Viva Las Vegas: No Limits for Realtors

Wouldn't it be great if what happened in Vegas really did stay in Vegas? Realtors are in Las Vegas all week but I'm sure they'll be back for open house Sunday. In Vegas the house always wins but in house sales it's the realtor who always wins, no limits. I'll be here all week. I'll be waiting on those lobbying reports due today. Ka-ching, ka-ching!

Construction Inflation Higher Than CPI

Ever wonder about rising construction costs and why it's so absurd to expect spending on infrastructure to stay within the limits of consumer inflation (CPI) while keeping up with growth?

After years of minimal cost increases, prices of many construction materials skyrocketed from 2004 to mid-2006. Since mid-2006, some input prices have moderated, while others have fallen. But the cumulative increase in the producer price index (PPI) for construction inputs since December 2003 (28 percent through August 2007) remains more than double the 13 percent increase in the most common measure of overall inflation, the consumer price index (CPI) for all urban consumers. Labor costs, in contrast, have risen at similar rates for construction and for the private sector as a whole.

Cumulative Change in Consumer, Producer & Construction Prices

Source: Associated General Contractors of America, Data Digest.

The cumulative difference matters because the estimates for many projects now being bid, especially public facilities, were prepared in 2003-2005 under the assumption that construction costs would escalate at the same rate as the CPI. That divergence explains why some projects are being canceled, delayed or redesigned.

In the next several months, the PPI for construction inputs, which covers items used up in construction such as diesel fuel as well as materials that go into a project, is expected to accelerate to a 3-5 percent annual rate of increase from the recent 1.5- 3 percent range. By the end of 2008, and indefinitely thereafter, construction input costs are likely to be rising at 6-8 percent. Labor cost increases could top 5 percent by the end of 2007 and 5-6 percent in subsequent years.

For more information read the AGC Construction Inflation Alert

The bottom line: Owners, budget setters and contractors should expect larger materials and labor cost increases in 2008 than they have experienced in the past 12 months. Nonresidential construction activity is still likely to grow, as will demand for construction materials that are used in other industries and other countries.

Money Talking

This came in my email last night:

From: "**** ********" <*********@*****com>
To: gregflynn@******.com
Subject: ALL WET
Date: Wed, 7 Nov 2007 20:00

Greg,

Money don't vote.

It came from someone whose company received money from the NC Association of Realtors for both statewide and local Astroturf campaigns. I'd say that's money talking, even if he didn't sign it and, used his wife's email account.

Looking at the money that went into local Astroturf committees it appears that realtors and home builders spent about $6.50 for every vote against the transfer tax proposals. I'd say that's money talking.

In Chatham County voters declined the opportunity to lower impact fees by $1,000. In races across the state voters voted into office candidates who want to slow down rapid growth or raise impact fees for new development. People don't like rapid growth and they certainly don't like paying for it. That was people talking.

Home builders support sales tax increases to pay for the infrastructure associated with rapid growth. The campaign against the transfer tax demonized local governments and whipped up anti-tax sentiment so effectively that even sales tax proposals were defeated in counties where home builders supported them. With sales tax proposals in question it will fall to builders or property owners to pick up the tab.

I support responsible growth and reasonable ways to pay for it. I may be all wet but it's home builders and property tax payers who will get soaked, not realtors.

Update: The same person who wrote that "Money don't vote" also wrote this little ode to money, for political advantage:

They say money is the mother’s milk of politics. It’s true. Every two years the members of the General Assembly are up for re-election. The average cost of a North Carolina Senate race is now over $100,000---and climbing each year. Candidates and elected officials running must have money to win their campaigns, and they rely on those of us in the business community to help them out.

That’s where groups like ours can play a huge role---in the political process. Making a contribution to members of the general assembly does one thing---it buys access.

Money Talks

Looks like the transfer tax referendums failed in all 16 counties:
Brunswick , Chatham , Davie , Gates , Graham , Harnett County, Henderson , Hoke , Johnston County, Macon County, Moore , Pender , Rutherford , Swain , Union , Washington .

Sales tax referendums appear to have failed also.

Update: Sales tax failed in all counties where both a transfer tax and sales tax were on the ballot (Davie, Graham, Harnett, Johnston, Rutherford). Looks like realtors and home builders mobilized the anti-tax crowd too well and will have difficulty getting schools and infrastructure in place to support development. In counties where only sales tax referendum was being considered it appears to have passed in 6 counties (only Sampson, Catawba, Surry, Pitt and, Columbus confirmed as of writing).

Update: Home builders are going to be losers in this and they only have themselves to blame, especially in those counties with both transfer and sales tax measures on the ballot.

David Thompson, the executive director of the North Carolina Association of County Commissioners, said he expects voters will become more comfortable with the land-transfer tax in the coming years.

"There was a lot of well-funded publicity against the tax," Thompson said. "But it's still early. The growth is going to continue. The needs for schools and the needs for infrastructure improvements are going to continue to grow."

Transfer Tax Puppet Show

© John Cole. First published November 5th, 2007 at NC Policy Watch

NCACC on Growth and Tax

Chris Fitzsimon interviews Todd McGee of the NC Association of County Commissioners who talks about the problems of rapid growth and the tax strategies needed to deal with them at NC Policy Watch [Click to listen]

VOTE

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Johnston County Group Noncompliant

Donald Byrd, a Selma realtor, may be listed as the treasurer for the Johnston County Property Owners Against Transfer Taxes but he failed to sign the report submitted to the Johnston County Board of Elections as required by state election law. Perhaps it's because the report was actually prepared by the NC Association of Realtors.

William DePriest, the state Realtors' chief operating officer, said he is keeping the groups' books.

Astroturf Musings

A few of my thoughts from my Astroturf post over at BlueNC.com

According to Jason Schrader of the Asheville Citizen Times, Macon County voters have been getting robo-calls from Freedomworks, another group with connections to Art Pope.

Johnston County Commissioners have apparently said they will not impose the tax even if it is endorsed by referendum. Sort of like "If elected I will not serve". As I said earlier this tax is only as permanent as the next commissioner's meeting.
That 0.4% will indeed apply to everyone who has paid 6% to a realtor.

The 6% is a manifestation of a web of controls that seem legit when looked at individually but collectively have the effect of a monopoly. From kick-backs signing bonuses to requiring membership for MLS access to charging member firms for non-members, having newly licensed brokers dependent on member firms in "provisional status" and pressuring employees to make PAC contributions it's a well integrated machine.
Also I've begun thinking about patterns of sales and growth. If a new person comes to town and buys a new home, it's one sale for a builder and one sale for realtors. If a new person comes to town and buys an existing home from someone who buys a new home, it's one sale for a builder and two sales for realtors.
I guess that's an argument for impact fees. I just wonder if out of towners are steered to existing homes. I'd be interested to know the stats of first deed transfers.

As much as I hate the money NCAR is pouring into the transfer tax issue I'm loving the fact that they have been draining their pond and making enemies in state and local government. Next session will be a good opportunity for positive change.
Another issue I see is the real estate broker who is also a mortgage broker. Seems to be an area ripe for abuse that could use some oversight.

As much money as they have at their disposal, the realtors and homebuilders can't afford to fight this in 94 counties so they are going all out to suppress it as much as possible in the 16 voting next Tuesday.

Some of the [anti-tax] rhetoric goes round in logic circles. It's getting close to Tuesday. I noticed a steady trickle of early voters at county BOEs. Don't know what that means for candidates and issues but glad to see it.

Outside Influence

Charlotte Observer editorial this morning:
Transfer tax campaign: Will torrent of outside money obscure local interests?

In most counties, those state associations are providing the majority of the money for the anti-tax campaign, with local Realtor and homebuilding groups supplying the rest.
...transfer tax would hold down, if not prevent, increases in the property tax. Outside interests don't have to weigh those alternatives.
...if the transfer tax is defeated, don't expect them to be worrying about how local governments will fund local needs.

Astroturf Update 11/1

The Charlotte Observer has an article by Julia Oliver about this today:
N.C. groups finance local tax fights: Watchdog organizations say real estate interests trying to project grass-roots efforts

Total contributions to these Astroturf groups exceed $600,000 to date. (Editorial note, the chart for Harnett County should read $44,425.03 from state level NC Realtors and NC Homebuilders associations).

Union County Astroturf Report (via Charlotte Observer)

No local group has raised more money than the Union County Coalition Against the Transfer Tax. Of the $85,000 the group raised in the last month, about $50,000 came from the two state associations. The rest came from local realty companies and groups, including $20,000 from the Charlotte Regional Realtor Association.