"The Law of Supply and Demand" - A comment on the national home-building industry

"It has come down to a classic case of "Catch 22". According to the latest figures just released by the U.S. Commerce Department, the sales of newly built, single-family homes fell by more than 3 1/2% in September, to a seasonally adjusted annual rate of barely more than 400,000 units. If you are in the business of building and selling homes, this is not welcome news. In fact, if your professional livelihood depends in any way on this sector of the economy, to say that it appears you have serious cause for concern is a considerable understatement. According to industry economists, September also marked the 29th consecutive month that the inventory of new homes has continued to decline, to approximately a quarter-million units, or a number roughly equivalent to a 7.5-month supply, based on the current rate of sales. In a more robust market with higher levels of demand that number of units could be absorbed fairly rapidly, but obviously, such is not the case at present. As bleak as these numbers are, they don't begin to constitute all the bad news for the building industry. Numbers from a Census Bureau's recent Quarterly Vacancy Survey (in this case, the second quarter of '09) reported over 14 million vacant homes in the country, including rentals, second homes, homes for sale and those held off the market for whatever reason. The number of these units for sale, including single family and condos, was estimated at slightly under two million and, according to the real estate industry, there are roughly another two million occupied homes on the market as well. In addition, there is the lurking specter of millions of homes that are classified as "under water." Some estimates of these units range into the tens of millions, but the numbers are difficult to verify. Most everyone agrees, however, that those units are not going away, and that they not only affect sales demand for existing new and used inventory, but that they have a significant negative impact on the already dismal appraisal situation as well. The big picture was examined by a group of expert panelists who spoke to the NAHB board of directors at the recent fall meetings in Chicago. The situation was summed up quite succinctly during the session, a discussion of "Outlook and Opportunities and Climate Change," when one of the panelists stated simply: "We don't need additional shelter at this time." And therein, as they say, lies the rub. There is little justification for taking out permits and starting new projects, assuming the financial resources are in place (an increasingly doubtful scenario in and of itself), when the demand for those housing units is just not there. I can't help thinking about the corn farmer. The more he produces the more he drives down the demand, and ultimately, the price of his product. So he has to produce more just to stay even since he is getting fewer dollars per bushel for his efforts. He is on a treadmill that he can't seem to escape. The only way out is for him and/or other corn farmers to go out of business, or … maybe he could try growing something else? Corn may have the highest yield per acre but what does that matter if you and your competitors produce more than you can profitably sell? All indications are that the "recovery" of the housing market is going to be painful and protracted. Maybe a more sustainable business strategy involves the existing housing stock with an emphasis on the sub par performance of more than 100 million housing units already constituting communities in all parts of this country. Most of the programs and incentives coming out of the federal government seem to be focused on exactly this sector of the housing industry and its occupants. The immense need to upgrade, update and improve the performance of our existing residential building stock represents a great reservoir of opportunity for the shelter industry, and it comes at a time when there is tremendous upside on the environmental, social and political fronts as well. It will also provide the means to sustain members of the industry through a period of transition and into a more robust market at some point in the future. Just as important, it may force us to take advantage of a much needed opportunity to refine our products and retool our processes. For as long as I have been in the housing industry, I have heard it said that "builders don't create demand, they respond to it." It appears that we may have finally reached a point where we can say that with a straight face, as bitter as that mouthful is for some." -Ron Jones Home Performance is a specialty of Kodiak Enterprises. Please see www.comfortbykodiak.com for more information about how to improve the performance, durability, and comfort of your existing home.

Summit County Builders Association Newsletter, October 2008

Hello all... This month’s installment brings a myriad of topics for me to rant about. September always brings a LOT of work, even if you completed your Parade home in June like I did. Still, the weather has been great and our industry has been hustling to beat the snow. Economic woes are keeping a lot more folks at home these days, and when they spend more time at home, they have more time to look around and consider what they want to improve. I don’t have any proof, but I think there is a current mini-boom going on with the remodeling business right now, which tells me that maybe this “recession” isn’t quite as bad as the media would have us believe. Of course, “home is where the heart lives”, so they say…it is true that our homes are important piece in the lives of our families. That is why I build homes. Did you think I was in it for the money?!?! Speaking of homes, this year’s Summit County Parade of Homes was really incredible. Once again we outdid ourselves. Our industry is making stunning strides with architecture and design, and of course, energy. Many of our builders and associates showed me how they see through the “green-washing” in the market to produce superior homes that will stand the tests of time, and our design professionals really set a new bar. Great job everybody! November 4th is five weeks away as I write this. This is quite an election season that is upon us. So many issues, it can seem overwhelming. So many questions. I cannot stress enough to all of you how important these local elections are for our collective futures. For the SCBA, how do we navigate this as a group, with our common interests out in front? Who is best candidate for the office they are running for? Who should pay the taxes government has been aiming at our industry? Well, we’re going to have our candidate forum on October 13th, and I strongly believe this event will make it easy for anyone who might be on the fence to make a decision they can feel good about. Please be certain to be there on Monday night, and in the meantime, lobby an SCBA Director about your positions in this election. The SCBA leadership will be taking our association on an active path thorough this election, so get involved and make a difference. We who work for a living in this County cannot afford to be silent. Thanks for listening….Rock your vote.

Summit County Builders Association Newsletter, September 2008

Hello all... The Town of Breckenridge continues to move forward with its density-focused home size limitation policy, citing concerns about community character in the older neighborhoods as the prospects of remodeling with additions and scrape-offs MAY present. Quite a few builders and architects spoke out at a recent planning commission meeting, advising the commissioners that the answer lies not in home size, but in good architecture. However, it appears that the advice is not to be heeded. As the SCBA Board considers our approach with the Town, I am drawn to consider the larger picture. So much of our local government’s activities of late are focused on social engineering, with on onslaught of regulation by new ordinances. Why is there so little faith in the ability of the free market to fulfill needs of the community? “Work-against” replaces a “work-with” approach. In discussion of this matter, one of your SCBA directors used a term I’ve never heard before. “This is Eco-naïveté. It's become cool to be so earth and community sensitive” he said. I laughed, but really it is no laughing matter. Property rights are in jeopardy. I took some time to read the staff report from the Breckenridge Planning Department. Of the 17 public comments in the report presented by staff, 12 were against such a restriction, yet staff reports a mixed bag, and as one of our Directors was told “it’s a done deal”. Breckenridge will have a Floor Area Ratio restriction, and it seems to me that Town Council is ignoring public input. By the time this reaches you, Council will have voted on the measure. In the meantime, the SCBA Board and a few SCBA members will have made a series of attempts to discuss this with individual Council members. We’ll see what we can do. In any event, each of us needs to think carefully about upcoming elections. Quite a few of you are currently engaged in our annual Parade of Homes scramble. Best of luck to all of you in your efforts to complete the homes by September 19th. I’m really looking forward to visiting each home; from the program, it promises to be a terrific Parade. Thanks for listening….See you at our 14th annual Summit County Parade of Homes.

Summit County Builders Association Newsletter, August 2008

Hello all... I would like to extend a congratulations and a sincere THANK YOU to all that rallied in opposition to the recently proposed impact fees. At the July 7th Countywide Planning Commission meeting, the audience was filled with SCBA and SAR representatives to hear the proposal. Thankfully, the Commission was generally not receptive to the idea of new impact fees for the single-family home construction industry. Public comments ran the gamut from open space to construction industry to Referendum 5a and affordable housing perspectives. Gary Martinez from the County Manager’s office was welcomed for a chat at our July 17th Board of Directors meeting. He was to offer some insight into the County Commissioner’s thoughts about these impact fees, but mostly he informed us that the idea was off the table for now. At the July 24th Summit Combined Housing Authority meeting, Lou Fishman and I addressed the impact fee proposal again. It was our first audience with County Commissioner Thomas Davidson since the proposal. Lou and I reminded the SCHA that during the campaign for Referendum 5a, the measure was proposed as a way to avoid future impact fees and inclusionary zoning, and that if affordable housing needed more money, an increase in property taxes would be the next option. The result was that the current impact fee proposal is dead for the time being. This is a victory for our local industry and all that were involved in the opposition this last month. The idea is not defeated, however, and vigilance is necessary. During the fray, SCBA Government Affairs Officer Mike Burman has been in contact with NAHB. National will be providing a review of the proposal. In addition, the SCBA will be commissioning our own study via NAHB of the impact of second homes on affordable housing and the local economy, the very premise County Government has based this impact fee proposal. We’ll be filling our war chest with facts and examples of other communities faced with similar challenges. I am confident that better solutions will result, and next time an impact fee proposal presents, we will defeat the idea entirely. Thanks for listening….I’m going diving.

Summit County Builders Association Newsletter, July 2008

Hello all... Feeling the pinch of the credit crunch and fuel prices that have doubled? Affecting your business bottom line and future opportunities? Thinking that others in this community are experiencing the same thing and want to find ways we can all help each other? Think again! Contained within a stunning proposal by Summit County’s long-range Planning Department are a set of impact fees that just about made me fall out of my chair. The sixty page report contains, among other revisions to the County’s Transferrable Development Rights program, a scheme to single-out our single-family home construction industry in an unprecedented manner. If you thought Referendum 5a was expensive at $2 per square foot, double it for a house over 3000 square feet. For a large home, consider $15 per square foot. Shocking! The supposed “need” for these impact fees is 1) to fund County open space efforts to purchase mining claims and privately owned land in the backcountry and anywhere else outside “urban areas” and 2) to provide additional funding for affordable housing programs. There is clearly an attitude among the Planners and others in government that second homeowners should pay for these efforts. The “tie” of these impact fees to larger second homes is contained within a report commissioned by government. Larger second homes require maintenance and therefore create jobs. Job creation is a good thing, or so I thought, but apparently increases the need for affordable housing. I think I know what the reaction of our Board of Directors will be, but we will discuss it at our July 17th meeting. Personally, I think that if the County wants more money for these sorts of things, they need to ask the citizens for a property tax increase and spread the burden among us all and not single-out one industry. A countywide problem requires a countywide solution. As proposed, this scheme will no doubt hurt a great many people and is a kick-in-the-teeth for a housing industry that is already down. Have an opinion? Want to know more? Attend Countywide Planning Commission meetings and County Commission meetings and direct your comments through the SCBA office. Think that this proposal is crazy and would never pass? Wrong! Without public input to the contrary it would likely slip through. The SCBA Board of Directors will formulate a position statement on this issue and ratify it July 17th. It is up to all of us to carry the message.

Summit County Builders Association Newsletter, June 2008

Hello all... A Breckenridge Town Council work-session item regarding the Summit Sustainable Building Code produced a large audience late last month. In addition to myself, SCBA Directors Michael Rath and Craig Campbell attended. Interestingly, all three County Commissioners were present, too, which I thought was a particularly poignant display of the County continuity I have spent much time lobbying for on behalf of our industry. The specific topic discussed by the Council was when the Town of Breckenridge would adopt and implement this new “green” code. The SCBA leadership had requested a one-year test phase, and the Breckenridge Community Development staff had suggested a few options: two basically immediate, and another of October 1st. Councilman Peter Joyce, an SCBA member, suggested January 1st as the soonest possible date that would still allow architects some time to absorb and implement the new code with their designs. Councilman Eric Mamula, having recently built his own home, echoed the suggestion, stating that his own design process would have been interrupted at an extra cost. The rest of the Council unanimously agreed that January 1st would be the earliest date. So, it appears that beginning in 2009, the Summit County housing development industry will be operating with a new Sustainable Building Code. Summit County government is considering the same timeline and Rick Weinman, Building Official for Silverthorne, has indicated his jurisdiction will follow Summit County. In the meantime, it appears that our Community Development Departments will begin with the test phase, which is necessary to expose any shortcomings of the program, among a myriad of other benefits. The SCBA has requested additional project performance examples be accessible for public scrutiny. Please see our letter elsewhere in this newsletter. We’re hoping that the next seven months of county-wide cooperation will produce revisions to the code that 1) ensure economic equality among the different sectors of our industry and 2) focus the code on the concepts that are truly best for our community. I know you’re asking: “How can I do my part?!” Well I’ll tell ya! First, if you have any specific comments on the SSBC, visit the SCBA website to find an e-mail link. SCBA Director Randy Barrientez will be consolidating our comments and submitting them to the Efficient Building Advisory Group. Any backup documentation supporting your point would be extremely helpful. Second, if you have upcoming projects, or you have recently started a project, be sure to have your Community Development Department submit your SSBC worksheet to the High County Conservation Center for posting at their website. Examples will be the tools that help us all to refine this new code for our mutual benefit. Next month, I will explore whether we are experiencing a slowdown in Summit County’s housing industry, and if so, what does it look like? See you at the golf tournament… Dave Koons

Summit County Builders Association Newsletter, May 2008

Hello all... April 30th: The weather has been nice. Giant piles of snow have been receding. Still, the weather forecast calls for 7 to 12 inches over the next 24 hours! This is springtime in the Rockies. Just when you thought… Earlier in the week, I had an encouraging meeting with Jennifer Kermode, Director for the Summit Combined Housing Authority. The SCHA has enjoyed continued success with their down-payment assistance programs and sales of deed restricted units. The SCHA continues to serve a vital need for this community. The focus of our meeting, however, was the disposition of monies collected by our five governments in impact fees. Simply stated, Referendum 5a directed impact fee monies to be used for capital projects and the sales tax component for administrative costs and other programs. My concern is that, a year and a half later, only two of the five governments are moving forward with individual plans for capital projects. I think the citizens of this County expected, and voted for, a singular effort. Unfortunately, however, the cooperation promised isn’t happening. Clearly, combining the impact fee monies in a singular effort would provide greater efficiency and better use of our taxes. Instead, with limited funds, each government has chosen to individually attempt negotiations with developers regarding projects in their respective towns, which begs the question: Why on earth isn’t the SCHA the developer? Why haven’t they hired a Construction Manager to contract with architecture and civil engineering firms to plan these projects on public land? Most importantly, why aren’t the five members of the SCHA working together for the benefit of our entire community? It is important for me to point out that, by asking these questions, I do not seek to expose a failure. On the contrary, I strongly support the success of the SCHA with Referendum 5a. It is important that the tax money we pay achieves the best results in closing the housing gap countywide. Now that a fair amount of money has been collected and land has been identified, the time has come to make this community benefit happen in one direction, not five. Congratulations to Peter Joyce in Breckenridge, Bruce Butler in Silverthorne, and Gary Wilkinson and Larry Sawyer in Frisco for being elected to their respective town councils. The SCBA supported these candidates in their bids for election, and we feel they will do well to represent the industry countywide. Last month, your SCBA Board of Directors voted to support the Summit Sustainable Building Code. Here is what was written to the community development departments: “ (Jane please cut and paste the text of the letter here)’” Thanks for listening…. Dave Koons

Summit County Builders Association Newsletter, April 2008

Hello all... By the time this newsletter reaches you, our first ever local election candidate forum will have happened. I sincerely hope you were in attendance. I am eager to press the questions that the business community needs to ask of our local elected officials. At the top of my list is the question of “County continuity” and who thinks it is important. With five governments in Summit County, it seems impossible to have each jurisdiction in lock-step with one another, unless of course our representatives are committed to it! And they ought to be. Summit County is not so large that we need five governments with five different methods for solving the issues we all face together. What we need is continuity. Continuity brings cooperation. Cooperation brings efficiency. Efficiency in government benefits us all. Look at Referendum 5A. Town officials said little in the multitude of meetings that occurred leading up to the ballot question. The Housing Authority said they would never have brought the ballot question without the support of the SCBA. The SCBA supported the measure with caveats we made quite clear. The measure passed, the impact fee. Then five governments practically ignored our caveats and each did their own thing with administration of the millions in tax money supposedly earmarked for one entity, the Housing Authority. Had the ballot question been clear on how all of this would actually play-out, I think the result would have been different: there would be no Housing Authority funding. I have mixed feelings on this whole story. On the one hand, I see five governments sitting at one table on a monthly basis and discussing affordable housing strategies as one (this is good!). On the other hand, I see minimal cooperation between five jurisdictions on spending the impact fee revenues in a combined effort. Clearly this is what the citizens expected when they passed Referendum 5A! As I consider this example a year and a half later, an important point comes to mind, one that I’ve come to fully realize only recently. Here’s the negative spin: it seems clear to me that some of our council representatives suffer the mushroom syndrome, where they are kept in the dark, fed dung, and – when grown big enough – decapitated, by the town government staffers. I know, this is a harsh comment, but from what I have seen with Referendum 5a, and now with the Summit Sustainable Building Code, the challenge for a member of town council is to read between the lines of staff reports and ask the hard questions about whether an issue was handled with integrity and continuity. With local elections upon us, we citizens have the opportunity to seek out and elect those council members that have the right stuff. I will be at the Town of Frisco Town Council meeting March 25th to address said Council regarding yet another town government folly. The Efficient Building Advisory Group, creators of the Summit Sustainable Building Code currently being discussed throughout the County, agreed unanimously early in the process that County continuity with regard to this code is paramount. Now Frisco plans to deviate from that agreement, requiring more points than the code was designed for and choosing costly LEED for New Construction for multi-family projects. Here we go again! Two members of our Association, Gary Wilkinson of Range West Engineers & Surveyors and Peter Joyce of Rockridge Building Company, are running for the Frisco and Breckenridge councils respectively. These guys DO have the right stuff and I encourage all of you to vote them in if you live in these jurisdictions. As for the rest of the council hopefuls, I guess we’ll see who’s best for our community at the candidate forum March 26th. I hope you were there to support local business groups during a critical election. Be sure to vote appropriately April 1st and April 8th. Thanks for listening…. Dave Koons

Summit County Builders Association Newsletter, March 2008

Hello all... As I write this monthly membership address, it appears that the deep freeze has thankfully broken. December and January presented substantial struggles for construction operations, and I am quite impressed with how many contractors continued in the wind, snow, and sub-freezing temperatures. The weather, though it seemed extreme, was more normal by my experience. Certainly the resorts and the snow sports enthusiasts should be happy. By the time this newsletter reaches you, petitions to town councils for Breckenridge, Dillon, and Frisco will be announced. We know already that Gary Wilkinson of Range West Engineers and Surveyors will be running for Frisco council. The SCBA supports Gary in his bid for council and intends to help him achieve that goal. Some measure of reason and construction experience would be very helpful to leadership of the Town of Frisco. In Silverthorne, petitions are due March 14th. Local council elections are April 1st for Breckenridge, Dillon and Frisco and April 8th for Silverthorne. Please take some time to get to know the candidates and exercise your right to vote. Be on the lookout for candidate forums in March. This is our opportunity to shape our future communities in ways that match our common interests. If you didn’t join in the SCBA’s formal comments on the Summit Sustainable Building Code, it’s not too late to add your two cents. Public input can continue in perpetuity via e-mail to building@highcountryconservation.org. Supposedly, the Efficient Building Advisory Group and the Technical Advisory Panel will continue to edit this “living document” to ensure that works well for the building industry here in Summit County. Some of the major comments the SCBA provided to the group for inclusion in their second draft include: • Expansion of the sample projects to include more examples and multi-family. • Evidence that all measure of multi-family projects are equally challenged by the SSBC. • Requirement of assistance from our local governments written into the code with regard to homeowners associations and opposition to some of these measures. • Inclusion of a "hardship" appeal process described within the SSBC ordinance. You may have read in the paper how Frisco intends to adopt the document immediately and prior to any second draft. The SCBA opposes this action. This “code” is simply not ready and public process has not been allowed. We’ll be at the Frisco Council meeting February 26th to voice our opposition to their fast-track process. Preparations are well underway for our Home and Outdoor Living Show at the Keystone Conference Center. If you haven’t signed-up to participate, the time to do it is now. This is a perfect opportunity to expand that exposure and get one-on-one time with the clients who saw your product in the Parade. Also, please note that volunteers are being sought for the show, so please contact Jane and get involved in another great event for the SCBA and the community. Don’t miss our March General Membership meeting with our local building officials. Tom Taylor, CAHB’s new President will be there so this is also a great opportunity to get a fresh perspective on statewide issues. Members should bring a non-member, as the meeting will certainly show the many values of our Association. Happy Building!

Summit County Builders Association Newsletter, Febru

Hello all... It is hard to accept the media’s warnings of a recession when our beloved Summit County appears to be bristling with activity. Snowfall has been steady and the traffic has been thick. Ski area parking lots seem quite full…am I missing something? While it is true that the mortgage crisis has negatively affected homeownership for a great many people nationwide, is it severely affecting our local industry? So far, no particularly bad news has presented, but certainly it is a time to be vigilant. Our local council elections are coming April 1st and April 8th. If you or someone you know is interested in participating in local political leadership, petitions are due to Breckenridge, Dillon, and Frisco on February 29th. In Silverthorne, petitions are due March 14th. The SCBA hopes to sponsor a candidate forum in March, perhaps in cooperation with the Summit Association of Realtors. Stay tuned for more information from the SCBA and watch your local governments for meeting opportunities. Last year, Colorado HB07-1146 required all cities and counties with building codes to adopt and enforce a relatively up-to-date building energy code by July 1, 2008. Draft of the Sustainable Building Code has been distributed via e-mail to our membership and the SCBA leadership was interested in your comments prior to the public forum on January 31st. We find it disappointing that the Town of Frisco has proceeded to adopt the code prior to a public forum. The draft code most certainly has some details that are ill-defined and incomplete, and some of the content was never discussed by the Efficient Building Advisory Group, which two of our Board members participated on. More discussion is warranted, and some investigation into what the Town of Frisco did. Initially, I was quite concerned that this Sustainable Building Code didn’t apply to multi-family and commercial projects. As it turns out, the code does apply to multi-family, and according to the building officials, commercial projects will be governed by the International Energy Conservation Code in Breckenridge, Silverthorne, and Summit County. The Home and Garden Show approaches and we’re very happy to have Betty Naftz as our chairperson this year. It is time to think about reserving your booth space, and I hope that our builders consider more displays in the builder gallery. If you’ve participated in the Parade of Homes as a sponsor, this is a perfect opportunity to expand that exposure and get one-on-one time with the clients who saw your product in the Parade. Builders, if you had a non-member sponsor for your Parade home, please contact them and encourage them to participate. Also, please note that volunteers are being sought for the show, so please contact Jane and get involved in another great event for the SCBA and the community.