The North Peninsula Building Association represents builders and associates of the building industry. We advocate constant improvement of building and business practices to provide quality construction in our community.
Vol. 5, Issue 7
PO Box 748 • 3430 E. Highway 101, Ste. #1, Port Angeles, WA 98362
What’s Wrong with this Picture? by Greg McCarry Westerra Homes
Imagine a conversation in which someone is describing a market where rents are rising, home prices are low, interest rates are below 4 percent, home inventory is shrinking, housing affordability is at a record high, new purchases are up 22 percent over last year and prices are starting to rise. What would you say? Take a look at these indicators: • -42.65 percent: Year over year (as of May) decline in Seattle area for sale home inventory • -28 percent: Decline in available inventory in 22 counties covered by NWMLS • 22 percent: Increase in Washington pending sales in 22 counties covered by NWMLS • 5.9 percent: Nationwide increase in pending sales for month of May • 12.8 percent: Average increase in prices since January 2012 in 22 counties covered by NWMLS • 3.66 percent: National average 30-Year Mortgage Rate • 2.1 Million: Pent-up demand for homes estimated by National Association of Home Builders • 4 percent: Annual rate of increase in rents • 183 percent: Housing Affordability Index. A family earning the median income has 183 percent of the income needed to qualify for a median-priced home, assuming 20 percent down. • 19.8 percent: Nationwide increase in new home sales over
last year Conditions for buying homes — including a record high affordability index, low prices, and rock bottom interest rates — may represent a once-in-a lifetime opportunity for a home purchase. However, the combination of increasing rental demand, rising investor cash purchases and declining home inventories are creating competitive conditions for those buyers getting into the market for homes and for those sitting on the sidelines thinking the chance to buy will still get better. All markets are local and these conditions don’t exist everywhere — like our own Clallam County market. For Clallam County homebuilders, the gap between cost to build and the median price is still too wide to unleash even a normal rate of new home construction. Generally, buyers are willing to pay a 7-percent to 10-percent premium for a brand new home over a resale. However, with an average price of $190,000 for a 1,700-square-foot home and cost to build (sales price) of $250,000, there is a gap of 25 percent. We still have to narrow that gap by at least another 15 percent. Fortunately, the markets that ultimately send customers to our area are steadily improving, including the four counties on the I-5 corridor: King, Snohomish, Pierce and Thurston. Here is a snapshot of year-to-year activity in those markets for pending sales activity. Pending sales are newly written purchase agreements for the month. From January through May of 2012, there has been steady improvement in the numbers. See the chart below:
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Return on Industrial Insurance (ROII®) Check Distribution NPBA recently held an ROII® check distribution event and returned nearly $170,000 to members who participate in the program. If you are interested in learning how you can get a refund on your L & I premiums and more about this great member benefit, please contact the NPBA at 452-8160 or e-mail email@example.com.
Continued page 2
Source: Northwest Multiple Listing ServiceNumber of Homes For Sale vs. Sold
NPBA Member Dave Lamon of Precision Truss is happy to have received a refund check, as well as his Green Spike award. NPBA would like to thank Dave and his company for being a charter member of the NPBA and for supporting the organization for nearly 36 years!
Vol. 5, Issue 7
Continued from page 1 Monthly payment matters There is another real issue for prospective home buyers. That is the fact that consumers are focused on home prices but ignoring the real cost, which is the monthly payment. For example, even if prices fall another 10 percent but rates go up by just another 1 percent, then it would cost more in the monthly payment. Say you want to buy a home that costs $250,000 with 20 percent down. You would need to borrow $200,000 with a current rate
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July 2012 of 3.75 percent, giving a monthly payment of $926. Now let’s say the prices fall another 10 percent and the same house is now priced at $225,000 with 20 percent down. The new loan amount drops to $180,000. However, if rates rise by just 1 percent to 4.75 percent, the new payment is $938 — it goes up! If prices DON’T fall any further and rates go up by 1 percent, then the payment is $1,043. At the $250,000 price range, a 1-percent change in interest rates costs $22,000 in borrowing power. Another factor is that of the many housing units representing a pent-up demand for 2.1 million homes (houses and apartments). That’s because many young people have moved back home after college or people have combined households to save money. The key to unlocking the pent-up demand is a better job environment. I do believe we will see improvements in the homebuilding sector in Clallam County as our external markets continue to improve, driving demand our way, and as an improving job market unleashes the pent-up demand on a market featuring relatively low inventories at favorable prices and terrific interest rates — creating a home-buying environment that represents the best opportunities we may see in our lifetimes. For full report, visit NPBA.info.
Housing Affordability Index
The Housing Affordability Index measures the degree to which a typical family can afford the monthly mortgage payments on a typical home. A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20-percent down payment. For example, a composite housing affordability index (COMPHAI) of 120.0 means a family earning the median family income has 120 percent of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the COMPHAI, then, shows that this family is more able to afford the median priced home. The chart above shows housing affordability. This is an indicator of how much a median-income family earns relative to the cost
Calendar of events: August: 9 NPBA Board Meeting, 5:00 p.m. 23 Housing Summit, Cedars at Dungeness 28 Rob McKenna Event
5 Expo Committee 20 NPBA General Membership Meeting 28 NPBA 13th Annual Golf Tournament
of a median-priced home. This chart shows a very dramatic increase in housing affordability due to lower home prices, dramatically lower interest rates and personal income improvement. The median-income household has 195 percent of the income needed to buy a median-priced home. So why are buyers delaying? It is still the low levels of confidence, lack of ability to meet new down payment requirements and tight credit standards. But this remarkable catalyst stands ready to charge the market as lending conditions improve and confidence returns. This period is a rare lifetime opportunity to capture the advantages of current market conditions before the general market realizes it. The buy lowsell high theory is at play now if you have the guts to ignore the herd.
business briefS: Everwarm Hearth and Home
Bio-mass hearth products (wood and pellet stoves, fireplaces, and inserts) have made an evolutionary leap. Travis Industries has released its newest line of wood and pellet products with LESS THAN 1% EMISSIONS! These earthfriendly heaters are more efficient and more user-friendly than existing biomass heaters. Everwarm recently sent 4 employees (Linda Alger, Shelby Dumas, Ernie Cashman, and Jim Amundson) to a week-long training class to learn all about these record-setting appliances.
Vol. 5, Issue 7
Dear Donna Donna L. Knifsend
Dear Donna: Question: As an employee of a public agency, I am concerned with the taxpayer dollars being spent on interagency disputes. How can we mitigate disputes and build healthy relationships to better serve the community?
Answer: Today’s agencies find themselves facing a host of competing challenges: accelerating technological change, the emergence of new laws and regulations (i.e. Public Records Act), cutbacks in personnel, tighter budgets, the need for accountability and transparency,
and — yes — politics. Add to this mixture that public agencies often have management and collective bargaining agreements, and it is easy to see that disputes can become polarized very quickly. With all of these challenges, public agencies as well as private companies need to implement new thinking and new strategies. All stakeholders need to explore innovative ways to resolve disputes internally and externally. Many Risk Management departments have incorporated alternative dispute resolution (ADR) tools, but without proper training for staff, unions, management and attorneys, such tools are sometimes ignored or used improperly. With the above considerations in mind, I encourage public agencies to explore the various methods of dispute resolution under the ADR spectrum. Mediation and arbitration are not the only procedures that may assist in reducing interagency disputes. Implementing ADR tools such as neutral fact-finding, early neutral evaluations, and a blending of different processes often provides relief to otherwise protracted taxpayer dollars
NPBA 13th Annual Golf Tournament Start practicing your swing as the 13th Annual NPBA Golf Tournament is just around the corner, Sept. 28! Sponsorship opportunities are available. Don’t miss your chance to bring name recognition to the participants of the tournament and demonstrate your support for the NPBA and its programs. If you are interested in sponsorship or would like to register for the tournament, give the office a call at 452-8160 or e-mail firstname.lastname@example.org. Cost per golfer is $90 and includes a cart, range balls, drink ticket, dinner and prizes!
being spent. It is important to remember that ADR is not a one-size-fits-all solution to disputes, nor is it meant to be a “touchy-feely” procedure. Some of the less-used forms of ADR provide opportunity and communication to help evaluate and eliminate impasse early, resulting in effective use of taxpayer dollars. For example, early neutral evaluation can assist in providing timely opinions on how a case might be decided if it went to court. Alternatively, when litigation is necessary to implement change and set precedent, ADR procedures can streamline discovery and stipulations, thereby reducing protracted litigation. ADR does not mean giving in but rather reaching common ground and solutions those stakeholders may not have otherwise considered. Additionally, the community needs to take active participation in reducing disputes and taxpayer costs as well. While the demand for public records and transparency sounds responsible, it is often abused and misused by the public, thereby stifling creative and innovate approaches to dispute resolution. Conflict and differences of opinion can be potentially constructive or destructive. Conflict can be good when it brings about constructive input on potential concerns. Collaborative input is constructive in reducing litigation
Needed NPBA is looking for volunteers to serve on a variety of committees. If you are interested in helping, please contact FaLeana at email@example.com or call the office at 452-8160 to discuss the rewarding volunteer opportunities which exist in your association! costs as well as red-flagging areas of conflict where change is needed within an agency. All taxpayers and public agencies need to evaluate what the common goals and needs of the community are and work together with those agendas in mind rather than focused positions and politics. The bottom line is that most conflict should be viewed as an opportunity, not as a battle between agencies or internal departments. Donna may be reached at: Donna L. Knifsend, Esq. PC 360-670-9406 or e-mail her at LawsuitPrevention@att.net. Disclaimer: The advice given herein is strictly for informational purposes only and does not reflect advice to the readers. If you have a legal issue, see an attorney for full evaluation and advice.
Thank you for voting us Best Place to Bank for 16 years!*
NPBA would like to thank the following companies for their continued support:
Aawnings & Sunrooms of Distinction Aldergrove Construction Angeles Plumbing Inc. Clark Land Office Cozi Homes Gary Priest Excavating JP Cabinets Lakeside Industries Osterberg Landscaping Parry Construction Power Trip Energy Rainbow Sweepers Spa Shop & Pellet Heat Company Sunset Wire Rope
Angeles Furniture Berneking Concrete Homes C & J Excavating Inc. Clawson Construction LLC DelaBarre Construction Eagle Home Mortgage Estes Builders LLC Extra Mile Tech & Electrical Feeley Construction Inc. J & J Construction of Port Angeles Jim Pfaff Construction Lincoln Industrial Corporation Inc. Oasis Well Drilling Inc. Olympic Electric Company Inc. Ralph’s Drywall
New Members: Allen Roofing • Oasis Well Drilling
Lower mortgage rates. Faster closings. We’ve made our mortgage loan process easier, faster, better!
800-800-1577 ourfirstfed.com *First Federal was voted Best Place to Bank and Best Customer Service in 2011 Peninsula Daily News ‘Best of the Peninsula’ poll. Member FDIC
Vol. 5, Issue 7
Why the 30-Year Fixed-Rate Mortgage is Important FaLeana Wech,
NPBA Executive Officer
Clawson Construction 360-457-8247
Lic. # CLAWSCL963RS
Partners Dave Clawson and Kevin Russell of Clawson Construction excel in building custom homes, remodels, light commercial and traditional log homes. Dave has over 20 years in the construction industry and has earned a solid reputation for quality work. With an innovative approach to each project, he provides the results that customers value. Dave manages the Dave KevIn construction services and provides the crew with an ongoing education of solid building fundamentals while Kevin oversees design, project management and operations for the company. Kevin is a former board member of several building industry groups, including the NPBA, and is a Master Certified “From planning to building, Clawson Construction Green Professional. kept me informed so I could make the best design and financial decisions possible. Their building skill By combining management and expertise, material product knowledge, and skills with technical expertise, Clawson logistical management of subcontractors made Construction strives to the entire process less stressful. The final product build every home as if it was a beautiful home, that included everything I were their own. With a wanted. Without hesitation, I would recommend passion for building and hard work, they take pride Clawson Construction.” — Rich Erickson in their craftsmanship, use of quality materials, and great attention to detail. Member “Hartnagels and Angeles Millworks have been our suppliers of choice since we started. Their selection and quality of materials, along with great customer service, allow us to get projects done in a timely manner. We get a great value from the Millworks and Hartnagels and we can pass the savings on to our clients.” —————————— Contractor Spotlight is sponsored by —————————— Lumber and building materials for all types of construction projects.
1601 S “C” St., Port Angeles
457-8581 • angelesmillwork.com
3111 Hwy 101 E, Port Angeles 452-8933 • hartnagels.com
Rely on the employee owned and operated stores that contractors rely on!
Today’s historically low mortgage interest rates are good news for both prospective and current homeowners. Families looking to buy can afford more home for their money, and homeowners may be able to refinance their mortgages and lower their monthly payments or tap into their home’s equity to pay for expenses such as school tuition for their children or a major renovation. But the 30-year, fixed-rate mortgage — the primary housing financing tool for most Americans — is being threatened. Some members of Congress are pushing to end the federal backstop for housing. Without a federal role to absorb market risk, private lenders would increase interest rates and fees on all types of available financing options, including the 30-year, fixed-rate mortgage. During the Great Depression, the national homeownership rate was well under 50 percent and buyers were often forced to finance their homes with a 50-percent down payment on a five-year balloon mortgage. The 30-year, fixed-rate mortgage came about as a result of President Franklin Roosevelt’s New Deal policies and played a pivotal role in helping to increase the national homeownership rate so that today two out of three Americans own a home. The 30-year loan is the most popular and sustainable mortgage in the marketplace for many reasons: • Affordability. Thirty-year terms lock in low monthly payments, allowing households with average incomes to comfortably budget for their home loan. • Inflation protection. Knowing their monthly housing costs will remain the same year in and year out regardless of whether interest rates rise provides households with a sense of financial security and also acts as a hedge against inflation. • Long-term planning. Many young buyers know that as their incomes rise, their mortgage payment will stay constant and take up less of their monthly budget, which will enable them to save for other costs such as their children’s school tuitions and their own retirement. • Tax advantages. In most instances, all of the interest and property taxes a home owner pays in a given year can be deducted from their gross income, reducing their taxable income. This can result in thousands of dollars of tax savings, especially in the early years of
a 30-year mortgage when interest makes up most of the payment. Economists agree that there can be no sustainable economic recovery until the housing market rebounds. A sound housing finance system that provides a stable and affordable supply of credit for home buyers and rental housing is essential to ensure a healthy housing market, to keep standard 30-year fixedrate loans and adjustable rate mortgages readily accessible and affordable, to spur job creation and to maintain a strong and durable economy. To learn more about the threats to homeownership and how to take action to protect it, contact the North Peninsula Building Association at 452-8160 or go to www.protecthomeownership.com.
2012 Officers and Board of Directors President: Rick Gross, Estes Builders LLC 1st Vice President: Garret DelaBarre DelaBarre Construction 2nd Vice President: Bill Feeley, Feeley Construction Inc. Treasurer: Julie Myers, First Federal Secretary: Donna Knifsend Lawsuit Prevention & Mgmt Immediate Past President: Tracy Gudgel Zenovic & Associates State Directors: Annie O’Rourke, Drafting Solutions Scott Schwagler, J & J Construction Garret DelaBarre, DelaBarre Construction Mark Smith Builder Directors: Alex Anderson, Alex Anderson Concrete Larry Hanna, L.P. Hanna Construction Bill Feeley, Feeley Construction Inc. Greg McCarry, Westerra Homes Associate Directors: Kelly Raymond, Sound Community Bank Dan Donovan, Allform Welding Inc. Roger Wheeler, RJ Services Life Director: Bill Roberds, Excel Utility Construction Inc. Executive Officer: FaLeana Wech