Home Sales Highest in 3 ½ Years

Sales of previously occupied U.S. homes ticked up last month to the highest level in three and a half years, helped by a jump in the number of houses for sale, reports the News & Observer.  The National Association of Realtors said that sales rose to a seasonally adjusted annual rate of 4.97 million, up from 4.94 million in March.

Home sales have risen 9.7 percent in the past 12 months, evidence that the housing market is still improving. But sales have been roughly flat since November. The supply of available homes remains tight and many potential buyers aren't able to get loans.

The number of homes for sale rose 12 percent in April from March to 2.16 million. But inventory is still almost 14 percent lower than a year earlier. The increase in inventories partly reflects the beginning of the spring selling season. The supply of homes would be exhausted in 5.2 months at the current sales pace. That's below the typical level of about six months. More Americans are interested in purchasing homes: buyer traffic has risen 31 percent in the past year, the Realtors' group said.

Rising demand and tight supply has pushed up prices. The median price of a home for sale jumped 11 percent last month from April 2012 to $192,800. That's the highest in nearly five years. The median is the figure halfway between the highest and lowest number.

Higher prices could encourage more people to sell homes, fueling further sales gains. The increase in prices partly reflects more sales of higher-priced homes. Sales of lower-priced homes are rising more slowly.

And sales of cheap foreclosed properties are falling. The proportion of distressed sales has fallen sharply in the past year, to 18 percent from 28 percent in April 2012. Distressed sales include foreclosed homes and homes in which the size of the mortgage exceeds the home's value.

But first-time buyers made up only 29 percent of sales last month, the lowest proportion in more than 2 years.  That's well below the 40 percent typical in a healthy market and down from 35 percent a year ago. First-time buyers usually help drive healthy markets. They purchase from existing homeowners, who then are able to move on to larger houses.

Many homes are being snapped up soon after being put on the market. Homes were on sale for a median 46 days in April, down from 62 in March. Homes are selling at a 45 percent faster pace than a year earlier. Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. Those changes have left many would-be buyers unable to qualify for the super-low mortgage rates.

Rising demand and limited supply have encouraged builders to boost construction. Applications for building permits rose in April to the highest level in nearly five years. And U.S. builders started work on more new homes and apartments in April compared with the same month a year earlier. Read More.

 

 

NC Senate Proposes Defunding of Rural Center

Guest Editorial from Rural Center President Billy Ray Hall

I was as shocked as everyone else this morning to see a proposed Senate budget that eliminates all state funding for the Rural Economic Development Center and re-creates key center programs in two state departments. 

The budget seriously shortchanges the people of rural North Carolina. The Rural Center has a proven, 26-year history of creating jobs, improving infrastructure and providing access to clean water in the state's 85 rural counties. By removing all state funding from the center, the budget seeks to abolish the one organization dedicated exclusively to delivering a full range of financial resources and technical assistance to rural communities. 

As the budget process moves forward, we look to House Speaker Thom Tillis and the House of Representatives to craft a budget that reinstates center funding and best serves the 4.7 million rural people of this state. 

Why the center is important to North Carolina's rural communities 

The Rural Center is the only statewide body focused exclusively on the economic challenges and opportunities of the state's 85 rural counties. 

The center has delivered more than $600 million in financial resources to rural communities since 1987. More than 33,000 jobs have been created and more than 4,500 business have expanded.

The center's grants have leveraged more than $2 billion in other public and private investments.

91 percent of the center's appropriations directly aid local communities.

The center's job-generating grants have created one job for every $5,700 in grant funding.

Projects funded by clean water grants (two-thirds of the total) serve more than 2 million customers.

Rural communities continue to face daunting challenges from long-term economic restructuring, natural disasters and recession. They need a dependable, proven partner for progress.  Read More.

 

Billy Ray Hall has served as president of the Rural Center since its founding in 1987. Prior to joining the center, Hall served as deputy director of the N.C. Department of Natural Resources and Community Development and chief economist for the Office of State Planning. Former Gov. James B. Hunt Jr. twice appointed Hall to lead state disaster recovery efforts, following Hurricane Fran in 1996 and Hurricane Floyd in 1999.

 

Can You Stop Work for Nonpayment?

If a general contractor fails to pay you (a subcontractor) for work performed or services provided, does the subcontract allow you to stop work? Many general contractor proprietary subcontracts are likely to be silent on a subcontractor’s ability to stop work for nonpayment.
 

The American Subcontractors Association provides members with the information they need to negotiate a particular subcontract clause, including ASA-recommended language, samples of what a subcontractor may see in a client’s proprietary subcontract, an explanation of the impact of poor language on a subcontractor, negotiating tips, and sources for more information.
 

Without specific language in the subcontract, the subcontractor is left with the ambiguous and unpredictable “common law” right to stop work and only if nonpayment constitutes a material breach by the contractor. Stopping work can be extremely risky without specific language because of courts’ wide-ranging views, and can be risky if the subcontract prescribes liquidated damages for unexcused delays. ASA recommends subcontractors include language such as:
 

“Should Subcontractor’s payment be delayed because (a) Customer fails to receive timely payment of amounts certified and approved, or (b) Customer fails to make timely payment after receiving payment for Subcontractor’s work, then Subcontractor may suspend work after giving at least seven (7) days written notice to Customer of the intent to suspend and the date of intended suspension. Should Subcontractor’s work be thereafter suspended for at least twenty-one (21) days, Subcontractor may terminate this subcontract upon written notice of termination to Customer.”
 

If the general contractor argues, “I can’t worry about you stopping work” or “This is an unreasonable request,” the subcontractor can counter with, “Why worry that I have the right to stop my work for nonpayment? If you pay on time, this becomes academic anyway.” The subcontractor could also respond, “I’ve agreed to give you all sorts of rights if I foul up. I need the same right if you default.” If the general contractor persists, “I just don’t get why you think you need this,” the subcontractor could argue, “I don’t have enough money to throw ‘good money after bad’ if payments dry up or if the job shuts down.” Sometimes general contractors insist, “This isn’t industry practice.” On the contrary, a subcontractor could reply, “What I’m asking is in line with what both ConsensusDocs and AIA documents say is fair, and these forms reflect current industry practice.” Read More.

Getting A Handle on the Economic Effects of Drilling in NC

Guest Editorial by Michael L. Walden

Like many public issues, drilling for energy resources in our country has both strong advocates and equally vocal critics. Supporters see domestic energy development as a route to national energy self-sufficiency and lower fuel prices. Detractors worry about possible costs to the environment and our health.

North Carolina has joined this debate. Estimates show our state has the largest reservoirs of off-shore energy resources of any East Coast state. There are also thought to be significant supplies of natural gas underground in the central part of the state.

This information has led to a push for developing North Carolina’s off-shore and on-shore energy resources, with the hope of creating substantial jobs, income and tax revenues for the state.
But what exactly will be the size of these economic effects? And how significant might be the environmental and other costs? Unfortunately, there have not been comprehensive answers to these questions, so – without any funding from any side of the drilling debate – I embarked on a study to find out.

It appears the largest economic benefits could come from off-shore drilling. Based on the mid-point estimates for off-shore energy quantities from the federal government and forecasts of energy prices from domestic and international sources, I estimate that more than 1,100 jobs and $181 million of annual economic activity would be created during a seven-year period of building the necessary infrastructure for drilling off-shore.

Then, assuming a 30-year production period, off-shore energy operations could create almost 17,000 jobs and $1.9 billion of yearly economic activity. Importantly, these economic numbers are only for North Carolina and do not include jobs or incomes going out-of-state. The numbers also include effects on suppliers and other supporting firms.

The average quantities of on-shore energy resources estimated by geologists are significantly smaller than for off-shore, so the economic-impact estimates are also lower. I calculate that just shy of 500 North Carolina jobs and $80 million of new annual economic activity would occur in our state while wells are drilled and supporting infrastructure constructed. Then, as the energy resource is being accessed and produced, 1,400 jobs would be supported and $158 million of yearly commerce would be created.

But these estimates are very, very sensitive to two factors: the amount of energy resources that exists and the future prices of those resources.

The federal government gives a range of estimated energy-resource quantities available off-shore and on-shore. I used the “mid-point” estimate for my calculations – meaning this was the amount the geologists were 50 percent confident was there. However, the government also gives a much lower amount that it is 95 percent confident exists and a much larger amount it is only 5 percent confident is there.

Forecasts of future energy prices are also fraught with uncertainty. Higher prices increase the economic value of the energy. And higher prices also make it profitable for energy companies to spend more exploring and finding more energy. But lower prices send these two effects in the opposite direction.

The point is that different assumptions about how much recoverable energy resources exist for North Carolina and the prices of these resources can dramatically change the estimated economic effects – both up and down – sometimes by a factor of 100!

What about the potential downsides of energy production in North Carolina? For off-shore production, I estimated the average annual cost of damage from oil spills. Using average spillage rates for the last 40 years and estimates of costs per spill, I calibrated the likely average yearly cost to be $83 million. Of course, improved technology and safety related to drilling could reduce these costs.

On-shore energy development from hydraulic fracturing is relatively new, so less data are available. However, several studies have found a negative relationship between on-shore energy production activities and residential property values. Unfortunately, the potential range of the effect is quite large, but applying the results suggests possible – and I emphasize, possible – property value declines between $600 million and $4.7 billion in affected North Carolina counties. The lower property values reflect the perceived adverse effects from drilling.

All these numbers and estimates are subject to change as new information becomes available. But hopefully my study can serve as a baseline for further debate and discussion. Read More.

Reprinted from the May 16, 2013 issue of News & Observer. Michael Walden is a William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at N.C.State.

CAGC-Supported Career and Technical Education Bill Clears House

In a 105-6 vote, the NC House approved a Carolinas AGC - supported bill calling for pay for industry certifications, credentials and bonus funding to be awarded to local administrative units. Under the bill, H968, students would be supported to earn approved industry certifications and credentials. Local school administrative units, in turn, would receive bonuses for each student earning an approved industry certification or credential. 

Funding Proposal: The bill, as initially written, would appropriate $1,252,157 for 2013-14 and $7,011,200 for 2014-15 to pay for industry certifications, credentials and bonus funding to be awarded to local administrative units. The latest version of the bill that cleared the House was amended on the floor without the specific appropriations, as suggested by Rep. Hugh Blackwell, R-Burke, who said he hoped the budget bill would include the appropriations. Specifically, the latest version of the bill says: 

"This act becomes effective only if the General Assembly appropriates funds to implement it in the amounts set out in Section 2 of this act for the 2013-2015 fiscal biennium. If such funds are appropriated, this act becomes effective July 1, 2013, and applies beginning with the 2013-2014 school year." Section 2 of the bill says that the act becomes effective on July 1, beginning with the 2013-14 school year.  

What's Next: The bill will go to the Senate and be assigned to committee. Read More.  

Construction Material Prices Fall 0.1 Percent

National construction materials prices slipped 0.1 percent in April, according to the producer price report by the U.S. Department of Labor. Year over year, construction materials prices are up just 0.4 percent, reported the Associated Builders & Contractors. Nonresidential construction materials prices decreased 0.1 percent for the month and are down 0.4 percent over the last 12 months.

"Contractors should not be surprised if nonresidential construction materials prices bounce back significantly over the next several months," said ABC Chief Economist Anirban Basu.  “In the most recent month, materials prices would have actually fallen significantly except for an increase in energy prices,” Basu remarked. “In recent weeks, commodity prices have generally been weaker, a reflection of a soft global economy still prone to bouts of weakness.

Nonferrous wire and cable prices dropped 3.5 percent for the month and are down 4.2 percent on a year-over-year basis. Prices for plumbing fixtures and fittings slipped 0.5 percent compared to March, but are 0.8 percent higher than April 2012 prices. Prices for fabricated structural metal products decreased 0.4 percent for the month and are down 0.9 percent compared to one year ago. Iron and steel prices slipped 0.3 percent in April and are 9.3 percent lower from the same time last year. Steel mill product prices are an exception to the trend for metal prices, as they increased 0.4 percent for the month but remain 8.9 percent lower than the same time last year.

In contrast, crude energy prices increased 3.7 percent as natural gas prices jumped 15.5 percent. Year over year, crude energy prices are up 8.4 percent. Softwood lumber prices continue to climb and are up 2.5 percent for the month and 33.1 percent during the past 12 months. Prices for prepared asphalt, tar roofing, and siding increased 2.1 percent in April and are 6 percent higher compared to the same time last year. Prices for concrete products increased 1.1 percent compared to last month and are 3.2 percent higher from one year ago.

Overall, the nation’s wholesale goods prices decreased 0.7 percent in April—the largest drop in three years—but are 0.7 percent higher compared to April 2012.

Analysis

“Once again, the headline number for nonresidential construction materials prices remains benign,” said ABC’s Basu. “Over the past six months, the monthly percentage changes in nonresidential materials prices have shown little movement.

“However, beneath the headline numbers is some emerging volatility that should concern contractors,” said Basu. “This volatility is not necessarily associated with rising prices, but rather with expanding monthly fluctuation that may render bidding projects more difficult.

“Economic growth in China now appears to be firming and Japanese economic activity is accelerating, which would tend to be consistent with future materials price increases,” added Basu. “In addition to a shifting global outlook is the impact of central bank policy around the world. Many central banks are now following the lead of America’s Federal Reserve by lowering interest rates and increasing money supplies—a policy environment that is more likely to be associated with both volatile and rising materials prices.

“Only time will tell if materials prices generally remain lower,” said Basu.  Read More.
 

 

 

NAHB Announces Improved Housing Metros

The number of U.S. housing markets showing sustained improvement in three key measures fell slightly to 258 in May from 273 in April, according to the National Association of Home Builders/First American Improving Markets Index (IMI). This total includes entrants from all 50 states and the District of Columbia.

The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Four new markets were added to the list and 19 were dropped from it this month.

North Carolina cities on the sustained improvement list experiencing improvement in employment are: Charlotte, NC (8.2%), Durham (6.0%); Fayetteville (1.9%); Goldsboro (3.6%); Greensboro (1.7%); Greenville (6.6%); Hickory (2.1%); Rocky Mount (1.2%) and Winston-Salem (3.4%).

“The fact that over 70 percent of all U.S. metros are holding onto their spots on the improving list is definitely good news, and representative of the generally brightening outlook for housing markets nationwide,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “That said, our industry’s progress on the road to recovery is being slowed by rising challenges related to the availability of credit, building materials, labor and lots for development.”

“While seasonal trends in home prices resulted in an overall decline in the IMI this month, the index remains at a very strong level and continues to represent markets in every state,” noted NAHB Chief Economist David Crowe. “Some metropolitan areas that had previously charted marginal home-price gains dropped off the list this time as a result of typically softer prices seen in the winter months, which is similar to what the index showed in this same period last year.”

“Today’s report shows that the majority of U.S. metros are experiencing strengthening house prices, employment and permitting activity, which is a much more positive picture than the one we were seeing a year ago,” observed Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. “That’s the big picture on which consumers need to focus.”

A metro area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.
A complete list of all 258 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in May, is available at www.nahb.org/imi. Read More.