Hobbs’ Ink Blog

This quote from the New York Times this morning says SO much about the time we live in now that I just had to share.

“The only new start-up bank to open in the United States this year operates out of a secondhand double-wide trailer, on a bare lot in Lake Charles, La. ”

It makes one wonder what self respecting bank would set up in a trailer. The answer is, “a brilliantly managed one!” One of two things seems probable. Either the bankers actually know how to be responsible with their depositors money - a rare trait these days. Or, else they want their depositors to BELIEVE they are responsible with their money. I’m not sure I’d mind even if it were the second of the two. I’m so tired of the hubris and self importance of those who seem to be running this country I think I’ll go seek out the guys who at least know that’s not what is needed and wanted by the public.

I’m reminded of a joke my grandmother used to tell about Henry Kissinger. For those of you who don’t know who Henry Kissinger is and just to make it relevant to this article, I’ll substitute “banker” for “Henry Kissinger”.

A private pilot is flying a small plane carrying a priest, a hippie and a banker. After an hour or so, the pilot puts the plane on auto-pilot and comes back to speak to the other three. He tells them there is something seriously wrong with the plane which is going to crash. He says there are three parachutes. He takes one and jumps. The banker looks at the priest and hippie and launches into a long speech about how this country could not run without him and his good works. He explains how his bank is the engine that keeps the national economy going and how he is the mechanic without whose brilliance the engine would fail. He goes on to say that he is actually the smartest man in the world and it would be a disservice to his country if he were to die. He takes the second parachute and jumps.

The hippie turns to the priest who is obviously conflicted about what to do and says, “Don’t worry, Father, the smartest man in the world just jumped out of this airplane with my backpack!”

If you watch the news you will be absolutely convinced the sky is falling and we are in the depths of a terrible economic crisis from which we will not recover for many years. There is no question that this is not a “boom” time, but things aren’t as bad as the media would have you believe.

According to the economists at Texas A & M who track the actual statistics rather than the ones the media wants to feed you, Texas is experiencing growth right now, not dramatic growth, but good solid growth. This is a quote from their e-newsletter of 24 August, “All Texas industries except the construction and information industries had more jobs in July 2010 than in July 2009.” (Given that most of my friends and family are in one of those two industries I could be grumpy about that part, but please read on.) The same article also tells us we are in the third of three straight months of employment growth. They also said this, “The state’s actual unemployment rate in July 2010 was 8.5 percent. Midland had the lowest unemployment rate followed by Amarillo, San Angelo, and College Station-Bryan.”

According to The San Jose State University Economics folks the unemployment rate in 1933, during the Great Depression, was 25%, yes, TWENTY-FIVE percent! Right now in Texas we are at a little over 8%.

There really is nothing more to say. Stop reading the paper and cheer up! It isn’t that bad.

Here is one respected economist’s take on the economy.  It isn’t as cheerful as I’d like, but my take on what he says is that the economy is artificially depressed by bad management.  Blame that on whomever you will.  But, the profits are there.  The consumer spending is there.  Businesses just aren’t willing to hire yet because we’re still reeling from the last round of butt kicks and we’re afraid there will be more.   That’s my opinion.  Here’s what the expert actually says….

Rebound Or Double Dip? Economist Offers Forecast For 2011

July 14, 2010

Mark Dotzour

COLLEGE STATION, July 14, 2010 – As much of the nation ponders whether the country is in rebound mode or headed for a “double-dip” recession, the chief economist and director of research at the Real Estate Center at Texas A&M University’s Mays Business School offers insight about why the economic engine is in “neutral” and what it will take to get it in gear and up to speed.

The economist, Mark G. Dotzour, says that while the road ahead is filled with potholes, he sees definite signs that point to hope for the future.

“As we begin the second half of 2010, clearly the entire country is ready for the end of the current economic decline and the beginning of a new phase of economic expansion. There are signals that the economy is trying to turn the corner. Consumer confidence has increased from a year ago, and consumer spending has resumed its relentless upward trajectory,” Dotzour notes.

He says the most important positive indicator is that corporate profits have rebounded.

“In a free-market, capitalistic system like America, profit growth is the key indicator. When profits are growing, companies hire employees. When profits flatten, they stop hiring. When profits fall, they start to fire people, and they keep on firing people until profits start to increase again. Clearly, most businesses have right-sized their firms sufficiently to regain profitability,” he observes.

So why aren’t they hiring people?

“The answer is uncertainty: uncertainty of capital gains and income tax rates; Uncertainty about the cost of health care and the possible increase in energy costs due to ‘cap and trade.’ The prospect of new and increased government regulation makes it hard for business to see clearly into the future,” he contends.

Dotzour points out that businesses can buy insurance against risk, but there is only one way to “insure” against uncertainty–and that is to hoard cash.

“There is now nearly three trillion dollars sitting in cash on business balance sheets,” he observes. “They have much more capital then the Federal Reserve, the FDIC, Fannie Mae, and Freddie Mac combined.”

So, what will it take to get businesses to deploy their capital and start hiring? In asking that question, the Texas A&M-based economist emphasizes that a new cycle of economic expansion in the United States will not happen until that capital is deployed and hiring is under way.

“The answer lies in business owners seeing the opportunity to make significant profits again. It is unlikely that the issues of taxes, ‘cap and trade,’ insurance costs and new regulations will be resolved in 2010. Hence, expect a sluggish economy through the remainder of the year. After the elections in November and new Congress members are seated early in 2011, business owners may get a clearer picture of what the future looks like. As the uncertainty recedes, the confidence to invest, expand and hire will increase,” Dotzour predicts.

“Many business decisions have been deferred in the past three years. There could be a pleasant economic surprise if, and when, businesses see the “all clear” signal from Washington, because of the pent up demand that has been created by several years of postponed purchasing.

“A second headwind for economic recovery comes from the government sector at the state, county and city level, including school districts. All over the country, income tax revenues are down. So are sales tax revenues. Property tax revenues from commercial real estate have fallen some, and are likely to fall further in 2011. In many states residential property taxes have fallen as home prices declined.”

He says these declines in revenues are forcing government entities to make difficult decisions regarding spending and hiring.

“There is little doubt that there will be reductions in employment at all levels of government. The private business sector has right-sized their firms to adjust to the current environment. Individual households have increased their savings rate to pay down debt and improve their balance sheets. Government has begun the same process, but has a long way to go yet.

“Small business is crucial at this stage of the game. As the government lays people off, it will be essential that small businesses resume hiring. Otherwise, we will start losing more jobs rather than beginning a new expansionary cycle.”

Look for signals from Washington, the Real Estate Center economist advises.

“If the signals are positive toward business owners, then the recovery could happen soon. If such signals are not forthcoming, then 2011 will look a lot like 2010,” he says.

“Business owners are like race car drivers. They have a precision-tuned machine with lots of spare tires and parts. They have skilled mechanics and drivers. They are just waiting to hear from Washington that the yellow flag of government intervention has been lifted and it’s time to roll back onto the track and resume the race,” he concludes.

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About research at Texas A&M University: As one of the world’s leading research institutions, Texas A&M is in the vanguard in making significant contributions to the storehouse of knowledge, including that of science and technology. Research conducted at Texas A&M represents an annual investment of more than $582 million, which ranks third nationally for universities without a medical school, and underwrites approximately 3,500 sponsored projects. That research creates new knowledge that provides basic, fundamental and applied contributions resulting in many cases in economic benefits to the state, nation and world.

Contact: Kelli Levey, Texas A&M University News & Information Services, at (979) 845-4645 or Mark Dotzour at (979) 862-6292.

Janet here. If you’re like me and the words “cap and trade” don’t mean much, here’s what I found when I looked it up. It’s basically a way that companies that produce emissions of some sort can pay to buy the right to do so (which drives the cost of their product up) so energy production companies like coal plants and that sort of thing now have increased costs which impacts the overhead of all businesses which is why the economists are always talking about it. (”Cap refers to cap on emissions. “Trade” refers to the ability to “trade” with other companies to increase your cap by buying some of their ability to “emit”.)

Last month I was involved in a little fender bender one evening in the rain and my little Beetle had to be towed. My attention was really on my own situation as I saw the tow truck arrive, but after a while I began to realize that the tow truck driver had one of those metal canes that has bands that go around your forearm to free up the hand. He was hobbling a bit, but was quite capably and quickly manipulating about my car even though it was partly on the pavement and partly on a very wet, soft and muddy shoulder on which I had found it difficult to walk just a little while earlier.

The very business-like way he was getting my car prepared and then pulled up onto the wrecker made me feel a little silly for feeling sorry for myself and I started paying more attention to what he was doing. I said something to my husband from whose nice, dry car I watched as this guy did his work in the rain. I said something to my husband about the cane and he said, “Yes, he has no leg.” At first I didn’t understand. Then I put my glasses on and looked a little harder. The man who was doing all this work so capably was missing a leg - not a foot or the lower part of his leg, but the whole thing. Stupidly I thought I should somehow acknowledge this feat that seemed to me absolutely beyond human ability and I stepped out into the rain thinking I would say something to him.

He very politely called me “Ma’am” and asked me to find another spot to stand so that I wouldn’t be hurt if the car were to not be held correctly by the many bands and hooks and various fastenings he had employed. And, I realized that he was trying to protect me as I was trying to protect him. I’m not sure what I was trying to protect him from - some cruel world or some kind of difficulty I perceived he would experience as the result of this obvious (to me) disability. Whatever it was, I was wrong. He suffered from no disability at all. His abilities were and are just fine.

I didn’t catch his name, but if you know a tow truck driver who is missing a leg, please tell him that he is a bigger person than most of us. I don’t know about you, but his professionalism told me it was about time to knock off the whining, to be thankful for what I have and to be just a little bit more graceful about how I conduct myself.

In 2009 Builder magazine published the results of a survey, the Builder/Amercian Lives New-Home Shopper Survey - on who was buying homes post - bust.  To quote the magazine, “It’s becoming clear that builders’ old one-size-fits-all marketing and product approach won’t work on any of these buyer groups…”

It’s no big surprise that the respondents were still concerned about the economy, but three fifths of them said it was a good time to buy a house.  Only one in five is waiting for the market to bottom out before buying.  They are buying but their priorities have shifted a bit.  Cocooning, staying at home, entertaining at home and being with family and friends in the neighborhood are even more important to them than before.  The old adage about “location, location, location” being the three most important principles of real estate holds true for this market.  Eighty-five percent indicated neighborhood was extremely important to them and more than half said they would be willing to accept a smaller house to live in the community they wanted.

If you’re reading this blog looking for good news on new home sales I should mention that a big draw of new homes over existing homes is energy efficiency.  Some buyers care about this because they are sensitive to the environment and some simply because they are frugal.  All but five percent of those surveyed agreed with the statement, “we will destroy the environment if we continue living the way we do.”  The vast majority are looking for energy saving systems in their new homes, but, as we hear again and again, they want the energy efficiency to have a reasonable payback time for the initial increase in investment.

Some other trends the magazine noted had to do with changing demographics of buyers.  More homes are being sold to immigrant buyers of various ethnicities and with various needs which need to be surveyed on a local basis.  With the “graying of America” more are being bought or built by empty nesters who want smaller but higher quality homes.  “Millenials”, buyers between 18 and 30 years of age, are another surprisingly large segment of often non-traditional households including many single women owners, a very fast growing segment of the buying market.   Again, with this last group, location is extremely important.  These young buyers are largely fueling the move back to the urban core that many cities are experiencing.

Here at Hobbs’ Ink we’ve experienced a definite shift in clientele since the economy went South (or since the media convinced us it did).  During boom times our business is roughly divided in thirds - one third new custom homes for individual clients, one third homes commissioned by builders and one third remodels or additions.  For the last two years the builder work has all but dried up.  We are doing a few customs that were brought to us by builders and VERY few houses being commissioned by builders to build and sell (spec houses).  But, we are seeing an increase in several other types of commissions.

Remodels and additions are on the rise.  People are choosing to stay home and just spruce it up instead of selling and moving to a new place.  This kind of work is always rewarding and is, of course, the ultimate kind of “green” as it reuses an existing home instead of building a new one.  It is always rewarding to dress up the old family place instead of starting with all new.  And, sometimes you can really improve energy efficiency at the same time.  A representative of a prominent green building program recently described one of our remodels as, “the best example of green remodeling” she had ever seen.

Vacation and weekend homes are another growing segment.  In some cases these clients are just not as severely affected by the vagaries of the economy as other folks, but in many cases it seems they may just be shifting their investment strategy from less than stellar traditional investment vehicles to a second home their family can enjoy and where their dollars can ride out the downturn in the economy.

We also saw a little blip of young new home buyers taking advantage of the first time home buyer tax credit, but, as it was artificially created, we don’t see any long term trend there.

And, last but not least, we are seeing clients who simply aren’t affected by the economy because they have been prudent and frugal for many years and can afford to build a home in spite of what is happening RIGHT now in the economy.  These are the ones who don’t necessarily show up in the most expensive cars or ask for the most square footage.  They are the blissfully calm ones who know what they can afford and what they can’t and who aren’t trying to do too much.  They look a little serious because they have heard what the media has to say about how dire it all is.  They may move a little more deliberately and with less abandon than clients of a few years ago, but they do move and they are financially stable enough to build a house.   It’s these people who make this country strong and who will fuel the resurgence of our economy.   And, we are ever so thankful that they have chosen us to help them with their homes.

1. Get together all your documentation:
   a. Survey (with topo and trees if not cost prohibitive, but at least a boundary survey which you can find in the packet of documents you got when you closed on your property.)
   b. Any magazine clippings, photographs or sketches you have to illustrate your ideas.
   c. Some idea of what you want in the home (if you work with me I have a questionnaire I’ll e-mail you to fill out that will cover this step).
   d. Anything you know about governing bodies we must please: Homeowners’ Associations, deed restrictions, etc.
2. Meet with me (or whomever you choose) preferably twice – once at the property and once in the office - and get some preliminary design work done. Different design professionals go about this differently. While I keep in mind the proportions we’re setting up as we go along, I usually get the basic two dimensional floor plan pretty well worked out before I move on to exterior look of the home. Then, once we get the floor plan designed so that you and I are both pleased with it I would do the most important exterior view of the home and make sure you like that. If so, we’ll go ahead and draw all the major exterior views.
3. At this stage you can either have us finish up the plans or you can stop and get these “bid sets” (simple floor plans, four exterior views and site plan) to your builder to get some preliminary pricing. He will usually give you a bid at this point from historical data (comparing your home to others he has built and getting a general idea of the costs that way). It helps them to get you good cost estimates if they have some idea what kinds of selections you will ultimately make so I always suggest my clients start a document on their computer that lists anything they know for sure. It will have items like, “hardwood in living room, Wolf range, metal roof, pref. standing seam, but screw down okay” and that sort of notations.
4. You can often get Homeowners’ Association approval started while the preliminary bids are being done.
5. If all okay on the preliminary pricing, we will finish the plans, add electrical plans, interior views of cabinets or other things that need a bit more clarification than the builder can get from floor plans, and a lot more detail on the floor plans, roof plan, fully developed site plan, probably a cross section through the building and a lot more refining and annotation than was done in the bid set stage.
6. Once we are pretty certain nothing about the foundation will change, you will contract with a structural engineer who will design your foundation. If you want the extra peace of mind or if we have exceptionally long spans in our design that require it, you can also ask him to do your framing plans. I will give you some names of reputable engineers and will provide them with digital files of the plans that they will use to start from, but you will choose the engineer and pay him or her directly. If your property is not served by a municipal sewer system you may have to hire a septic designer at this point, too.
7. Then these full sets of plans including the engineering and the document you have been completing as we go along that tells him what types of selections of materials you plan to make all go to the builder again. This time he will send copies of the plans to all his sub-contractors and get firm bids from each of them on the costs to build exactly this house. This process can take several weeks.
8. While that is being done your plans can go to the Appraiser to make sure all is well with your financing and you can be getting that all lined up.
9. Once you know your costs and get your financing, you’ll sign a contract with the builder and the construction process begins in earnest. You sign a contract with the builder who will take the plans to the governing authority to get a permit. Again this can take a little while depending on where you are building. In some counties it is a matter of a day or two and in some cities it can be a month or even more if there are special circumstances.
10. Buy a  new shovel that will look good in the photographs and have a ground breaking party - quickly before the builder gets started!

When I was younger I told a mentor of mine I was concerned I might not be able to get a job in the bad economy of the times. She didn’t even slow down to give that any credence. She just announced, “There’s always room at the top,” as if it were the most obvious thing in the world. I’ve thought of that comment many times since then. It can apply to many different situations and the “top” can mean many different things. This week it meant to me that the news in real estate isn’t all bad.

It brightened my day when I got a quick e-mail from a builder we do some plans for. He said this, “The little house we built on (address omitted) earned a 4 star rating and we listed it on Friday and have a full price contract on it now.” (The 4 star rating refers to the Austin Green Building program ratings.) This message came at a time when doom and gloom news is everywhere. Home prices are discounted, “nothing is selling”, it’s all bleak….

Well, if you do a good job and deliver a good product maybe it isn’t so bleak. Keep your head up. Do your best. Don’t be greedy. Do the right thing for the environment and your fellow man. Don’t pass up the opportunity to work on that “small house” or its equivalent in your area of expertise. That “small house” may be the gem that someone else is looking for. And, if you ignore the news media and go about your life you will probably find out things may turn out better than you think.

A client of ours wrote this in an e-mail to me this week. I thought it so perfectly described how we all live these days that I’d post it to make you smile a bit.

Our lives are still crazy as ever. All we do is TALK about slowing down. It is hard to find a way off the merry-go-round…..especially when we are being paid to ride.

An “as-built drawing” is a drawing of the house as it currently exists. This type of drawing is usually used when you intend to remodel or add on to your house. Many people assume that the design fees for their remodel should be less than for a new house. What they don’t realize is that their design professional has to draw the house TWICE - once as it is and once as it will be once it is remodeled. He or she also has to come measure the existing home. A handy homeowner can save some time from this process by doing the measuring himself, but there are a few things to know before you start.

These are directions I gave to a client who was planning to measure her own home. They may help you to do a good job and present realistic measurements to your remodeling contractor or design professional.

Often you will have pretty good outside measurements from the survey (check your closing documents to find your survey) so you don’t need to spend a lot of time measuring outside unless there are things added since survey was done that we need to work with. Exterior wall thicknesses are pretty predictable with construction done in the last 50 years or so (not like on some older homes where you NEVER know how thick the walls might be.) That will give me my building envelope. So, what I need from you are a LOT of interior measurements. So, here are the “rules” for that.

1.  Redundancy is good. There will be some measurement you write down incorrectly somewhere or that I can’t read, so if we can take “best two out of three” it’s always a lot better than having to stop drawing and get you to recheck.
2.  LONG measurements are good. There is cumulative error if you measure from corner to door jamb, then across door, then to the next opening and so on. Always get the WHOLE measurement across any room or space in addition to any shorter measurements. AND, if you can get a clear shot across several rooms or spaces through doorways and such, take those measurements, too.
3.  Be consistent on how you write down measurements if you can – feet and inches (12’-6”) or all inches (150”).
4.  Measure sheetrock to sheetrock, not wood trim to wood trim wherever you can.
5.  On doors and windows, measure to the actual opening in the wall, not to the edge of the wood trim that is on the surface of the wall and not to the edge of the glass on the window. For instance, at the master bath you would measure wallpapered edge to wallpapered edge of that window. At family room you’d measure from where the wood trim turns back toward the window.
6.  Don’t try to get every measurement on one page. You’ll drive yourself crazy and you’ll miss some. Sketch the whole floor plan out, and write what you can on there, but realize it is okay to go to a separate sheet to do the dimensions for a crowded area like the master bath or something. I’d rather have 7 letter sized scans with easy to read numbers on each one than ONE crowded sheet I can’t read.
7.  It’s a good idea to sketch the floor plan in one color and write your dimensions in another. After you have a lot on there dimension lines start looking like walls and vice versa.

But the single MOST important thing for people who don’t do this for a living is to realize the walls themselves have thickness so you have to take this into account or everything will be 4 ½” off somewhere. So, you either have to draw a wall with thickness on your floor plan sketch and make a mark for me on the side you measured to or you have to always go to the same side of every wall or something consistent. A picture is worth a thousand words, so if you draw the wall with some thickness and mark the side you measured to it cuts down on the possibility that I misunderstand.

If you do a good job of sketching and measuring it can save you as much as 8 hours of drafter time - often that number would be multiplied by two because you need two drafters - one to hold each end of the tape.  (Laser measuring devices are tough to use in remodel situations because the house is occupied and there is a lot going on between the walls that can confuse the readings.  It can be done, but I prefer an old fashioned tape.)

A colleague recently sent me an article about the anti-microbial characteristics of copper. The article claimed that copper kills germs. So, if you have a copper sink (get out your checkbook; they are price-y) you aren’t just washing dishes. You are also killing germs. The article claims that even the EPA has corroborated this. I’ve checked around a bit and it does seem to be true! When I was growing up my Dad used to put a copper compound in the water of the pond on the family farm to kill algae so I guess it does have some kind of mysterious quality that is toxic to some things. I’m sticking with stainless steel myself, but in this germ conscious age it’s an interesting concept.

The article had the following quotes and link if you are interested: “The anti-microbial characteristic has come as a pleasant surprise benefit to consumers and designers alike,” says Naomi Howard, president of Native Trails, http://www.nativetrails.net/ the country’s largest producer of hand-hammered sinks and tubs. “A copper sink is not a substitute for good hygienic practices, but it’s nice to know that the copper surface actually has a role in! disinfecting your sink.”