It feels like we’re finally entering a year where the significant impacts of the pandemic are in the rear-view mirror. Certainly, the economy as well as more typical challenges are still in play, but we’re seeing signs that key parts of HBA’s operations are improving and showing promise for stronger growth as we move further into the new year. That is welcomed news after almost three years of rough, chaotic and unpredictable seas.
That certainly doesn’t mean business is returning to usual. In fact, none of us should expect that. We may not know exactly what will be different or how current impacts and pendulum swings will re-center, stay stationary, or swing the opposite direction. However, like any strong business, we are focused on identifying what our members/industry need going forward, and what we can learn from recent challenges and changes to help us better prepare for our future.
Certainly, advocating for housing and our industry’s ability to provide it as affordably as possible while increasing needed supply in the months and years ahead is critical. Learn more about our goals in that area in the Housing and Industry Advocacy section of this magazine.
Beyond that, we’re working on a number of other areas to provide value to all of our members, including segments that have their own unique needs. Recently, we reformatted our Remodelers Council (formerly known as PRO) into the Remodeling and Custom Building Council, recognizing that most builders who specialize in one of those two areas also work in the other, and many of the issues the two segments experience are similar. Those of you in these categories should have received some communication from us about this new council. Look out for more details and a launch event announcement very soon.
We know that during times of market uncertainty and slowing of sales, our industry needs different things, including:
• Information and data on how the market is performing, including nuances in market sub-segments and outlooks for potential improvement overall.
• Peer-to-peer learning opportunities, especially from those who have been through previous recessions, on how to manage through and prepare for growth coming out of downturns.
• Connections to resources and new relationships that can provide more business opportunities.
• Business services and benefits that can further help reduce costs or increase value to employees or your company. The insurance, fuel, warranty, credit card and other programs we offer are highlighted on page 10. Energy efficiency and building envelope review services we can offer through our Building Science Program are highlighted on page 12.
• Education and training through programs like our annual BuildRight Conference in April, offering deep dives on potential opportunities for business growth and development.
Our staff and members engaged through HBA’s Boards, Councils and Committees are working on these and the evolution of other programs and services like our consumer shows, industry labor/job training partnerships, and outreach to a larger and more diverse base. If any of the above areas or opportunities are of interest, please reach out to me and let me know if you would like more information or to learn how you or your company can become more involved.
HBA is looking forward to a new year, even with the bumps and challenges still ahead. As always, thank you to our members for your continued support.
DEDICATED BUILDER TEAM WITH OVER 50 BRANDS TO CHOOSE FROM. SPECIAL BUILDER PRICING FROM ENTRY LEVEL TO LUXURY PREMIUM PRODUCTS. DEDICATED IN-HOUSE SALES, PARTS & SERVICE, INSTALLATION, AND DELIVERY. NO PROJECT TOO SMALL OR TOO LARGE. WE CAN SERVICE A SINGLE-FAMILY HOME UP TO LARGE MULTI-FAMILY PROJECTS.
From land use regulations to permitting timelines, the development of the region’s housing stock is heavily impacted by the regulatory environment under which builders work. For HBA, partnerships with local governments are essential to our advocacy efforts. They help ensure these regulations do not pass an undue financial burden to the end user: homeowners. For one HBA member serving households earning 35%85% of the Area Median Income, these regulations and partnerships are particularly impactful.
Habitat for Humanity Portland Region provides homeownership opportunities to those who would otherwise likely be limited to the rental market—in fact, between 2018 and 2022, roughly 29% of Habitat homeowners previously lived in subsidized rental housing before applying to Habitat. Within their traditional model, Habitat acts as the general contractor of a development, while helping a buyer acquire a down payment and mortgage set at no more than 30% of total household income. Funding and labor are donation and volunteer driven, with an in-house construction team overseeing the projects.
Applicants for the homeownership program must meet income, employment and credit requirements, and applications are only accepted when properties are available. The homeownership program even requires sweat equity hours – a concept all homeowners or business owners can resonate with.
“Our staff are out building houses with volunteers and homebuyers,” said Steve Messinetti, President & CEO of Habitat for Humanity Portland Region. “There are very few affordable homeownership providers who are the builder, help the buyers acquire mortgages and down payments, and teach homeownership education classes.”
In Habitat’s case, the support of local jurisdictions is critical to bringing affordable homeownership opportunities to the community. For instance, Portland offers a 10-year tax abatement of property taxes for buyers in affordable housing developments. More recently, the City of Lake Oswego has taken strides to support a Habitat project, demonstrating a shift in a city not always known for its affordability.
With a donation and volunteer-based model, the number of people Habitat is able to serve is impacted by the cost to build. While materials and labor can be accounted for through donations, regulatory costs and processes create an additional burden.
“SDCs (permits and fees) can often exceed the cost of land and are a big hurdle for affordable housing,” said Steve. However, there are seemingly simple actions cities can take to help mitigate these development costs. “Some jurisdictions, including Portland and Lake Oswego, waive all or part of SDCs for affordable housing development. We’d love to see other jurisdictions take this step to enable affordable housing development.”
For Habitat, navigating permitting processes includes an added layer beyond the headache of delays and added expenses that any market rate builder experiences. If they are utilizing government funding for a project, there can be deadlines or strict timelines for spending those funds. Any permitting delays complicate this process, but again, Habitat offers practical solutions for jurisdictions to help mitigate these challenges – solutions that could also be applied to process market-rate housing more efficiently.
“We’re encouraged by the momentum around streamlining the permitting process in Portland,” said Steve. “One promising idea is to designate a single point of contact
who is charged with shepherding the permitting process for affordable developments.”
Another barrier to producing for-sale affordable products is the lack of consistent funding programs from government. “We have state and local governments with consistent affordable rental funding that developers can count on every year, dozens of nonprofits and even for-profit developers who specialize in building affordable rental housing, and banks that specialize in financing that rental housing,” Steve explained. “None of that exists on the for-sale side. Our hope is to create that infrastructure.”
Partnering with jurisdictions is essential to addressing challenges faced in the affordable housing development process. But beyond regulations and development processes, leadership from local elected officials is essential to bringing affordable housing goals to fruition, Steve explained.
Two projects currently in the Habitat pipeline illustrate this important connection. Land for Century Commons, which will contain 18 affordable homeownership units in an amenityrich residential neighborhood, was donated to Habitat by the City of Hillsboro. “Mayor Steve Callaway’s leadership was instrumental,” shared Steve.
“This development reflects our City’s commitment to equity, to creating opportunities and accessibility for housing – for everyone who wants to live in Hillsboro,” shared Hillsboro Mayor Steve Callaway. “Being part of this neighborhood and the greater Hillsboro community will enhance these residents’ health, education, and quality of life. ”
Habitat is moving forward on their first-ever project in Lake Oswego this year, West Lake Grove. While the funding for purchasing the land came from an American Rescue Plan Act (ARPA) grant supported by state legislators, the City of Lake Oswego has as also committed an additional $800,000 of ARPA funding for infrastructure at the site. “We learned about the property from Lake Oswego Mayor Buck who was very interested in seeing an affordable homeownership developer take on this project that a local developer had envisioned,” explained Steve.
“Lake Oswego is in dire need of housing with secured affordability to ensure the many people who support our community daily are also able to call our city home. It’s how we’ll remain a thriving municipality,” shared Lake Oswego Mayor Joe Buck.
Habitat hopes that Clackamas County will follow their example and match the additional funds Lake Oswego is providing. “Mayor Buck and the full City Council have been great champions of this project,” Steve said. “The city has also implemented an SDC waiver policy for affordable housing developments, which has a significant impact.”
“Homeownership builds wealth, and Lake Oswego provides an unparalleled education and quality of life. The Habitat project assimilates both to ensure these opportunities are available to families for whom housing ownership in Lake Oswego would otherwise be too far out of reach,” added Mayor Buck. “It’s a win for all and hopefully just the beginning.”
Both Century Commons in Hillsboro and West Lake Grove in Lake Oswego also represent Habitat’s focus on development in high opportunity areas, or established residential areas with access to amenities and economic opportunities. Constructing affordable housing in these areas can often be met with resistance from neighbors driven by misguided fears of impacts to their property values. It can also face challenges with local design requirements that could drive up development costs or property taxes that are out of reach for low- or moderate-income families.
However, Habitat outlines several benefits to building in these areas and creating mixed-income communities. “Housing density near jobs, transit, schools, services, and community spaces reduces carbon emissions, makes transportation cheaper and more accessible, and adds to the diversity and vibrancy of our neighborhoods,” said Steve.
“Mixed-income communities also mean expanded social networks, which can lead to more job opportunities and connections. Businesses also benefit from having affordable housing in their community because it means employees can actually afford to live near their places of work.”
Story continued on page 6
Story continued from page 5
Habitat for Humanity Portland Region continues to move forward in full force to provide affordable homeownership opportunities to the community. They currently have 100 units under construction in Portland, Hillsboro and Beaverton. Another 124 units are in the pipeline, including the Lake Oswego project as well as communities in Portland and King City.
Looking forward, “We are finishing up our new five year strategic plan and one of our new initiatives is to scale our model by partnering with other non-profits and forprofit developers,” Steve said. They are looking forward to some pilot projects to weigh the viability of these types of partnerships, where Habitat would continue working with home buyers to help them secure an affordable mortgage and down payment, and other non-profits or for-profit developers would take on the actual construction of the homes. “We all need to advocate for more policies and funding that would make these partnerships possible,” Steve said.
Despite longer odds and higher risks, some of Habitat’s greatest barriers to success mirror those in the market-rate housing community. Increased permitting timeframes, rising interest rates, and long-standing local anti-development tensions make it all the more difficult to reach success. However, in working with local governments and exploring partnerships with for-profit builders, Habitat for Humanity is demonstrating that the dream of homeownership can be realized by more low-and-moderate income earners.
Located on Boones Ferry Road in Lake Oswego, West Lake Grove is near Lamont Springs Park, has easy access to I-5 and bus transit, and is walking distance to the amenities and economic opportunities on Lower Boones Ferry Road. The project will contain 23 units, housing over 100 people in attached townhome-style design. The homes are a mix of three and four bedrooms ranging from 1,200 – 1,700 square feet.
Century Commons sits on a quiet, established residential area off Century Boulevard in Hillsboro, located near the Orenco MAX station, Noble Woods Park and Frances Street Park, and is walking distance to the amenities of Main Street and Tualatin Valley Highway. The majority of the 18 attached homes at Century Commons have four bedrooms and are between 1,400-1,800 square feet, with a few three-bedroom, 1,150 square foot units.
Over a dozen of the West Lake Grove homes have an ADA accessible bedroom/bath on the main floor off the common living space. At Century Commons, two homes are single-story and fully accessible, and the remaining 16 homes each have a ground floor accessible bedroom and bathroom. All homes in both communities meet Habitats visitability standards, ensuring that the common living space is accessible to those in wheel chair.
Every Habitat home is sustainably built – achieving an Earth Advantage Platinum certification. “This gives Habitat homebuyers confidence that their new home has been built to a very high standard of sustainability, helping to keep their maintenance and utility costs as low as possible,” Steve explained. They also landscape their projects with a goal of obtaining a Backyard Habitat Platinum certification, which ensures native, drought tolerant plants are used and there is adequate stormwater management and resources for birds and insects. Thoughtful landscape planning and limitations on the use of chemical pesticides helps ensure a healthy, manageable outdoor space.
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February 8
HPC Executive, 9:30 am, HBA Offices + Zoom
February 9
HBF Executive, 8:30 am, HBA Offices
Government Affairs, 10:00 am
February 14
SOD Builder/Sponsor/Exec Meeting, 12:00 pm, HBA –First Floor
February 15
PWB Executive, 10:00 am, HBA Offices + Zoom
Membership & Retention Committee, 12:00 pm, HBA Offices + Zoom
February 20
March 1
PBUD Council Meeting, 9:00 am
March 8
HPC Executive, 9:30 am, HBA Offices + Zoom
March 13
Past Presidents Committee, 3:00 pm
March 14
SOD Builder/Sponsor/Exec Meeting, 12:00 pm, HBA –First Floor
March 16
HBF Board of Directors, 7:30 am, HBA Offices
March 23
Finance Committee, 10:45 am, HBA Offices
March 9
President’s Day – HBA Offices Closed
February 23
HBA Board of Directors at the Spring Home & Garden Show, 11:30 am, Offsite
HBF Executive, 8:30 am, HBA Offices
Government Affairs, 10:00 am, HBA Offices
March 15
PWB Executive, 10:00 am, HBA Offices + Zoom
Membership & Retention Committee, 12:00 pm, HBA Offices + Zoom
Golf Committee, 1:00 pm
HBA Executive, 11:30 am, HBA Offices HBF
Thursday, February 23 - Sunday, February 26
Show Hours: Thursday – Saturday 10:00 am to 7:00 pm; Sunday 10:00 am – 5:00 pm
Portland Expo Center 2060 North Marine Drive, Portland
Cost: $15/per person. Children 12 and under FREE Exhibit in one of the nation’s hottest housing and remodeling markets! Contact Yvonne Lerch, 503-479-2660 to reserve your booth space today. All current HBA
Members receive two complimentary tickets to the show, available to pick up at the Will Call office. Visit www.HomeShowPDX.com for more info.
Thursday, February 23 5:00 pm – 7:00 pm
Portland Expo Center 2060 North Marine Drive, Portland
Cost: Free to attend with admission to the show
Hosted in the spectacular showcase gardens at the Spring Home & Garden Show, this is one of the most popular events of the year. Come and network with industry peers while enjoying a casual signature happy hour with appetizers and a no-host bar. Admission to the Home and Garden show is required. Open to all HBA members and guests.
Saturday, March 4
The Home Building Foundation coordinates teams of volunteers from the home building community to paint, clean landscape and perform minor repairs to facilities owned or operated by nonprofit agencies serving the homeless in the greater Portland Metropolitan region. Visit www.BuildHopePDX.org or email Chris McDowell at ChrisM@hbapdx.org for more information.
Remodeling
Council Launch Happy Hour
Thursday, March 9 5:00 - 7:00 pm
Save the Date! All members are invited to celebrate the launch of our RCB council. Visit hbapdx.org to register and for more information.
All-Member Lunch
Thursday, March 16 11:30 am – 1:00 pm
Home Builders Association | HBA Conference Center 15555 SW Bangy Rd., Lake Oswego – First Floor Cost: Early Registration: $25 members / $30 Non-Member | After March 10: $30 Join the HBA for the annual spring all member luncheon.
2023 PWB Retreat
Friday, March 17 – Saturday, March 18
**Save the Date**
Join Professional Women in Building for the annual PWB Retreat. It’s two days of inspiration, sharing, connecting, and learning. There will be inspiring and thoughtful sessions with powerful speakers, activities, and much more!
DISCOUNT GAS
For more information contact Kathy Temple at 541-408-5155 Kathy.Temple@ edstaub.com
CREDIT CARD PROCESSING
For more information contact Tim Holstein at 503-975-0660 timh@ swipenow.com
BUILDER/REMODELER MANUFACTURER REBATE PROGRAMS
For more information contact Tami Walter, 503-684-1880 or tamiw@ hbapdx.org
The Home Building Association has been an integral part in the growth and success of our small business. Through the offered education, member benefits, and networking/ collaboration opportunities, the association offers a very strong representation of our building community and the supporting professionals that belong to it.”
CONSTRUCTION INDUSTRY CRIME PREVENTION COUNCIL
For more information: www.cicpp.com
Aris Hydronics
Robert Benjamin 503-388-6735 robert@arishydronics.com
Cougar Restoration Inc.
Brian Thomsen 503-349-5538 brian@cougarrestoration.com
BUILDER MEMBER
Clover Renovations
Kelvin Schoen 503-888-8358 Kschoen@cloverrenovations.com
WORKERS COMPENSATION
Qualifying HBA members can save up to 1% on SAIF.
BENEFITS
For more information, contact the Program Manager at Capital Benefits Group at 425641-8093.
Brent Olsen
Premier Central Vac
Fiberon
Kelly Barrett 360-520-1155 kelly.barrett@fiberondecking.com
Floor Solutions LLC
Kasey Jackson 503-309-3785 kaseyj@floorsol.com
Keith Trice Keith Trice 503-407-5973 keith@keithtrice.com
Grow Modern Audio Video LLC
Samuel Hess 971-313-2770 samuel@growmodernav.com
Happy Planet Softwash
Noah Stokes 503-567-1110 noah@happyplanetsw.com
Revel Home LLC
Michael Bungartz 415-940-2570 michael@revelhome.io
Mighty Growth Christy Lawrence 206-914-3669 christy@mightygrowth.biz
MSI
Ana Coddington 503-454-1500 ana.coddington@msisurfaces.com
The Dunn Brothers Scott Dunn 503-628-9020 dunnportland@gmail.com
The Saunders Company Inc
Kate LaMare 503-537-9950 kate@thesaunderscompany.net
40-49 Years
Chicago Title Insurance
Steve Smelser Homes Inc.
30-39 Years
The Conifer Group
C C & L Roofing Co.
Griffith Roofing Co.
Konell Construction & Demolition
Sisul Engineering
The Holt Group, Inc. / Holt Homes
Woodcrafters Lumber Sales, Inc
20-29 YEARS
Don Young & Associates Inc.
Four Star Insulation Inc.
Oregon Custom Cabinets, Inc.
Oregonian Marketing Solutions
Residential Warranty Company LLC
10-19 YEARS
3J Consulting California Closets
DPI Solar
Dual Force Construction
G Cam Ltd.
Garner Electric
Hamish Murray Construction Inc.
Home Certified Inc. InterWorks, LLC
Jacobs Heating & Air Conditioning
James Hardie
JDL Development Inc.
Leggett Asphalt
Lennar NW Inc.
Metropolitan Land Group, LLC
Montgomery & Graham, Inc.
Mountainwood Homes, Inc
Northwest Energy Efficiency Alliance, Inc.
(NEEA)
Ostercraft Homes Inc.
Palisade Homes, LLC
Powell Built Homes Inc.
Skyles Drilling, Inc.
Steward Construction Corp.
Turtle Mt. Construction
Ultra Quiet Floors
Verhaalen Painting
Westwood Homes LLC
5-9 YEARS
Atlas Labs Inc
Circle K Construction
Curtis Homes LLC
Custom Stone Creations, LLC
D & D Construction Cleanup
Dotzenrod Demolition
Eagle Landing
Emerio Design, LLC
Gotcha Covered
Green Light Construction LLC
Impact Sign Co.
Mattress World NW
Northwest Waterproofing LLC
Oregon Outdoor Lighting
Otis Construction
Owen Gabbert LLC
PayneWest Insurance
Rick’s Custom Fencing & Decking
Swiftsure Energy Services LLC
Timberline Structures LLC
Toll Brothers
1-4 YEARS
5d Contractors
Absolute Painting & Power Washing
Atwell LLC
Budget Blinds Central Portland
Darryl Bodle at Keller Williams
Dluxe Construction LLC
Duke Construction & Excavation
Ed Staub & Sons
Gentle John’s Moving & Storage
GRO
Hillsboro Community Foundation (HCF)
J Thayer Company
JLO Investments, LLC
Mike Riddle Construction LLC
Pacific Coast Siding Inc.
Portland Floor Inc
Secor Homes LLC
Standridge Inc.
Sterling Custom Homes, LLC
Stoneridge Custom Development, LLC
Storm Water Services, Inc.
Valley West Landscapes
Take advantage of these exclusive member discounts from HBA business partners, visit hbapdx.org/benefits for more info.
Tim Roth, an HBA member for over 40 years, passed away unexpectedly in December at the young age of 69.
Tim began in the industry as a framing contractor but started building and selling his own homes in the late 1970s. By the early 1980s, still in his 20s, he joined HBA and built his first Street of Dreams home and was growing a successful building company.
As Tim progressed further into his career, he became more active in the association. He served on HBA’s Board for almost 20 years from 1993 – 2013. He became a Board Officer and served as President of HBA in 2004. He was heavily involved in and supported a variety of areas –membership, government affairs, and some of our consumer home tours, to name a few. He also developed sites for and built in other shows, like our Street of New Beginnings and Ultimate Open House home showcase events in the 2000s.
Tim was a Board Officer when I started at HBA. He could be tough and he was passionate, which led to many animated conversations over the years. He had strong opinions and a sharp mind and cared about
the details – whether it was the financials of HBA’s operations or how we were serving our members and consumers. If you were discussing something with Tim, you knew you better be prepared. I appreciated that.
Tim also cared deeply about people and family – both his blood family and extended “family”. When he was an Officer, he attended many of our staff get-togethers and events, spending additional time out of his own personal schedule that he didn’t need to do, in order to connect with and support our team. Tim would go the extra mile to help us celebrate, like volunteering to venture on the building’s roof in the cold, wet winter to hang lights around the perimeter and spread some Christmas cheer, or bringing treats in for the team unannounced. He was generous too, even inviting my family to his home for Christmas parties with the kids when we were new to the area, or opening up his beach house to us and others.
Tim was a lot of fun to be around. He believed in working hard but also having fun. I have too many stories I could share, and any of us who knew Tim could say the same.
Tim was in the process of doing two big things as he was working to wrap up his career and enjoy life more with his wife Theresa: developing the site for our 2023 NW Natural Street of Dreams in Sherwood and transitioning his company, JT Roth Construction, to be run by his two sons Austin and Kenzie. Both those things are continuing, and I know the family appreciates the support and care they’ve received from all of the various business partners they need to rely on through this.
Tim’s family held a Celebration of Life honoring him on January 7. Well over 300 people, mostly from our industry, but also long-time friends, family, and members of his Building 20 Club (from all over the country) attended. Tim will be missed greatly, but he will never be forgotten for those of us who had a chance to work with and get to know him. For those of you who work with his company and family, thank you for your continued support. Please keep at it, as their journey through the business, family and emotional loss will take time. Our thoughts, prayers and love continue to be with Theresa, Austin Kenzie and their families.
BuildRight is coming up in April 2023 and we have an amazing event scheduled. In addition, we have invited Allison A. Bailes III, PhD to do a book signing of his newest Building Science book A House Needs to Breathe… Or Does It? An introduction to Building Science. Allison may not be able to join us due to a conflict with another conference in Seattle but if he can squeeze it in, he will. The book is an easy read, organized well, and uses language and details that make Building Science logical and easy to apply to building practices. I thought I would summarize one section in the book:
1. Comfort Begins with the Building Enclosure. When designing a new home, you have control over size, shape, orientation, and other factors relevant to comfort. Many people think comfort is solely the product of the heating and cooling system, but the architect has a huge influence on comfort.
2. Use Passive Strategies First. The comfort that comes from a properly insulated, airtight enclosure with wellthought-out windows has no operational costs associated with it. You pay for the comfort on your energy bills.
3. Make it Airtight. A house does not need to breathe! Airtightness solves a lot of problems associated with comfort.
4. Insulate Fully. Radiant temperature doesn’t get nearly as much attention as it deserves but has a huge effect on comfort.
5. Reduce Thermal Bridging. Insulation is great, but it is interrupted by wood which causes thermal bridging. Less is better when it comes to framing. Check out Advanced Framing alternatives to save money on lumber and create a more comfortable home for your clients.
6. Put the Right Amount of Window Area in the Right Places. Energy modeling can help you make decisions about window area, but it is best to keep the east and west window-to-wall ratios about 10% or less. You can go up to about 20% on the south windows and up to about 40% on the north facing windows.
7. Use Exterior Window Shading. Overhangs, exterior shades or trees can contribute to the overall comfort of the home by not letting the heat into the home. North facing windows do not need shading and south facing windows are easy to shade with a minimal overhang. East facing windows can take advantage of the sun in the early morning hours when the temperatures are lower but rooms with west facing windows quite often need higher air flow from the HVAC system to make those rooms comfortable.
8. Don’t Blow Air on People. One reason not to blow air on people is that the air they feel probably won’t be at room temperature. Heading air away from people allows it to mix with the air in the home, so by the time it reaches them, it won’t be as warm or cool as the air coming out at the vent. If the heat comes from a heat pump, it may occasionally blow cool air during the defrost cycle. Moving air isn’t comfortable during the cooler parts of the year. No one likes a draft.
9. Use Smaller Equipment Blowing Less Air. A high percentage of heating and cooling systems are oversized. The result is heating systems and air conditioners that come on for a short time and then go off, causing more noticeable changes in the indoor temperature. Consistency is comfort. If the system is grossly oversized the short cycling can shorten the life of your system.
10. Heat with lower-Temperature Air. Lower temperature air means more air flow to deliver the same
Join the HBA Building Science Consultant, ETO and other experts every Thursday at 9am via Teams or Zoom. Talk through code questions, address specific building challenges and find resources for better building practices. To schedule your individual chat, contact HBA’s Building Science Consultant Carol Eisenlohr at 503-710-2910 or buildingscience@hbapdx.org.
amount of heat. That helps even-out the temperature in a room, much like the air flow rates of right-sized equipment.
Hope to see you at BuildRight!
Remember: Design Right, Build Better!
The HBA Building Science Program is a technical resource available to HBA members free of charge, funded in part by Energy Trust of Oregon, Home Certified, OrePAC, Portland General Electric and NW Natural. If you would like to utilize the Building Science Program to create a continuous improvement plan focused on your building challenges or a plan to prepare for future code changes, contact Carol Eisenlohr, HBA’s Building Science Consultant at carole@hbapdx.org or call to schedule an appointment at 503-710-2910.
Highlights from the Homes of Tomorrow Today Tour
The 2022 Homes of Tomorrow Today Tour showcased new homes throughout the Portland region, featuring the best in sustainable building practices, comfort and durability. Participating homes included cutting-edge technologies like heat pump water heaters, ductless heat pumps, EV chargers and solar or solar ready options.
In addition to showcasing the latest building trends to the market, the tour also serves as a forum for builders to collect ideas for upcoming projects. Revisit tour highlights here:
1. Watch the KATU interview with Energy Trust program manager, Scott Leonard – visit www.katu.com and search for Homes of Tomorrow Today Tour to find the interview.
2. Take a look at the Homes of Tomorrow Today Tour site to learn about the participating builders – www. HomesOfTomorrowPDX.com
3. View the recording of Energy Trust’s webinar “The Best of the 2022 Homes
of Tomorrow Today Tour”. This webinar featured a panel discussion, digging into the questions:
• What are the home building technologies available today that can be used for the future?
• What are home buyers looking for in their future home?
• What are the barriers and opportunities for builders aiming to incorporate new technologies featured in participating Homes of Today Tomorrow Tour homes?
The recording can be found on Energy Trust’s YouTube channel at youtube.com/ watch?v=a5qhnUCpaHc.
The tour is produced by the Home Building Association of Greater Portland and presented by Portland General Electric. If you have questions about the EPS New Construction program or the webinar recording, please contact the EPS New Construction team at eps@ energytrust.org.
Homes of Tomorrow Today Tour presented by Portland General Electric returns for 2023!
October 13 – 15, 2023
Join the tour!
The Homes of Tomorrow Today Tour presented by Portland General Electric returns to the greater Portland area for 2023! To learn more about entry requirements, submit a project for the tour, or learn about sponsorship or partnership opportunities, contact Jodi Bailey at jodib@hbapdx.org.
On October 7th, 2015, the City of Portland declared a formal housing emergency. Since then the entire region’s housing supply has constricted, permitting timeframes have grown, affordability has diminished, and racial homeownership gaps have persisted. While there’ve been plenty of well-intentioned policies proposed and over $1 billion in voter-approved bonds passed, the situation has only gotten worse. The reason? We simply aren’t building enough homes.
It is sometimes said in local advocacy circles that, “you can’t build your way out of a housing crisis.” As The Atlantic’s Jerusalem Demsas noted, this attitude defies logic. In fact, the only wholesale way to improve housing affordability is to make sure there are enough homes being built for a growing population and an aging housing stock. Yet, as a region, we’re currently staring down a 60,000-unit housing shortage. And in just 18 years, we’ll need another 220,000 homes built just to keep up with population growth. Clearly affordability suffers when supply has been constrained for as long as it has—and right now, roughly 30% of Oregon households spend more than 1/3 of their income on housing.
In order to meet the current crisis and avoid one in the future, we need to immediately double the current rate of housing production across the region. In other words, we need to encourage a new era of residential construction not seen in nearly a century. Without bold initiatives (and a little local sacrifice), our economy will languish, homelessness will worsen, CO2 emissions from commuters will rise, and a new generation of households will be locked out of homeownership for good.
Of course, capital markets will always have an impact on housing production, especially when it comes to mortgage interest rates. But local government regulations often play an even bigger role in determining whether an empty patch of dirt turns into a new home for a working family. There is perhaps no industry that is as regulated by local government than housing. Whether looking at zoning, building codes, system development charges, permitting requirements and delays, land supply constraints, energy efficiency standards, or affordability subsidies—local policy makers and city staff are perhaps the single greatest driver or deterrent of new housing in any given community.
Fortunately, there appears to be some positive signals in the fight to increase our housing supply. More and more elected officials and government staff are heeding the call to simplify, streamline, and expand local production strategies. As an organization that has been around since the early 1940s, the Home Building Association of Greater Portland recognizes how vital government collaboration is in bolstering private construction activity. This is why we are excited to have such a diverse group of pro-housing advocates agreeing on a simple, yet powerful message on housing: we need more of it.
In 2023, HBA will work to bring together builders, elected officials, government staff, and local non-profits to deliver localized solutions that will bring our housing stock into the 21st century. The proposals below reflect our industry’s top housing priorities for 2023.
#1: Get housing built now. Eliminate land use and building permitting delays to move planned housing from concept to constructed. From submission to approval, no residential housing permit should take longer than 40 days to complete. We encourage every single permitting entity (cities and counties) to assess their permitting process in 2023 and remove unnecessary touchpoints in the approval process to meet this practical target. Tools that reduce construction timeframes, like concurrent reviews and early addressing, should be prioritized. Additionally, we support a Metro-led effort to conduct regional analysis of permitting timeframes and efficiencies across every jurisdiction.
#2: Expand affordability.
• SDC Reform. We recommend that every jurisdiction collect payments for System Development Charges at the point of impact (rather than at the beginning of construction). Doing so will allow builders of all sizes to save on carrying interest costs on financing of such expenses. Over time this small change would have a big impact on affordability and supply.
• Affordability Waivers. Adopt or expand local affordability waiver programs to support housing construction for purchase at or below 120% AMI. We support cities’ discretionary choice to waive building-related fees for projects incorporating affordability requirements.
• Tax Exemptions. Remove arbitrary unit caps and expand the success of Portland’s Home Ownership Limited Tax Exemption (HOLTE) program to encourage the construction and accessibility of new middle housing types. We implore every county in our region to lead the way in working with cities to establish or improve property tax exemption programs.
#3: Plan for the future. We support Metro’s proposed designation exchange for River Terrace 2.0 in Tigard and we applaud Sherwood’s well-planned expansion for SherwoodWest, both of which would develop new lands for housing and employment in the coming years. The next, most rational lands for close-in expansion is in and around the Stafford area. We urge involved parties to begin planning to bring this valuable and logical swath of buildable land into the UGB to ease the region’s housing shortage. To advance these goals, cities should explore innovative funding strategies to install infrastructure in newly expanded areas. HBA also recognizes the need for statedriven reforms to local Housing Needs Analysis and Buildable Lands Inventory methodologies—cities should all play by the same rules to get new housing built statewide. Combined, these policy proposals will result in more housing starts in the greater Portland area in the coming years, increasing affordability and access to homeownership. The shared effects will help begin to close the troubling racial homeownership gaps that have persisted for far too long. Our association strongly believes that 2023 will be a defining year for housing and a significant turning point for our industry’s collective efforts to deliver housing affordability to the region.
On November 15th, 2022, following input from HBA, the Lake Oswego’s City Council passed a resolution to codify and update their Demolition Tax program. Since 2020, the demolition fee has inherently increased costs to homebuyers and remodelers, but the city recently created a new path for builders to avoid the fee if they use enhanced deconstruction methods. Originally, the $15,000 tax applied to the demolition of any and all residential structures, with a small discount for certified deconstruction. HBA staff held several meetings with city officials and provided testimony to council urging greater flexibility of the fee’s application. As a result, the new rules enacted by council went into effect December 15th, 2022 and will now allow full fee waivers if builders utilize certified manual deconstruction contractors/methods to remove an existing residential structure. Doing so will now save builders $15,000 on any demolition they undertake. There is also a new allowance for affordable housing to receive the waiver and a new requirement for deconstruction of homes built before 1940.
Originally intended to raise funding for parks maintenance, since 2020 when the tax went into effect, there’ve been 83 demolition permits pulled and $1,125,000 in fees collected. Although we are disappointed that the council did not agree to sunset the tax as HBA had originally advocated, we are pleased that they listened to our testimony to allow more flexibility for discounts and waivers.
On December 6th, 2022, Happy Valley City Council voted on a host of Land Development Code changes to comply and accommodate for state mandates related to HB 2001 and middle housing legislation. While most of the updates are technical fixes and will have minimal impact on housing and new home construction, HBA is concerned with several
For more information on any of the below items, please contact Director of Policy and Government Affairs Preston Korst at prestonk@hbapdx.org
provisions that would increase building costs and reduce living space for new homes. One specific item of concern is council’s proposal to increase interior side setbacks from 5-feet to 7-feet. This will reduce living space, hurt interior livability and flexibility, reduce exterior design variability, and reduce land values by impacting potential yield on development.
HBA has been engaging with the City of Portland on their Home Ownership Limited Tax Exemption (HOLTE) program for the past month and continues to advocate for a reasonable increase in the program’s per/unit cap set by the Housing Bureau. Both HBA staff and members of our Portland Building and Urban Development Council (PBUD) met with commissioners’ staff as well as the leadership team of the Housing Bureau to voice our support for increasing the current price cap from $430,000 to reflect construction cost increases related to inflation and supply chain constraints, as well as market and employment trends in recent years driving the cost to purchase a home higher.
On December 6th, 2022, Milwaukie City Council considered two resolutions related to the banning of the installation and use of natural gas in all new home construction. The council has yet to release any draft language or agenda packets for the resolutions being considered and HBA, along with other advocacy groups, are concerned that there has not been enough public outreach to reach an informed decision. Not only are we worried that this new ban will adversely impact the cost of building and maintaining new housing, but we have serious doubts that the city has undergone the appropriate public involvement process for such drastic action.
HBA’s Political Action Committee, OFAH, supports pro-housing candidates and measure at the local and state level. We advance policies that support the entire housing industry while directly challenging antidevelopment activities. Our work ensures that Oregonians, regardless of income, have access to diverse and affordable housing options.
Material cost increases, delays and lack of availability due to supply chain issues and other inflationary pressures continue to plague the construction industry. I gave a presentation on these topics in February at the National Association of Homebuilders’ International Builders’ Show in Las Vegas. If you missed that presentation, here are some suggestions for managing the risks of material cost increases, delays and availability issues. Who bears the risk of material cost increases is typically spelled out in the construction contract. For instance, where the parties enter into a so-called “lump sum” contract with a fixed price, the general contractor generally bears the risk of material costs increases over and above the lump sum price. Conversely, where the parties enter into a so-called “cost plus” contract pursuant to which the owner pays for the materials plus a contractor’s fee, the owner typically bears the risk of material costs increases. If an owner is hesitant to agree to a cost plus contract, the parties have the option of agreeing to a guaranteed maximum price (“GMP”) where the contractor bears the risk of cost increases over the GMP. Contractors can also include contingencies and/or allowances in their bids and budgets for materials whose costs are volatile. For instance, a lump sum bid or cost-plus budget can exclude certain materials, listing those as separate line items the costs of which will be determined if/when those materials become necessary, thereby allowing the parties to account for any interim cost increases. Alternatively, contractors can refuse to agree to a lump sum price at the time of contracting, choosing instead to set the final contract price at a date closer to commencement, such as the date the permit is issued.
Regardless of the type of contract, parties can also include a so-called “escalation clause” in the contract, which places the owner on notice that there may be material cost increases outside of the contractor’s control that the owner will be responsible for. Typically, such provisions require the contractor to notify the owner of such cost increases and the parties to execute a change order to account for the increased costs.
Where the parties are not only concerned about material cost increases but also material availability, a contract can include a provision allowing the contractor to substitute comparable materials in order to avoid increased costs or project delays due to issues with the originally specified materials. Of course, where a party requires the use of a specific material, that party should generally bear the risk of cost increases, delays and lack of availability of that material.
I also recommend that contractors establish relationships with material suppliers and base their bids and budgets on firm bids
from their suppliers to ensure a steady supply of materials at a known cost. Similarly, contractors should get firm bids from their subcontractors upon which to base their bids and budgets and to enter into subcontracts as soon as possible after the prime contract is signed in order to avoid unexpected subcontractor cost increases and availability issues.
Contractors can also order products in bulk and/or store them on and/or offsite and may even require that the owner pay for storage costs, although contractors should be aware that materials stored offsite may not be covered by insurance and/or subject to lien in certain instances. Contractors building spec homes can also list homes as close as possible to completion, as opposed to commencement, in order to recoup increased material costs.
A contract can include a termination provision allowing one or both parties to terminate the contract in the event of unexpected material cost increases, delays or lack of availability. Even in the absence of such a provision, a party may be able to argue that a significant cost increase renders a project financially unfeasible or impractical and seek to terminate on that basis alone. Unfortunately, these arguments face an uphill battle if based merely on increased costs, unless the increase is attributable to force majeure or similar unexpected event outside of the parties’ control, like the COVID pandemic.
A general contractor can also try to shift some or all of the risk of material cost increases and delays to its subcontractors by entering into so-called “turnkey” subcontracts wherein the subcontractors supply both labor and materials. Of course, subcontractors face the same risk of cost increases as general contractors do and, therefore, can demand cost-plus subcontracts, impose GMP’s, as well as include escalation and/or substitution clauses in their subcontracts.
Finally, there is simply no good substitute for candid conversations about project issues, especially significant cost increases. As such, the sooner an owner is made aware of unexpected material cost increases the better. Owners are more likely to be receptive to paying or at least sharing in an unexpected material cost increase when the contractor timely communicates about the issue, especially when the owner understands that the contractor has little/no control this issue, which impacts the industry as a whole and not just one specific project.
In summary, material cost increases, delays and lack of availability affect the entire construction industry. As such, parties should be proactive in addressing these issues before they become a significant problem and cause an otherwise great project to turn into a distressed project. As always, contractors who are considering making changes to their contracts to address cost increases and/or other such issues should consult with experienced legal counsel.
Bill Joseph is a partner at Portland law firm Dunn Carney, LLP and the leader of the firm’s Construction & Design Team. He also serves as the HBA’s general counsel. His practice focuses on business litigation and transactional law with a specific emphasis on helping those in construction and related industries.
Late December brought the passage of the Secure Act 2.0 (December 29, 2022). The bill is loaded with various provisions, mainly focused on retirement plan related changes. The bill brought increases in tax credits for small businesses related to retirement plan start-up costs. The required minimum distribution (RMD) age was raised from 72 to age 74 for individuals who turn 74 years of age by 2032. There was an increase in allowable retirement plan catch up contributions. Also related to catch up contributions, there are now income limitations ($145,000) on catch up contributions being tax deductible. Taxpayers with income over that limit
would have their catch-up contributions subject to Roth tax treatment.
We find one of the more interesting provisions was related to unused 529 plan funds. Taxpayers may now convert unused 529 plan dollars to Roth IRA accounts (rollover maximum of $35,000 over their lifetime) if 529 funds were not used to pay for education. There are some requirements that must be met to qualify for the rollover such as the 529 account must have been open for 15 years and that the 529 to Roth IRA rollovers are subject to annual Roth contribution limits. However, such conversion would relieve taxpayers from a possible 10% withdrawal penalty.
Among other things added were additional relief from penalties for
retirement account mistakes, additional exceptions to penalties for certain qualifying retirement plan withdrawals, and a whole new set of rules permitting access to retirement funds during times of need. A few notable events providing relief from penalties include natural disasters, terminal illness, and a more open ended “emergency withdrawal for unforeseeable or immediate financial needs” up to $1,000 per year. Additional restrictions apply to qualify for penalty relief. Note that although penalties may not apply to certain retirement plan withdrawals, they are still taxable and it’s important to plan for payment of income tax on any distributions.
BY REGENCERevered football coach Mike Leach died recently following complications from a heart condition, the Seattle Times reported. The passing of the 61-year-old coach, who led the Washington State University Cougars to achieve bowl eligibility six times, is a good reminder of the importance of maintaining your heart health.
Heart disease is the leading cause of death for both men and women from most racial and ethnic groups in the United States, according to the Centers for Disease Control and Prevention (CDC). One person dies every 34 seconds in the U.S. from heart disease, the CDC says. Having regular check-ups with your doctor and receiving recommended preventive care can help reduce your risk of developing heart disease.
Most Regence health plans cover preventive care with no out-of-pocket costs when you see an in-network provider. That includes an annual wellness
visit with your primary care provider, who can make sure your heart is in good condition and recommend things you can do to improve your heart health.
Cardiovascular behavioral therapy and screenings are also covered every year, and screening tests for cholesterol, lipid and triglyceride levels are covered once every five years. Most plans also cover nutrition counseling to help you establish a heart-healthy diet. Check your insurance plan today to see what’s covered for you and to learn more.
Need help finding an in-network primary care provider? Regence can help with that too. Our online search tool makes it easy to find a doctor that’s right for you. Having an established primary care provider now will make it easier for you to get care when you’re sick. Regence members who want to learn more about their health plan coverage, in-network providers and more can visit regence.com or call the number listed on their member ID card.
The Home Building Association of Greater Portland has partnered with Regence BlueCross BlueShield of Oregon and Capital Benefit Services to bring members more affordable health care through the Building Industry Insurance Trust. HBA members deserve a health plan that's tailored to your industry and focused on the well-being of your employees and your business. Powered by the most trusted name in health insurance, your plan offers access to a broad provider network and support from an award-winning customer service team.
To learn more or get a quote, visit buildingindustryinsurancetrust.com or call (425) 641-8093.
HBF reached out to the more than 30 high school construction programs at the beginning of the school year. We now have a growing list of the programs poised to complete valued work for our nonprofit shelter providers.
The students at Reynolds Learning Academy are currently finishing up a tool shed that we will add to the gardens at Home Plate. The students finished wonderful cedar planting boxes for the Beaverton drop-in center, which are ready for planting. HBF will be helping the students perform at a high level by providing their Trades program new tools.
At Yamhill Carlton, we are donating kits so the students can build bee houses for the men who live at the nearby Blanchet House Farm. This rural facility provides men in recovery the opportunity to take care of farm animals, and work in a woodshop.
Students at Merlo High have finished some terrific playhouses, which will be featured at the upcoming HBA Spring Home and Garden show. They will also build picnic tables for pod shelter villages this spring. Grant High students will build tables as well, continuing our successful pilot of the “Picnic Table Project” last year. A grant from the National Association of Home Builders, Bank of America, and International Wood
Products helped us provide materials so Sam Barlow High in Gresham, Reynolds Learning Academy, and Constructing Hope could build sturdy cedar tables, which are now in use at three Portland housing villages.
Amity High’s construction teacher John Sterns toured the grounds of our project for Yamhill Community Action Partnership’s Harvest House. His students will come to the site this spring and help with the fencing, and build a covered outdoor pavilion. A grant from Fireside Home Solutions will help make this project a reality.
Glencoe High’s Todd Patterson came out to see the opportunities at Project Homeless
Thank you to the 2022 HBF Board of Directors, and a special thank you to Jason Waugh, owner of Berkshire Hathaway HomeServices NW Real Estate, for his leadership for the last two years. We have had some challenging times, but HBF has continued to thrive and make a difference for the most vulnerable in our community. We also say a heartfelt goodbye to several board members; Tim Nacrelli with Zepak who has faithfully served on the HBF Board since 2011, Darci Fredricks, owner of California Closets, who served as President in 2019-2020, and Jeremy
Connect in Hillsboro. His students will help build a shed, and work on the grounds of the project as a part of their senior capstone project. Students at St. Helens High will help build a shed, and we are in talks with the construction programs at Tigard, Tualatin, Gresham, and Sam Barlow High for further involvement.
And our friends at Constructing Hope will be looking sharp this coming year. Just before Christmas, HBF dropped off some beautiful new saws and other tools, using a grant from the Maybelle Clark Macdonald Fund.
Comiskey who served two terms on the board. Thank you all for your dedication and commitment. We would like to welcome Taylor Pawley with Rick’s Custom Fencing, and Mark Bierwagen, owner of Stone Creek Homes, as new board members for 2023. We will be in good hands under the leadership of long-time HBA member, Brian Schmidt, owner of Brian Schmidt Builder who will serve a two-year term as HBF Board President.
Name: Kelly Cowan
Company & Title: Clean it up Mark. President
Tell us about yourself (What you do, how you got started in the business, etc.): We are a construction clean up and recycling company. I came to work for Mark McGregor to learn the business and eventually purchase it from him.
How did you get involved in the HBF? What keeps you involved? Clean it up Mark has been involved with the HBF since its beginning. The foundation is always working on a great cause and we are happy to help where we can.
What is a fun fact about you that not everyone knows? I have a group of friends that run adventure races and this year we are going to get our Spartan Trifecta.
What is your favorite hobby?
I enjoy going golfing with our weekend group.
Thanks again for being our “Hero”, we appreciate you!
Metro’s Economists submit an overview of their Quarterly Economic Forecast to HBA’s Building Home Magazine so that members are able to stay up-to-date on economic outlooks at a national and reginal level. Articles are written by Metro staff and do not necessarily represent the opinions of Metro or the Metro Council.
Economic factors including slower global economic growth, elevated inflation rates, rising borrowing costs and exchange rate currency pressures have begun to negatively impact consumer spending and business production. US inflation is still too high and has prompted the Federal Reserve (FED) to further tighten financial conditions. FED rate hikes will start to slow employment growth, but it’s not evident yet, and will eventually lead to inflation lowering. Despite the FED’s determined efforts, US GDP exhibited surprising resiliency, posting a final annualized growth rate of 3.2% in Q3. This implies that GDP growth at the start of Q4 was likely stronger and combined with robust consumer spending for the holiday season, the fourth quarter will likely end on a positive note, perhaps a rate near 2.5%.
Bottom line: Despite an upward push and revision to real GDP growth at the end of the year, it is likely insufficient momentum to carry forward into the next quarter. A mild contraction is expected in Q1 of 2023 and lasting to Q3.
Consumer inflation has moderated a bit from its peak, but it remains very high. The headline CPI inflation rate (seasonally adjusted) has eased slowly over 5 consecutive months and now stands at 7.1% as of November. The rate peaked at 9.1% in June. Inflation will likely stay elevated through much of 2023. If a recession does materialize, consumer prices could fall faster than otherwise due to a lack of consumer demand related to higher unemployment and lower consumer income. On the other hand, inflation might not ease as much as expected if supply-chain difficulties don’t ease as much as expected and/or volatile energy prices go higher than expected due to fuel shortages in Europe stemming from the conflict between Russia and Ukraine.
Bottom line: The US inflation rate has been heading in the right direction, but it has not diminished enough for the FED to ease from its tight monetary policy.
Consecutive interest rate hikes from the FED have totaled up to 4.25 percentage points this year and drove 30-year fixed mortgage rates up above 7% by early November until easing to about 6.5% at the end of December (according to data from Mortgage News Daily). The steep run-up in interest rates has made housing less affordable for first-time home buyers and has made existing homeowners less willing to trade up when a new a mortgage could be 4 percentage points higher than their existing mortgage interest rate. Virtually every indicator for the residential home market has turned down since the FED committed to tightening financial conditions.
Here in the Portland region, median sale price for a single-family house has eased since peaking last summer. Other indicators such as “average days on the market” and the ratio of “inventory in months” have also pointed to a reversal in the home real estate market. The S&P/ Case-Shiller housing price index (HPI) for Portland shows home price appreciation is coming down fast, now standing at 5.4% y/y for October.
Nationally, the HPI hasn’t fallen as rapidly as Portland’s HPI value, according to the Case-Shiller 20-city average (8.7% y/y) and the Federal Housing and Finance Administration (FHFA) HPI (9.8% y/y). The decline in HPI suggests prices have topped out in this real estate cycle. Certainly, the National Association of Homebuilders (NAHB) housing market index (HMI) shows builders believe the building cycle is coming down quickly as the index has declined every month this year and is now nearly as pessimistic (31) as the pandemic reading in April 2020 (30).
Bottom line: Considerable angst exists in residential markets and the construction sector because of affordability concerns. Mortgage interest rates will likely be higher in 2023 than it was in 2022, responding to more rate hikes by the FED.
Conditions in the US labor market remain tight. The headline US unemployment rate remains fixed near 3.5% while recent unemployment claims have been rooted at very low levels prior to the pandemic. Although there have been announcements of employment layoffs by big-name high-tech employers, these layoffs have done little to dampen a heated labor market. Surveys by job placement firms have indicated laid off high-tech workers have been able to find new jobs within a few months. Official labor market reports by the Census Bureau and the Bureau of Labor Statistics (BLS) reinforce the view of strong labor market demand. Employment has increased steadily and has had moments of very robust growth since the recovery from COVID shutdowns. Month-to-month nonfarm payroll employment has seen an average increase of nearly 400,000 jobs this year. Since the FED’s four consecutive rate increases of 75 basis points, the month-to-month increase to payroll jobs has slowed to about 277,000 jobs per month; still very strong compared to the slow rise in labor force.
Bottom line: Higher unemployment is expected. Job growth will eventually moderate because the FED wants it to bring down inflation. Interest-rate sensitive manufacturers which rely on fixed-investments, consumer financial service sectors and the construction industry are expected to bear the brunt of the rate hikes.
Facing rising economic uncertainty and a slowdown in growth, consumer spending has shown resiliency up until now. Since spring, nominal retail sales including food service sales had shown strong growth of over 9% y/y. November’s sales were the first sign of a reduction in spending. Nominal sales decelerated to 6.9% y/y growth, but in real terms had declined. Consumer
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surveys, citing concerns about the direction of the economy, jobs, and inflation, have been more pessimistic, but future spending appears to be lining up with today’s low consumer expectations. In the closely watched University of Michigan consumer sentiment index, participants’ outlook edged up slightly in the last month (59.7), but the index remains mired near its historic low (50).
Bottom line: Consumer attitudes are unlikely to improve markedly so long as inflation rates remain elevated, borrowing costs keep rising, stock market values continue to decline, and labor markets are expected to become weaker.
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Deliberations by the FED have led to hikes of 25 basis points (bp) up to 75 bp, with the latest decision in December to lift rates another 50 bp. The FED has raised rates 75 bp each time in its prior four meetings. The year began with the Fed funds rate between 0 - 0.25% and after the latest round of rate hikes is between 4.25 – 4.50%. Recently, the yield curve, which is the relationship between borrowing costs (i.e., interest rate) and the time to maturity for treasury securities, has inverted, meaning the interest rate on short-term treasury bills is higher than the interest rate on long-term treasury bonds. This became the case when the bond market began pricing greater economic volatility and higher inflation into the valuation of shorter-term securities. An inverted yield curve is often a harbinger for an economic contraction.
Bottom line: The FED has been clear that it wants to see lower inflation. Therefore, interest rates will likely be lifted again until demand softens, growth slows, labor markets weaken, and inflation is down to 2%.
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How-to Seminars, Plant Sale, Speaker Series, and More!
Portland’s Design District Feature, Tiny Home Village, and Yurt & Camping Corner
Little Gardeners & Builders Kids’ Area
Urban Crafters & Makers Marketplace
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