renowned speaker in the building industry whose seminars cover subjects like how to properly evaluate construction cost percentages, gross profit percentages and key operating expenses. He also helps builders identify which reports, technology tools and key statistics and ratios that will be important as home builders prepare for success in the changing times ahead. As well, this type of crucial, market specific data is now available through the HBA, thanks to an exclusive agreement with MarketGraphics research company.

Due to the value and importance of what Steve will present in Springfield, we have decided to combine this presentation with the HBA’s fourth quarter Builder/Remodeler-Only Breakfast on Thursday, December 17, 2009. The Builder/Remodeler-Only Breakfast will begin at 8:00 am at the Library Center (4653 South Campbell in Springfield). At approximately 8:45 am Steve will begin his presentation, which will conclude around 11:30 am. Thanks to the generous support of breakfast sponsor Connell Insurance, the Builder Breakfast and the presentation are offered at no cost to you.

I encourage you to take a few hours and come and listen to Steve as he presents “The Cost of Doing Business – Best Business & Tax Practices for the New Decade”. (Download event flyer by clicking here.) Get your business management questions answered and prepare for success as the coming recovery arrives.

Again, the complimentary breakfast program is ONLY for builders, remodelors, and developers. The staff must have an accurate head count to order food so you MUST RSVP by Tuesday, Decemer 15 if you plan to attend. So, please RSVP by clicking here, or by calling 881-3711.

Keepin' the Faith,
Rusty MacLachlan

Change and the Art of Survival

2009-08-30T22:40:00.001-05:00

A very large Oak Tree was uprooted by a storm and thrown across a stream. It fell among some reeds, which the powerful tree addressed, “How is it that these winds can knock me down, but you who are so weak and frail survive?”

They replied, “You fight and contend with the wind, and consequently are destroyed; while we have learned to bend, and therefore survive.” The art of survival is not to avoid life’s storms, which we cannot, but to learn to adjust.

The time to adjust is here. In fact, a new state law affecting all new homes (custom built and spec homes,) is now in force. Any contract signed after August 28, 2009 must include an offer by the builder to install a fire protection sprinkler system at the expense of the buyer. The choice is fully up to the buyer as is the financial responsibility for the cost of the system/installation. As builders we should supply the buyer with an informational pamphlet endorsed by both the Home Builders Associations and the Missouri Fire Service Alliance, and ask the client to sign a form that confirms their intentions. Both forms are available at the HBA office. State law requires that builders make the offer; including the form as part of your contracts is your proof of compliance with the law. The HBA is requesting that you also provide us with a copy of the Offer Form. As you will come to discover these forms will provide invaluable data for future building code development. The current law sunsets December 31, 2011. At that point each municipality is free to decide for themselves whether or not to adopt the full IRC code that requires fire sprinkler systems to be installed in all new, and many remodeled homes.

The times they are a changing. In fact, in response to our ever changing and ever hungry for instant news society, your HBA has been testing, and is now ready to improve the way that you receive industry news. The printed newsletter that you are accustomed to seeing each month will become a quarterly printed report, and we will be adding a weekly e-Housing News. The board is receiving the test runs and we are more than impressed with the real time, useful reports. This e-newsletter is possibly the most professionally prepared report that you will find anywhere on the web. The navigation, the up-to-date information, and the easy click format is very user friendly. I am confident it will be a welcome new marketing option for those of you who want cutting edge, targeted advertising options.

The HBA is working tirelessly to make sure that our members are the best informed, best represented, and best prepared for success, industry professionals. Hey, now that the storm is over, the weather is looking pretty good. Sales are up and gaining strength. Permits are up, and new home inventory is getting very low. Watch for your weekly e-news reports for more details. God Bless.

Keeping the Faith,
Rusty MacLachlan

President's Blog: A Tale of Two Sams

2009-08-02T15:17:00.003-05:00

A wise grandmother once said, “If you’re having a bad day, then do something good for someone else. You will brighten their day and yours, too”. In the midst of a slow housing market, two of our builder members took the advice of Grandma.

At a time when conventional wisdom tells us to look out for #1, to scale back, to cut out ALL unnecessary expenses, the two Sams rose to the occasion. With the support of countless HBA members and other volunteers, Sam Bradley and Sam Clifton gave of themselves and changed lives. Two families and a hospital that provides cutting edge care to heal critically ill children were the direct beneficiaries, but the lives of all those involved have been forever changed.

Sam Bradley built the 2009 St. Jude Dream Home in our area, a collaborative project of the HBA Charitable Foundation and several other worthy partners. The home, located in Lions Gate subdivision, was a huge success. In spite of a slowing economy, our members (too many to list) donated time, materials, and sweat to produce a stunning home. Under the careful direction of Sam Bradley those involved put forth their very best. This 2009 Parade home was a work of art. This HBA Charitable Foundation project has actually raised approximately $1.7 million over the past three years to assist in the fight to find a cure for childhood cancers. The Dream Home has successfully raised money, but more importantly it has raised hope.

And, before anyone could catch their breath, Sam Clifton announced that he had been chosen to build a home for “Extreme Makeover - Home Edition”. With a groundbreaking date only weeks away, and an allotted construction time of one week, there was no time to waste. Sam Clifton called on the good people of our area and asked them to roll up their sleeves one more time. Many of you responded to the call by saying, “When can we start? What do you need?”

It looked like the State Fair had come to a Greene County farm road. Large circus tents were everywhere. Clifton truly was the ring master of a 24/7, three ring circus. The folks at “Extreme” said that this was an outstanding build and a top quality home. Again, many, many of our best stepped forward to give their all. With little or no sleep, volunteers poured out their hearts as they labored around the clock to assist a family in need. Months of work was squeezed into hours, even minutes. The EMHE’s theme this year is “Heroes”. Sam, you and all those who helped are truly Heroes.

Sam and Sam, and really everyone who had a hand in these events, you have made your grandmothers proud. God bless you all.

Keeping the Faith

Rusty MacLachlan, HBA President

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A Productive Talk With Our Lenders

2009-07-07T16:47:00.004-05:00

The board officers and our Education Czar recently invited member lending institutions to the table to discuss the dramatically different landscape we find ourselves in currently, especially with regard to AD&C lending and individual mortgage loans.

Our objective was to better understand both the market and regulatory forces which are creating the changes that affect our industry so substantially. We also wanted to promote dialogue with our lenders and work to convey accurate information to you, our members, so that you know what to expect and understand what changes we need to make to remain successful in an otherwise volatile industry at an incredibly challenging time.

While builders and lenders may have valid grievances with another – we agreed at the outset not to play a blame game. We need to move on and understand the rules of the game so we can position ourselves successfully. We also want the lenders to understand how our members represent the height of this profession and they can use our professional standards to prevent these problems from recurring in the future.

Here are some of what I believe were the most important points from our dialogue:

• A position of equity: For a speculative home, the builder must have some equity in the deal – no more 80% of appraisal. For example, if you own the lot, that value would be taken into consideration.

• More scrutiny – looking at the builder “globally”: I heard lenders saying that when they are lending for spec or a custom, they will be looking at the builder’s history and full financial profile in a very comprehensive way – debt service, cash reserves, insurance, years of experience, completed projects, current projects (including those with other lending institutions, etc.) They want to see a financial statement with liquidity and a comprehensive, itemized budget for the project. Those who are not professional builders will certainly not meet many of these requirements.

• Loan expiration: The lenders said that there have always been clauses in contracts about actions the lender may take after a certain period of time, if the home does not sell. For many years, however, these were nearly moot because homes were selling here in fairly short order. We need to be aware of the “fine print”, so to speak, and well informed about our legal obligations as well as those of the lender.

• Regulatory Hot Button – Appraisals: Those responsible for oversight of the lending industry are focusing intensely on the appraisal process. Some of the fraudulent schemes we’ve seen in the headlines related to manipulating appraisals are driving changes in the process of ordering an appraisal. Some banks are going to a more random selection of an appraiser from an internal list while others are using an Appraisal Management Company – a third party outside the bank that orders the appraisal to keep the process at an arm’s length.

• The Secondary Mortgage Market: this is a driving force behind this appraisal and other changes by making them requirements for those mortgages they are willing to buy. One banker said those eligibility criteria change and expand on a daily basis. This, of course, is also affecting what is required of the purchaser to qualify for a loan.

• Mortgage loans: a buyer will certainly have to provide a well-documented financial position. In the past, there wasn’t a need for the homeowner to sell their existing home before starting a custom. That may not be the case now. While there are still some bridge loans out there, the perspective on this situation is different. Before, banks made an asset-based decision in this equation. Now, it is more an issue of cash flow and whether or not someone can handle two loan payments for a longer period of time if the house does not sell quickly.

I really appreciated our lender members who made the time to come to this meeting to educate us, to listen to us, and to help us move forward in a productive way.

Keeping the Faith
God Bless
Rusty MacLachlan

Fire Sprinklers "Mandatory Option" is Just what the Doctor Ordered!

2009-04-28T12:19:00.004-05:00

A funny thing happened on the way to mandatory fire sprinklers. The Home Builder’s Association of Missouri and the State Fire Chiefs of the Show Me state hashed out an agreement where the real winner is the buying public. As you well know the National Association of Home Builder’s attempts to halt the inclusion of Mandatory fire sprinklers in the 2009 building codes failed.

Faced with mandatory sprinklers in all new homes, the HBA of Missouri caught the attention of state lawmakers with legislative language that would prevent political subdivisions (cities, counties, fire protection districts) from adopting the residential sprinkler mandate. Instead, the legislation we have supported would require all builders to offer complete information to their customers about fire sprinkler systems, their advantages, disadvantages, and costs:

A builder of single family dwellings or residences or multi-unit dwellings of four or fewer units shall offer to any purchaser on or before the time of enterings into the purchase contract the option, at the purchaser's cost, to install or equip fire sprinklers in the dwelling, residence, or unit.

Notwithstanding any other provision of law to the contrary, no purchaser of such a single family dwelling, residence, or multi-unit dwelling shall be denied the right to choose or decline to install a fire sprinkler system in such dwelling or residence being purchased by any code, ordinance, rule, regulation, order, or resolution by any county or other political subdivision. Any county or other political subdivision shall provide in any such code, ordinance, rule, regulation, order, or resolution the mandatory option for purchasers to have the right to choose and the requirement that builders offer to purchasers the option to purchase fire sprinklers in connection with the purchase of any single family dwelling, residence, or multi-family-unit dwelling of four or fewer units.

Placing this provision in state law would allow the home buyer to make an informed decision whether to purchase or decline a sprinkler system for their home. This “mandatory option” for homeowners seemed like a reasonable middle ground to us.

Action in Jefferson City began with our trip to legislative day this past February, when the HBA of Greater Springfield showed up to Jefferson City in force. In meetings with our representatives and senators we clearly expressed our concerns. They listened and this legislation was drafted to stop what those at the national level could not. Our “mandatory option” proposal was a move towards the center in hopes of finding a compromise with the fire districts. Many municipal fire departments and area fire districts were holding firm in their stand for nothing less than full adoption of the 2009 building code, including the fire sprinklers mandate.

The battle lines were drawn, and politically this was a “Hot Potato.” Senator John Griesheimer, from the St. Louis area, called for a meeting. He asked builders and fire fighters to come to the state capital to find common ground. Matt Morrow and I journeyed to Jefferson City last week to defend the American Dream. Senator Griesheimer made it very clear to the group that we needed to come to agreement and work in good faith. He then appointed the Eureka, Missouri Fire Chief as the meeting moderator, and promptly left the room.

Wow, the odds were not looking good. But, to the credit to the Fire Chiefs, they showed up ready to work in good faith toward a mutually acceptable solution. And, in the end we all agreed that ultimately the homeowner needs to decide for themselves whether or not to have fire sprinklers in their home. The fire officials believe strongly that if the buying public understands the virtues of residential fire sprinklers, then most will opt in. The primary remaining dispute on this day was over whether the state should enact this bill, or if the matter should be at the sole discretion of local authorities.

After a long day we agreed to support passage of our state legislative language, but to include a December 31, 2011 sunset to the bill. At that point the local authorities will regain control of the issue. Both sides agreed to jointly draft and sign a letter supporting permanent local ordinance language that reflects the temporary state legislative compromise of the “mandatory option.” This letter will be signed by the Missouri Fire Safety Alliance and the HBA of Missouri, and it will be sent to all state municipalities. The HBA of Greater Springfield will then spend the next 2 ½ years making the case to local and county governments that they should adopt this model ordinance endorsed by the HBA of Missouri and the Missouri Fire Safety Alliance.

The legislative process can at times be messy, but clearly the system works when you stay informed and stay involved. I have no doubts that our strong presence on legislative day, coupled with a strong PAC is paying huge dividends. Continue to stay informed, stay involved, and most importantly support our PAC, the Coalition for Building a Better Tomorrow.

Keeping the Faith

God Bless

Rusty MacLachlan

Fed Action Means Lower Mortgage Rates are on the Way

2009-03-19T19:18:00.000-05:00

Yesterday, the Federal Reserve announced some very aggressive steps aimed at unlocking the sluggish credit markets, with a major focus on further lowering mortgage interest rates. The Fed said it would significantly expand its ongoing program of buying Fannie Mae and Freddie Mac mortgage-backed securities (MBS) and debt. The Fed increased its planned MBS purchases by $750 billion, making the new target $1.25 trillion, and doubled its slated debt purchases to $200 billion. In addition, the Fed announced a new program to buy up to $300 billion in long-term Treasury bonds over the next six months. These initiatives are just the thing NAHB has pushed for in our recent meetings with Federal Reserve officials and should send a strong signal to consumers that homes can be purchased on very favorable terms.

Mortgage rates should drop significantly in response to the Fed moves. Some lenders have already lowered posted rates by a quarter of a point. This should be encouraging news for potential home buyers who have been sitting on the fence, waiting for the right reason to get back in the market.

Some dealers have indicated that the 10-year Treasury rate could test the December lows of just over 2%. It is anticipated that the majority of the Fed’s Treasury purchases will be centered on the 5-10 year sector, which will have the most influence on mortgage rates. The immediate result was a widening of MBS spreads as Treasury yields collapsed on the announcement of the new Fed Treasury purchase program. This presents an opportunity, however, for the Fed to methodically drive down this spread, as they proceed in acquiring the enormous volumes of Fannie and Freddie MBS and debt as outlined in the March 18 announcement.

You can click here to read the Fed’s official announcement.

If you have any questions, please feel free to contact Dave Ledford on the NAHB staff.

Keeping the Faith

Rusty MacLachlan

HBA President

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Hope Springs Eternal

2009-03-18T23:58:00.001-05:00

Good News! Good News! Good News! The St. Louis Cardinals are still in first place. Well so are the Cubs for that matter. But, opening day is just around the corner and our beloved redbirds are sure to have a banner year.Wow, a little good weather does great wonders for our spirits.

We just cannot help but believe that winter is over. The grass is greening up, the trees are budding, the flowers are beginning to bloom. The signs are all there. To be sure, there are still a few cold days ahead, but there is just no disputing that spring is pushing winter aside.

We also are seeing early signs that the housing slump is losing steam as well. Just this week the Wall Street Journal reported that “Home prices are closer to stabilizing today than at any time in the past nine years.” The data points to a housing affordability index that is at the exact ratio that we last saw in the hay days of the 1980’s. Of course the hot news on the national press in the last few days celebrated the 22% uptick in national housing starts from January 2009 to February 2009. This ended 18 consecutive months of decline. Encouraging news on the national scene!

Locally we can expect our market to rebound even sooner than most. Zanola Research Group suggests that we need to build 666 homes this year in Greene county alone just to keep pace with demand. The report went on to point out that southwest Missouri is continuing on a long pattern of job growth. We see all the reports of job losses but research shows that new jobs outpace job losses in our area. Add growing wages and a steady climb in population and we are three for three in those areas that matter most for a housing rebound.

Three for Three, that reminds me of baseball. Yes, opening day is almost here. Looks like busy days ahead. God bless!

Keeping the Faith

Rusty MacLachlan

HBA President

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Update on HBA & GSBOR meeting

2009-01-14T15:16:00.004-06:00

The leadership teams from The Home Builders Association of Greater Springfield and the Greater Springfield Board of Realtors held the first meeting in what is to become a quarterly event. Both associations recognize that we share common concerns over the housing market, and that we have much to offer each other. I am confident that our cooperative efforts will prove to be of tremendous value to a local housing market that is beginning to show signs of recovery.

We explored opportunities for our builders to share a database of custom home sales that will allow realtors and appraisers the opportunity to use custom homes as comparables for appraisals (thereby fostering higher and more accurate appaisals). And, the GSBOR is looking into adding the Builder's name on MLS forms for each and every listing. A builder's membership, or lack thereof, in the HBA could also potentially be noted on each listing. This would greatly increase the importance, and value of, homes that are built by HBA members.

We have agreed to lead a class for realtors on how to choose a builder, why insurance is important, the pitfalls of using a non-professional builder, and how Builders and Realtors can work together on custom homes. We all agreed that a lack of knowledge in how to cooperate on customs has hampered an often times neglected area that can benefit all involved.

In short, we had a very productive meeting of the minds. Both leadership teams agree that our market has slowed in large part because of news media reports about only those markets that have been hardest hit. In southwest Missouri we have have reasons to be hopeful. Spring is coming, and with it the early buds of our housing market are even now showing signs that they are about to bloom.

Keeping the Faith,

Rusty MacLachlan

A Rare Opportunity

2009-01-07T11:56:00.002-06:00

As Home Show approaches, it is important for us to be able to share the upside of the current market with the public. That is the focus of my message (see below) for the HBA Event Magazine which will be distributed at Home Show and other major events throughout the year.

PRESIDENT'S 2009 EVENT MAGAZINE MESSAGE

After 25 years of marriage I have to let my wife in on a little secret. She’s not my first true love. In fact, as time moves on I find myself longing to find my old love, for just one more day together, just one more trip to the lake. But even if I could find her, I’ll bet time has not been her friend. I am sure she would need a lot of work. Yes that ‘73 Monte Carlo still has a place in my heart. My first investment. Long hot days of work over many summers were required to save enough money to buy that first car. I still can remember the security of those keys in my pocket. The status, transportation, and freedom. I was sure that this 16-year-old who had life all figured out had made a great investment. Until it came time to sell. That $3,500.00 INVESTMENT went for $300.00. WOW! That was sure an eye opener.

Years later I was sold the investment of whole life insurance. I soon discovered that while that policy did have some value, it simply was not the key investment that I needed. My wife and I invested a little in the stock market and that too has proven itself to be a wise decision. But, I’ve found that there’s just something about the stock market that I don’t like. The key to the stock market is “there are no keys”. Oh sure over time the value has gone up and down, admittedly mostly up over the long haul. But, I really don’t know what it's worth. I have to rely on some seemingly random number that pops up at the end of each day to discover what value there is to this invisible investment. I can’t see it, touch it, or really even find it. I can’t get insurance on it so that if a financial storm wipes it out I can rebuild it. Will your friends and neighbors even come to a stock rebuilding party after the storm?

The key investment that I have found true security and value in is my house. You see the key is that there are keys. Not only has the investment in my home outpaced the stock market, I can use this asset daily. At the end of the day, my home provides peace, comfort, and security from the weather and financial storms. Best of all, my home has given me a place where life’s best memories are made. The true value of a home can never be measured in dollars alone. Yet, over the course of time, the American dream continues to be the best financial investment one can make. The investment in a home doesn’t just build wealth, it builds families.

Have you ever heard someone say, “Boy, I wish I had bought a home 3 or 4 years ago?" They kick themselves because the prices and values have continued to climb and they realize that those prices are long gone. Today, we find ourselves in one of those rare places where the clock has been set back 3-4 years. Yes, you can buy or build a new home today at yesterday’s prices. These opportunities only come around once every 25-30 years. In the months to come the prices and values will begin to rise again. In fact, population growth trends indicate that in the next 10-12 years we are likely to face a housing shortage in America.

In my lifetime, I have never seen a better time to buy or build a new home. Interest rates are surprisingly low. Locally, our banks are very sound, willing and able to make very favorable loans. Our local economy is sound. Our area is even experiencing job and wage growth. Now is the time to move. Yes, I still have fond memories of that ‘73 Monte Carlo. But while those old cars hold memories, nothing can replace the deep feelings of home. Taste the American dream. Make the investment of a lifetime today. Invest in a dream. Buy or build your new home today.

Rusty MacLachlan
HBA President

The HBA is In Good Hands in 2009-2010

2008-12-23T18:57:00.008-06:00

If you attended the HBA Christmas Party last week, you had an opportunity to hear in detail my list of "thank yous" to all of those members and volunteers who helped me so much throughout my tenure as HBA President. I won't repeat them all here but I do want to simply say it has been a privilege serving the members of this organization in this capacity. I'm very proud of what we've accomplished and I know that we are extremely well situated for success in 2009 with our new president, Rusty MacLachlan, at the helm.

I've been at a number of leadership meetings in the last week with Rusty and many of our incoming committee chairmen and board members. Rusty has an incredible grasp of both the challenges and opportunities our industry faces at the local, state and national levels. Trust me when I say, he has very detailed plans and the strategic focus necessary to help our industry come through the next two years even stronger. Please engage in HBA activities and events as much as possible in the coming year and make certain you take every opportunity to communicate your ideas to the volunteer leadership and staff. They want to know what you need from your association.

Finally, I want to wish everyone a very Merry Christmas and a Happy New Year. I am already enjoying the holiday - including my uniquely decorated tree (see photo at right) which features my new string of "Bass" lights. This is one good looking tree -- reminds me that fishing season is just around the corner.

Sincerely,

Kevin Clingan

Now, Officially,

PAST President

State Program Will Leverage Federal Tax Credit to Provide Downpayment Assistance

2008-11-30T20:59:00.002-06:00

On Wednesday, November 19, 2008 the Missouri Housing Task Force, on which I serve, held their third meeting in Jefferson City at the State Capitol Building. The Task Force received public testimony from the Missouri Housing Development Commission, National Association of Home Builders, Federal Reserve Bank of St. Louis and the Missouri Real Estate Appraisers Commission.

Missouri Housing Development Commission Executive Director Pete Ramsel discussed a new program within the state agency entitled “Tax Credit Advance Loan Program” that aims at leveraging the $7,500 federal tax credit to provide down payment assistance. According to Ramsel, the new program would enable first-time homebuyers in need of closing cost and down payment assistance to borrow funds on a short-term basis in anticipation of the federal income tax credit from the recently authorized tax credit by the federal government. Without this temporary loan many homeowners cannot buy a house and benefit from this tax credit incentive for first time homebuyers. The MHDC quickly worked to create this program at the request of the Task Force as concerns were noted at the last meeting that there was no way to monetize the federal credit. MHDC Commissioners approved the program at their most recent meeting and they hope to have it operation by the beginning of '09.

National Association of Home Builders Senior Economist Elliot Eisenberg testified on the cost of regulation on the housing industry and Missouri economy. Eisenberg noted that in 2007 the home construction industry accounted for 4% of the gross state product. The home building industry generated $8.4 billion in economic activity through 21,500 new construction permits. In addition, Eisenberg noted that for every 100 homes constructed a community receives $10.6 million in local income and generates $1.3 million in local tax revenues. Eisenberg stated that overregulation often prices potential new homeowners out of the market, which in turn further slows a depressed economy.

Federal Reserve Bank of St. Louis Assistant Vice President William Emmons discussed the issues facing the mortgage lending industry and the severity of the current economic situation. Emmons noted that the current crisis is major, but he does not believe we are heading into a recession.

Emmons blames Wall Street manipulation of the marketplace, failure by the federal government to properly regulate lenders, homebuyer financial illiteracy, high pressure mortgage brokers and irresponsible lenders for the mortgage crisis. Emmons discussed how the credit-default swap occurred and the drastic implications it brought on the mortgage lending industry. Emmons expects the federal government to continuing prosecuting lenders, brokers, realtors, builders, appraisers and borrows for several years to come.

Emmons stated that too many consumers did not save enough money and had no buffer for a financial disaster and were unprepared when the economy slowed. Emmons stated that the Federal Reserve is aware of cases were lenders subjected themselves to a 100% loan to value ratio, which is unacceptable.

Emmons stated that the key to recovery will be Missouri’s ability to find sources of growth through jobs such as manufacturing. The Federal Reserve believes Missouri banks’ credit quality has declined, but overall they are safe and sound. Emmons concluded by stating that Missouri’s new home construction industry has collapsed and he does not see it recovering anytime soon.

MHDC Executive Director Pete Ramsel asked Emmons if Fannie Mae and Freddie Mac will recover and be back in business for the purchase of tax free bonds and low income housing tax credits. Emmons stated that he expects Fannie Mae and Freddie Mac to return to the market soon, but under a substantially different business model.

Missouri Real Estate Appraisers Commission provided an update on their recent dealings with an increased amount of complaints against licensed real estate appraisers. The Commission noted they have received a record number of complaints in 2008 and that a majority of the complaints are being submitted by the mortgage lending industry. Discussion took place among members regarding multiple appraisals for one property and the potential of lenders to shop from several appraisers for their preferred property valuation. Task Force Member David Griege of Paramount Mortgage quickly dispelled this possible scenario and stated that lenders always reserve the right for multiple opinions on property appraisals. Further, central Missouri Appraiser Ann Nunn Jones stated that licensed appraisers all have different ways of appraising property and it is seldom that two appraisers will come to agreement on an exact amount and that property valuations can be higher or lower for countless reasons.

Kevin Clingan

HBA President

A Real Education

2008-11-04T09:24:00.001-06:00

With a little over a month left as president, staff asked if I would reflect back and comment on all that has happened, and what I have gotten out of the last two years.

I have been privileged to serve on many HBA and community committees/task forces during my tenure. At the September Board Meeting, I told our board that future HBA presidents have something to look forward to: the chance to listen and observe our civic and business leaders of Springfield. I have soaked it all in and it has been like attending two years of college, tuition free.
I have long had a fascination with people who are really at the top of their profession. When the Ben Hogan Golf Tour came to Highland Springs, I had to go. I had never played golf and likely never will. I simply wanted to see someone performing near the top of the sport. I wondered, how many rounds of golf and hours of coaching did take to get that good? The rounds of top-level golf originated from the practices and the coaching and all the little bits and pieces learned from various people along the way.

That’s sort of how I feel at this point. During my presidential tenure, I have been fortunate enough to talk with Mr. Hammons about economics and Springfield’s past. I have listened to author/entrepreneur Jack Stack talk about motivating employees and what he looks for when hiring someone. I have learned just what a tough job our city leaders have and felt the weight of the challenges ahead.

There is one thing I do know for sure. Whether you agree or not, I believe our civic and business leaders all share a devotion to Springfield. If there is one thing I have come to fully understand over all the time spent with these devoted folks is this: Our future success hinges on a healthy business climate and the perception that Springfield will continue to be a great place to live, work and raise a family.

The ground work is being done. We have new leadership in place and more on the way. I have been fortunate to ride along. If I could share anything with you as a result of this experience, it would be a sense of optimism for our region and a vote of confidence in our future. There is far more good than bad, but often we only hear the negative.

Most of what I know about the business of home building came from my father, with bits and pieces from others along the way. One of the more valuable things I learned came from Ralph Manley. Fortunately, he taught me 25 years ago that people react better when you are positive rather than negative. Never show disappointment while dealing with a customer, it will only hurt you in the long run.

I really would like to thank all of our members, civic leaders, the CU folks and business leaders for the education.

Kevin Clingan

HBA President

More Carrot, Less Stick

2008-09-10T00:05:00.002-05:00

One of our members recently called and asked the staff to do some research regarding whether Congress would likely renew the energy tax credits related to energy efficient construction. Most of the residential tax credits (windows, doors, roofs, insulation, HVAC and non-solar water heaters) expired at the end of 2007 and could be reported on the April 2008 tax return. The tax credit for solar water heaters and solar panels remains in effect through the end of 2008.

As potential clients are considering building, knowing that energy efficient tax credits for newly constructed homes would likely be available could certainly serve as an incentive to build a new home and to do so in way that makes the home perform more efficiently. Tax credits for home improvements could certainly help the existing housing stock improve as well.
We hear so many public policy makers talking about the high cost of energy and how we have to change our habits and reduce the carbon footprint, etc. It would seem like these tax credits would be a win-win. Guess that’s not how they perceive it in Washington. In fact, the NAHB staff has been working diligently to follow the issue and attempt to make certain that renewal of the tax credits, including those applicable to new homes (Section 45L), was included in any energy bill that might seem to have a chance of passage this year. The last version of the extenders legislation did not include the new homes tax credit.

Apparently there is a political fight over whether the extension of these tax credits should be “paid for” (i.e., offset from somewhere else in the economy). House Democrats say the legislation must be revenue neutral. Senate Republicans have said there is no reason to “pay for” extending existing law so they will not agree to any extension under those conditions.

Also set to expire at the end of this year are the renewable energy tax breaks. See the following excerpt from an article in Sept. 1 issue of the Springfield News-Leader (Renewable Energy Tax Breaks To Expire Dec. 31, Jim Abrams, The Associated Press):
“Congress is putting the short-term future of renewable energy companies in jeopardy even as the presidential candidates and most lawmakers hail windmills, solar panels and biofuels as long-term solutions to high gasoline prices and global warming.”

Without the $500 million in investment and production tax credits, solar and wind power companies say the will not only cancel expansion plans but probably downsize. The market demand at this point is still not enough to make them cost-competitive.

The one thing I know is that what we’ve been saying all along – let the market dictate and when possible, use more carrot (and less stick) to encourage green building – is the only viable way to proceed in terms of public policy decision-making. A prescriptive approach to green building, using mandates in our current economy, would be disastrous. Looks like that is also probably true for renewables/alternative sources of energy production. Consider this final excerpt from the News-Leader article cited above:
“Schott Solar has visions of quadrupling its operation in Albuquerque, N.M., to reach 1,500 jobs and $500 million in investment. But the investment tax credit, company spokesman Brian Lynch said, is what makes solar power cost-competitive. Without it, expansion plans must be reconsidered. "We don't want to build a giant factory that the market doesn't need or want," he said.”

Kevin Clingan

HBA President

CBBT Participation Can Earn More Home Show Points

2008-07-29T16:41:00.002-05:00

One thing I know for certain about our staff, board and committee members, there is a consistent pursuit to grow and promote our association.

Matt Morrow, John Harp, Sam Bradley and myself sat down a few weeks ago to kick around an idea Sam had involving additional Home Show points for those who contribute to the Coalition for Building a Better Tomorrow. Ultimately, we submitted the idea to the Home Show Committee and the end result was three ways for members to gain points for CBBT support/participation:

1. Entry level Coalition for Building a Better Tomorrow (CBBT) donation of $100 or more.
2. Participating in the CBBT Sporting Clays Tournament (if entry level donation has previously been made).
3. Sponsoring the CBBT Sporting Clays Tournament (if entry level donation has previously been made).

The Sporting Clay Tournament offers a perfect opportunity to support your industry’s political action committee. If you aren’t familiar with the CBBT, I hope you will take some time to learn more about this organization that works to elect decision and policy makers who will hold the line on the unnecessary regulation and fees which drive up the cost of housing. Plus, the tournament is fun. We have just about every level of experience represented at this event--from experienced clay shooters to those who haven’t ever picked up a gun before. Regardless of your level of experience, you’ll have a great time and you might even win something!

Because the tournament has grown so much, we are now offering two flights - morning and afternoon. Each will have an awards ceremony. I hope many of you will participate in the tournament or support it as a sponsor. In the mean time, our members will continue tweaking the “mousetrap” and making it better.

Kevin Clingan

HBA President