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“Man is the only animal who can be skinned twice” …Will Rogers

Well, it’s a done deal. The Stimulus Bill has been signed into law and now the waiting game begins to see if it will work as intended. We all hope that it will, for the entire world economy is dependent upon the financial health of the United States. The “talking heads” have marveled at how fast the bill went through Congress, which is reminiscent of how fast George Bush was able to convince Congress to declare war on Iraq. There is a valued old saying, “sin in haste, repent at leisure”. Remember that no one who created the Stimulus Bill was alive during the Great Depression, so we are relying upon textbooks and theories at this point.

Now, the next leg of the recovery plan must be to repair the housing industry. The housing industry lead the down cycle in what typically appeared to be another recession that comes along every 5 years or so. And these recessions generally last from 18 months to 3 years. What went wrong this time? Three major factors come to mind:

  • Mortgage Markets Run Amuck. It wasn’t just Fannie and Freddie buying the loans from borrowers who never should have qualified, it was also the jumbo loan servicing companies who knew they could pass along this junk paper to the next “Greater Fool” and Wall Street was ready to assist with this effort by bundling and securitizing mortgages;
  • Bankers Behaving Badly. The traditional bank policy of foreclosing on defaulted property has backfired. Because of the sheer volume of foreclosures, the foreclosed asset cannot be resold for any amount resembling the original loan principal. This compounds the banks’ losses, and gives rise to frequent trips to the Treasury for more taxpayer money. Slowly, lenders are realizing that keeping owners in their homes at lower interest rates is a far better business plan than the losses they realize upon foreclosure;
  • Unrestrained Consumer Greed. The credit card companies play the enabler role in this scenario too. Too many teaser rate credit card offers, too many “must have” cheap goods from China, and the belief by many homeowners that their house was a perpetual ATM.

Who’s to blame?  Forget it.  Putting Bernie Madoff in prison isn’t going to restore investor or consumer confidence in our system. Running the government printing presses to flood the world with paper currency won’t help much either. The real key to recovery is the belief by the consumer that when I wake up tomorrow, I’ll still have my job and a roof over my head. It’s largely psychological because 90% of Americans currently have both. However, “what if” is the Boogie Man gnawing on the human psyche, and that is going to take a long time to repair.

Posted in Housing Recovery | Tagged , , , , | Leave a comment

The Era of “Greenwashing” has Begun

 

As a nation we are becoming more aware of the importance of saving the planet earth. In the course of this paradigm shift, economic opportunities are created, and the “Green” movement is no exception. Green products are typically viewed as an upgrade, like organic food, and hence there is a surcharge connected to them.

Greenwashing is the term given to claims made by manufacturers that their products are environmentally friendly, all natural, non-toxic, and helpful to reduce global warming. Greenwashing is designed to appeal to the “feel good” side of the consumer’s conscience. Green products can range from cleaning supplies to computers, to cars, offices, and houses-a very broad spectrum. With each product claiming to be green, by what standards are they judged? After all, if 100% natural products are “green”, then arsenic, radon, lead and asbestos would be green since all these substances occur in nature and are not man made.

Apart from the Federal Trade Commission (FTC) which has published environmental marketing guidelines on product claims made by manufacturers for the past 16 years, there are other organizations that rate various products according to established environmental standards. The most recognized one is the federal government’s Energy Star Program which covers not only appliances, but just about any device that consumes electricity. Other organizations include: EcoLogo for many household products, Green Seal also household products, EPEAT which covers computers and peripherals, Forest Stewardship Council which certifies wood and paper that come from renewable non-old growth forests, U.S. Green Building Council and Build It Green . These latter two organizations certify buildings as they are being built to give them a green rating according to each organization’s point-by-point checklist.

For a newly constructed residence to achieve an independently recognized green rating, considerable effort must be undertaken by the builder. Under the broad goal of trying to get to zero energy consumed by the house, specific items such as super insulation packages, air-tightness of ducts, photovoltaic collectors and tankless water heaters are considered. Even the percentage of construction waste that is recycled is a factor. Because a point system is used, not all green rated houses will have the same energy saving components.

At this time, a few municipalities have adopted mandatory green building standards as part of the building permit process. Where there is no government mandate, builders are free to follow any green program they like, or follow none. To stay competitive and say they are building a green home, several builders are creating their own green building standards. Since the homes will not be built according to a recognized green building program, the issue of greenwashing comes front and center. Without exhaustive studies or research performed by utility companies, it will be extremely difficult for a builder to approximate to a buyer how much energy their home will save compared to a home without the green features. Predictably, the sales brochure is likely to list the energy saving and green features, and the consumer will have to decide whether this house is greener than the one on the other side of the fence.

 

Posted in Green Building, Green Home, Uncategorized | Tagged , , , | Leave a comment

Regardless of your favorite media, internet, television, or print, you can’t get by without a daily bombardment of negative news. At the present it’s all about worldwide terrorism or the next sector of the economy that is predicted to fail. Most experts who have been around for 40 years or more as adults, confess they haven’t seen any scenario quite like this one.

However, before you throw in the towel and assume the situation is hopeless, consider:
* At an unemployment rate of 8% (predicted to occur in 2009), 92 % of the people still have jobs;
* The steep decline of the stock market has presented buying opportunities that haven’t existed since the dot.com bust seven years ago, and finally;
* General Motors is not going to go out of business. They may seek a Chapter 11 reorganization, there will still be a model 2010 and 2011 Chevrolet rolling off the assembly line.

What’s this have to do with a cheap 2008 Holiday Season? Much of our wealth is in our heads, not in our wallets. If we think we’re well off we’ll behave differently than if we think we’re hurting. Part of the doom and gloom cast upon us was that Black Friday was going to be a retailer’s disaster. Yet, when the dust settled, overall sales were up 3% over 2007. While one day doesn’t make an entire Holiday Season, consumers are acting in a more responsible way this year, but they’re not staying home. The use of plastic is down and that’s good. A large percentage of consumers are still paying off their balances from Christmas 2007. Many shoppers are actually going to their bank first and withdrawing cash to stay within a budget. That’s also good. A debt riddled nation is an enslaved nation. So while the 2008 Holiday Season is likely to be less in total sales than 2007; consumers will still consume, albeit more moderately, and there will be a whole new school of surviving retailers who have taken a chapter from the Book of Wal Mart.

 Have a happy and cheap holiday!

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In the throes of an election year, the recent financial collapses in late September and October add additional and unforeseen challenges to the new Washington administration in January. When the year began, the election rhetoric was all about the Iraq war. You hear a lot of talk about Wall Street vs. Main Street, and the change in terminology from “bailout” to “rescue”. The fact is, we’re all in this together, including economies of countries that only recently became interdependent on us and us on them, such as Russia and India.

According to a recent CNN poll, nearly 60% of Americans believe our country is headed for another depression like the 1930’s. Despite the pessimism, a 1930’s type depression is not likely to happen. Here’s why:

1. Bank deposits are insured now up to $250K and in some cases $500K. In the 1930’s there was no insurance for deposits;

2. The foreclosures that were expected to occur in 2009 will be greatly diminished due to forced workouts that lenders will have to apply. We will see interest rate reductions, and even principal reductions. Lenders are finally coming to their senses that helping a homeowner stay in his house makes better economic sense than to take the house back and be forced by the federal banking authorities to sell the property at a loss;

3. Credit markets will loosen up and banks will start to loan to one another again. However consumer credit is likely to remain tough to obtain for the next 12 months;

4. Housing, the segment of the economy that started the downturn, will lead the recovery. The biggest problem that builders face today is the competition with foreclosed homes. Once the foreclosed housing stock is absorbed, building permits will be pulled, and the cycle of new home building will begin, albeit slowly.

However, the real recovery for the long term is to get our snouts out of the trough of foreign oil. Too much of our country’s wealth has already been transferred to the Middle East. Not only is oil harmful to the environment, it is a finite, non-renewable commodity whose price is likely only to go up in future years. Modes of transportation need to change. Unlike other means of automotive propulsion, the electric car offers great promise. The alternatives of hydrogen, fuel cells and liquefied natural gas all require a rebuilding of our infrastructure, but electrical outlets are everywhere. The internal combustion engine may still have applications in aircraft, rail and shipping, but for the rest of us, we’ll be supporting a new, non-polluting industry.

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Green. The buzz word of 2008. We are told that we must all become green. What does this mean? The terms renewable, sustainable, and carbon footprint are often used to the confusion of many. But in its simplest form, going green means conserving energy. The price of fuel is doing its part to reduce travel, and hence greenhouse gasses, but what about your home? In general, the older the home, the more energy it will consume. Here are some tips to apply to your residence without breaking the bank.

Energy Audit. Most utility companies will give their customers a free energy audit. A trained representative will come to your house and inspect your appliances, weatherstripping, insulation, water heater, furnace and air conditioner. The following recommendations are common:

Insulation. About 73% of a house’s energy is gained or lost through the attic. About 22% is lost through the walls and windows/doors, and about 5% is lost through the floor. Proper attic insulation is the most cost effective way to conserve energy in your home. Attics should have at least 12 inches of loose cellulose insulation or the equivalent in batt insulation. Even if the insulation in your house was 12 inches at one time, it may have settled. Adding more insulation is a simple, cost effective task. If the walls are not insulated at all, foam insulation can be pumped into them. If the first floor is not insulated, it is more cost effective to install a thick carpet pad, unless there is a stand-up basement to apply insulation batts. Replacing old weatherstripping is also very cost effective.

Lighting. Fortunately, the incandescent bulb is rapidly becoming a dinosaur. Compact florescent lights (CFL’s) are the replacement of choice. They use about 20 % of the energy of the incandescents, and they now give off a warm glow instead of the old harsh white look. However, there are two caveats to using CFL’s: they cannot be used with dimmers, and the burned out bulbs need to be sent to a hazardous waste disposer because they contain mercury.


Furnace and Air Conditioner
. If your furnace is 20 years or older, and if your air conditioner is 10 years or older, they should probably be replaced. Many technological advances have been made in recent years that have dramatically increased heating and cooling efficiencies. This is a capital expense that will increase the comfort of your home and very likely increase its value.

Appliances. Older kitchen appliances are energy hogs, especially electric ranges and refrigerators. When replacing any appliance, look for the Energy Star label before you purchase. Other appliances, such as plasma TV’s, use a significant amount of energy, not only when they are operating, but also when they are in the “standby” mode. If you leave the house for three or more days, it is best to unplug all appliances that have a “standby mode” feature.

Toilets. Toilets may not be thought of as energy consumers, but it takes energy to pump, store and distribute water. Toilets, even the newer 1.6 gallon flush models, are notorious leakers. Depending upon the water quality, deposits can build up inside the tank, thus making the valves hard to seat. Flappers and ballcocks should be replaced about every three years. Toilets that use more than 1.6 gallons per flush (such as the old 3.5 and 7 gallon models) should be replaced entirely. The price of 1.6 gallon flush toilets has come down in recent years, while the price of water has gone up, so this replacement is a cost effective move.

Other Devices. Newly popularized devices, such as photovoltaic solar roof panels, tankless water heaters, bamboo flooring, green lumber and coatings get mentioned frequently in the press, but unless you are planning to buy a new house, your most cost effective way to enter the green movement is to start with the insulation package in your current home.

Posted in Construction Practices, Green Building, Green Home, Green Maintenance, Home Builders, Home Maintenance, Home Ownership, Housing Recovery | Tagged , , | Leave a comment

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