Hi! Kathe Ostrom, your Minnesota State Rep here asking, “Have you noticed the price of materials lately? What is NAHB doing about it?” The answer is NAHB is making efforts to decrease the impacts of the increase of material costs. Below is an economic summary and prediction for material prices and actions NAHB is taking.

Economic Summary and Forecast

The long drought in housing not only took its toll on home builders, but also on the network of suppliers and contractors builders rely on. And, it will take time to rebuild that infrastructure. For example, prices of oriented strand board (OSB) have doubled since April 2012, and framing lumber prices have gone up by 40% over the past six months. Producers of wood products and gypsum have pointed to productive capacity that was idled or eliminated during the housing downturn, resulting in higher production costs and higher prices.

Lumber and OSB producers have indicated that returning or replacing that capacity to production depends on whether the current recovery in housing continues. Labor, materials, and distribution channels need to be re-established.

The forecast for lumber prices is unfortunately a continued high. The U.S. housing market recovery plus strong demand from China and Asia will keep upward pressure on prices. Meanwhile, the supply of available logs will be constrained, because the logs made available due to the mountain pine beetle infestation are reaching the end of their useful life. The beetle epidemic will result in a permanent reduction in lumber production in British Columbia. The second cost factor is the forestry management regulations in eastern Canada, where Quebec has reduced timber harvesting by 30% in the last 10 years.

The outlook for OSB is similar to lumber. Strong housing demand is keeping prices elevated while a wave of new capacity in the coming months is expected to help put pressure on prices. Gypsum producers have also pointed to productive capacity that was idled or eliminated during the housing downturn.

Here is a summary of NAHB efforts and actions to lower the impact of the rise in material costs:

1. Testifying before Congress. Legislation requiring the government to implement active forest management plans would benefit rural communities and boost timber harvesting on federal lands. On April 16, NAHB sent letters to members of the Senate Energy and Natural Resources Committee and the House Natural Resources Committee in support of the Lyon County Economic Development and Conservation Act. The bill would increase the production of copper, which can add up to 4.4% to the cost of building a new home.

NAHB has met with Canadian government and U.S. Commerce Department officials on the need to ensure an adequate supply of lumber, and other building materials, and urging Cabinet officials to ensure “there are no regulatory barriers or supply-chain interruptions that would increase prices or impede availability” of building materials

2. Providing price escalation language. To help members limit the damage of unpredictable price hikes for building materials, NAHB is providing price escalation language that can be included in home sales contracts. Email David Crump at NAHB or call him at 800-368-5242 x8491 for more info.

3. State and Local Issues Fund. The deadline for submitting applications to the NAHB State and Local Issues Fund is Tuesday, May 21^st. The SLIF application is available HERE.

Hey, it’s Kathe Ostrom again – your Minnesota NAHB State Rep.

I am calling local association presidents here in Minnesota to see how they are doing, asking if there are any problems that I or NAHB can help them with and just generally chatting about the state of the industry in their corner of Minnesota.

After talking with three last Friday, I realized there was a theme running through our talks….membership is stagnant, retention is difficult and finding new members is a problem. Not a surprise, right?  So I thought I would put the question to my state rep chat line…”How do you get members to a meeting?  And, more difficult, how do you get new prospects to a meeting?”  The following are some quotes from around the country which I thought might spark an idea or two:

“The only really successful and consistent way to increase membership is to involve the most successful and influential members of the community in the recruiting process and to structure the membership drive to force competition between the real leaders of the local association. “

“Membership is largely dependent on housing starts.  Even the best recruiting effort will have limited success without a reasonably strong industry to support it.”

 “Younger members are motivated in different ways from those of the older members.  They have to be given meaningful roles from the very beginning to encourage their involvement.  “

“We had an open membership meeting last night – what I’ll call a kitchen table or living room discussion – on how this group gives my little company a much larger voice at the local, state, and national level. We spoke about how our membership dollars are spent on the local and national lobbyists as well as the legal teams that can help us get back on track with the occasional derailments of conservation or heritage.”

“The trend I see as I travel around the country is membership is growing through commercial builders.”

“The west coast and mountain states seem to be the most progressive in terms of younger generations involved and inclusive of associate members. Many of their organizations are named Building Industry Association. Not ‘Home Builders’ in the name.”

“We asked our members to bring one new business acquaintance to our meeting. We offered a discounted first-year membership and we fed them.”

“Have any of us ever tried a Family Day for recruiting?  A day at the park or something like that?  Possibly an opportunity to convince spouse (in particular) that the HBA is important, etc?”

I hope something in here rings a bell for any of you who are struggling with the same issues. NAHB has many resources to help. There is a webinar on April 16, Strategies for Overcoming the Objections and the May 9, Basic Recruitment/Retention webinar.  Here is the link:  Membership Webinars Schedule and Past Recordings.

I understand Rochester Area Builders is doing great things in retention and recruitment of the Gen X/Y groups, and Central Minnesota Builders Association in St. Cloud was recently recognized by NAHB for their accomplishments in member retention.

We have some outstanding resources right here in our state, and I’m happy to say both Bonnie Moeller the Executive Officer of CMBA and John Eischen, Executive Officer of RAB, have graciously agreed to write a blog about their success and what they’re doing right. Thank you to both local associations. I can’t wait to see what they have for us.

Please comment if you have an idea or a recruiting/retention success story to share. We’re all part of this association because we care about the success and integrity of the industry. There are many others in this business that would benefit from membership as well.

Unifying the industry and banding together is important because we’re stronger together!

Kathe Ostrom, CN Ostrom & Son
Minnesota’s NAHB State Rep

There have been lots of rumblings, tumblings, and grumblings about the NAHB committee appointment process lately.  In Minnesota, there has been concern expressed about the number of Minnesota members given committee appointments. Our research shows we have two appointed slots. Discussion has also centered on a clear and fair process for earning a committee appointment.

This issue has been a major topic on my State Rep listserv which is an online chat open to all state reps.

The following is my version of the discussion points:

There are many things you can do to be appointed to serve on an NAHB committee – emphasis on what YOU can do:

1. Attend committee of choice meetings for 2 years and ‘Sign in” at each meeting. (2 years is not a requirement, but certainly should attend regularly to show interest)
2. Volunteer to work on any subcommittee
3. Participate in BUILDPAC
4. Let the committee chair/leadership know of your interest
5. Let your State Rep and NAC know of your interest in the committee appointment
6. Complete committee application on line and on time on NAHB.org
7. Follow-up with someone in leadership, hopefully a Senior Officer, to let them know you applied and are counting on serving FOR them.

As you can see, if serving on an NAHB committee is something you’d like, there is a lot you can do to enhance your chances of winning a committee seat.  It can be as simple as regularly attending NAHB committee meetings and donating to BUILDPAC.  Don’t wait for someone to ask you.  Step out and shake hands with the committee chair, state rep (that’s me), or NAC (National Area Chairman).  If you get a chance to introduce yourself to a senior officer – DO IT!  Remember, there are over 240,000 members vying for those seats.

As Minnesota State Rep, I will do everything I can to help each of you but you have to do the groundwork.

The BAM staff and I have been doing some research on Minnesota’s current involvement at NAHB.  Currently, we have only two appointed slots, one on the Legal Action Committee and one on the Business Management and Technology Committee.  As of last week, we have three members contributing to BUILDPAC.

For those of you interested in committee appointments, take a look at that list and start taking some action.  There are still open committee seats waiting to be filled so write that BUILDPAC check today!

It’s important for Minnesota to be involved in the work NAHB is doing and the decisions being made, but it’ll take some work on our part as individuals to collectively get Minnesota back on the map.

What has NAHB done for me lately?  Ever think this? My name is Kathe Ostrom, and I’m the NAHB State Rep for Minnesota. I’ve been a member of the builders association for over 20 years and run a remodeling company – CN Ostrom and Son. On this blog I plan to share observations and interesting tidbits I’ve learned from many corners of the Federation and news as I see it happen.

I have been involved in an NAHB committee called the State & Local Government Affairs (SLGA) Committee. Basically, NAHB helps Local or State Associations fight legislation and regulation issues.  In 2012 the NAHB SLGA helped several associations across the country. The committee actually helped with BAM’s fight at the legislature last year against a mandate of fire sprinklers in new construction.

• Illinois received assistance in their fight against fire sprinklers.

• North Dakota was helped in a fight to NOT eliminate property tax.

• Wisconsin received help in developing a framework to streamline water quality certification,

• Kentucky was provided with funding to ensure the EPA model for Total Maximum Daily Loads were correct and that Builders would have input on the final model

• New Jersey received funding to evaluate scientific and policy implications of a government Aquifer Study

• Florida was helped to rebut the Fish & Wildlife endangered species designation of diamondback rattler

• Texas was helped with an issue of immediate listing of 4 salamanders to Endangered Species by Fish & Wildlife Service.

There are issues all over the country and these fights have national significance. The SLGA Committee is working alongside local and state associations to win and set a precedent or at least put together a winning playbook for other states. If Wisconsin or Florida fights it and wins, hopefully Minnesota won’t have to. And if we do, we’ll at least have a winning strategy from which we can work.

The fiscal cliff, an economically damaging set of tax hikes and spending reductions scheduled to begin in 2013, has been avoided (for now) and that is good news for housing  in the short-run.

The enactment of H.R. 8, the American Taxpayer Relief Act of 2012, will extend permanently most, but not all, of the 2001/2003 tax cuts. The legislation prevents a fiscal drag of approximately $600 billion in 2013, which would have been large enough to push the current weak economy into recession. That in turn would have reduced demand for both owner-occupied and renter housing and threatened the ongoing recovery for home building.

That outcome has been prevented, although future fiscal policy debates loom on the horizon. For example, a legislative fight over the debt ceiling and the delayed sequester will take place in February. And 2013 may be a year in which comprehensive tax reform is under legislative consideration.

But for now, the following items in H.R. 8 are of interest to housing stakeholders and home builders:

Business Tax Items

• Permanently extends the 2001/2003 tax rates for adjusted gross income levels under $450,000 ($400,000 single); good for small business and home builders, 80% of whom are pass-thru entities who pay taxes on the individual side of the code
• Permanently extends the Alternative Minimum patch; again, good for small business owners who are frequently at risk of paying AMT
• Permanently sets the parameters of the estate tax; positive for family-owned construction firms; codfies the 2010 $5 million exemption amount (indexed to inflation) and a 40% estate tax rate
• Extends present law section 179 small business expensing through the end of 2013; offers cash flow and administrative cost benefits for small firms
• Extends the section 45L new energy-efficient home tax credit through the end of 2013; allows a $2,000 tax credit for the construction of for sale and for-lease energy-efficient homes in buildings with fewer than three floors above grade

Homeowner Tax Items

• Extends through the end of 2013 mortgage debt tax relief; important rule that prevents tax liability from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt
• Deduction for mortgage insurance extended through the end of 2013; reduces the cost of buying a home when paying PMI or insurance for an FHA or VA- insured mortgage; $110,000 AGI phaseout remains
• Extends the section 25C energy-efficient tax credit for existing homes through the end of 2013; important remodeling market incentive, although the lifetime cap remains at $500.
• Reinstates the Pease/PEP phaseouts for deductions; for married taxpayers with AGI above $300,000 ($250,000 single), the Pease limitation reduces total itemized deductions by 3% for the dollar amount of AGI above the thresholds. This is a negative change for some high cost areas, but should only have small impacts. Example, a married household with $350,000 AGI would be $50,000 above the limit and must reduce their Schedule A total by $1,500 raising their taxes by about $500. Only a share of that would be due to the MID.

Multifamily Tax Items

• Extends the 9% LIHTC credit rate for allocations through the end of 2013; absent the credit fix, the LIHTC program would suffer a loss of equity investment for affordable housing projects
• Extension through the end of 2013 of base housing allowance rules for affordable housing

Also noteworthy are items that are not in H.R. 8, including an itemized deduction cap or a defined fast-track tax reform process. Nonetheless, the return of the Pease rules suggests that items like the mortgage interest deduction will be under debate in 2013.

The resolution of the fiscal cliff now gives way to a series of mini-cliffs due to the need to raise the debt ceiling, establishing government spending levels and deal with the sequester. Over the long run, the future of housing demand, and interest rates in particular, will be affected by how Congress and the President solve the nation’s long-run deficit challenges.

Congratulations to the 2012 Award Winners!

(Click on a photo thumbnail below to see a larger version)

KC Chermak, Pillar Homes
Builder of the Year Award

Chermak has been a member of the builders association for over 15 years and a very active leader. He currently serves as a member of BAM’s Executive Committee, and has served as president of his local association, the Builders Association of the Twin Cities. Chermak has created an award winning and successful company known for quality.

Todd Bjerstedt, McDonald Remodeling
Remodeler of the Year Award

Bjerstedt has been a member for over 25 years and very active in the association. He has served on the BAM Board of Directors, on countless committees and councils, and as president of both BAM and his local association, the Builders Association of the Twin Cities. McDonald Remodeling has a well-deserved reputation for outstanding quality and customer service.

Gerry Traut, Xcel Energy
Associate of the Year Award

Traut was presented with the prestigious Associate of the Year Award given to an associate member based on their service to the local, state and national associations and the community. Traut has been a member of the association for over 15 years and is very involved in the association. “He is an excellent leader and we are fortunate to have him as an active member,” said Colleen Faacks, Executive Officer of the Mid-Minnesota Builders Association.

Sam Horn, Brainerd Savings & Loan
Rising Star Award

Horn was presented with the Rising Star Award given to a member who has committed themselves to the service of BAM or their local association at an accelerated level in the past year. Horn has participated in multiple committees at her local association, the Mid-Minnesota Builders Association (MMBA). “She is the first person to volunteer and she believes in the association,” said Colleen Faacks, Executive Officer, MMBA.

As NAHB and other trade groups have repeatedly pointed out to EPA and members of Congress charged with EPA oversight, the agency failed to perform prerequisite studies on the potential lead dust exposures to adults – not children – during renovation activities in pre-1978 commercial buildings. Under federal law EPA is required to perform these studies prior to proposing a commercial building rule.  To date, EPA has not conducted the required study.

In addition, EPA has yet to approve a test kit for the presence of lead-based paint that meets the accuracy standard it said it would require when the residential rule was implemented in 2010.

The residential rule has created a competitive disadvantage for professional remodelers bidding against fly-by-night contractors, and lack of consumer awareness only fuels this disparity.  Many professional remodelers are being outbid because their prices include compliance with the rule while their competitors do not.

NAHB continues to voice its concerns that this same inequity may transfer to the commercial market.   EPA’s three-year delay in developing the lead paint rule for commercial buildings is in part a recognition by the agency that it has not conducted the required analysis to move forward in the near term.

For additional information, contact Michael Mittelholzer at NAHB at 800-368-5242 x8660.

Read the full article here>>

More on the EPA Lead Rule here>>

Beginning September 15, 2012, the next phase of the contractor registration program begins.  In addition to registering, contractors will also need to comply with the subcontracting requirements of the new law.  This includes subcontracting work to registered or licensed contractors unless the contractor meets an exemption specified in the law.

DLI has created several tools to help construction contractors with the registration program:

•  Contractors can register at http://www.dli.mn.gov/CCLD/register.asp

•  Contractors can verify that their subs are registered or licensed on the DLI License Look-up link at https://secure.doli.state.mn.us/lookup/licensing.aspx.

•  Contractors can verify that their subs carry workers compensation insurance at http://www.inslookup.doli.state.mn.us/

• DLI has developed a checklist to help contractors comply with both the registration and the subcontracting provisions of the new law.  The checklist can be found at http://www.dli.mn.gov/CCLD/PDF/registration_checklist.pdf.  

•  DLI has updated the frequently asked questions (FAQs) on their website at http://www.dli.mn.gov/CCLD/PDF/registrationFAQ.pdf

For more information about contractor registration contact DLI at:

Phone:  (651) 284-5074

Email:  dli.register@state.mn.us

The resolution recommends that “the President and Congress act with a sense of urgency to address the nation’s housing crisis in a meaningful and responsible manner, while avoiding any legislation or regulatory actions that will inhibit the recovery of the home building industry.”

It also mentions “the role the home building industry must play in helping citizens achieve the American Dream and fueling our country’s economic recovery.”

“Preventing foreclosures will continue to be a priority for the National Lieutenant Governors Association,” said Lieutenant Governor Murray, who was named chair of the NLGA during the association’s annual meeting last week.

Read more…