60 Minutes—A big disappointment

I’ve always been a fan of 60 Minutes on CBS. Their stories are usually interesting and they usually bring to light facts that one doesn’t usually hear on the nightly news shows.

But a week ago, the piece they did about real estate was a big disappointment, to say the least. It was extremely slanted and wasn’t even accurate. There are many objections I could talk about, but I will focus on only a couple of the more important issues raised.

The introduction to the segment began: "For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years," goes the set-up. "But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers -- the encroachment of the Internet -- is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters."

As Blanche Evans of the Realty Times notes: “the six percent commission is not sacrosanct. In some areas it's seven percent, but in most areas it's less, because competition -- brought on by the swelling of agents into an already highly competitive business -- has reduced commissions and gross incomes for most Realtors.”

She goes on to refer to an internal report from the National Association of Realtors® (NAR), which found that commissions typically range from 4.3% and 5.3% as of 2005. And income for real estate agents generally has steadily declined as membership in NAR has skyrocketed during the past couple of boom years. According to NAR’s 2007 member profile, the median gross income for all Realtors in 2006 was $47,700, down slightly from 2004 when median gross income was $49,300. And that’s before expenses, which are significant

These are hardly incomes to write home about as the cost of living has increased. Many students just graduating from college are offered jobs with higher starting salaries than that and the only deductions they have are taxes--not business expenses, such as advertising for listings, internet websites, MLS dues, license fees, gasoline for showing properties, increased FICA deductions for being self-employed, to mention just a few.

In addition, the average agent does not receive the entire commission. Whatever commission the seller is paying is divided 4 ways—listing agent and listing company, selling agent and selling company. The result is that the agent usually gets about 1.5% or less of the sales price of any property, unless the listing agent sells the home. The implicit theme in the 60 Minutes story of Realtors gouging the public is just not accurate.

Another topic alluded to was the fact that many states have minimum service laws. Stahl’s interpretation of these laws was that they constituted a restraint of trade and prevented discount brokerages from existing in the states where they exist. What is not mentioned is that these laws were put into place to protect the public after many complaints from the public to licensing entities in the states where they exist.

Allyson Hoffman, a Realtor in Illinois, explains in her blog response to the 60 Minutes segment that the minimum service law in her state was one such law—there were so many complaints that legislators felt that consumers needed an assurance that at least basic real estate services were being provided by the discounters. In addition, Hoffman notes that full service real estate firms provided their sellers with more money in their pockets than did discount firms and sold their homes in less time, another fact that Stahl ignored. The issue is not really whether there is a 6% commission or something less, but rather what puts more money in the consumer’s pocket at the end of the transaction. Studies from NAR have supported Hoffman’s assertion.

A major problem with the 60 Minutes piece is that it was totally one-sided. Most of the people interviewed were from high-tech companies or discount brokerages. NAR worked with the producers of the piece for almost a year, and yet they declined to interview anyone from the organization to provide a balanced report. Instead NAR got the so-called “empty chair” treatment, a throw-away line that NAR disputed some of the claims of those interviewed. The absence of a NAR spokesperson gave the opposing views presented more weight to further the biased point of view of the piece. And the real estate agent they did interview was not articulate or capable of speaking to the issues raised.

I could go on and on. Ultimately the piece was a promotion for discount and internet companies who provide little or no fiduciary counsel to their clients and fed the current realtor-bashing debate. The bottom line for me is that I really don’t understand why people think that Realtors make too much money for what they do. I guess it’s because most people don’t really understand what we do.

How many people would work hours and hours without being paid for it? Real estate agents do it all the time—the sale that doesn’t close because of unresolvable problems or because the buyer was not approved for the loan, buyers who occupy hours (even days) of an agent’s time (and gasoline) and then go purchase a “for sale by owner”, sellers who change to a different agent when the listing period is up because they priced their home too high (contrary to the advice of their agent) after the agent has spent hours and hours on the sellers’ behalf and paid for numerous newspaper and magazine ads, internet advertising, etc.

The current commission system is antiquated, based on a system where the real estate agent takes all of the risk and assumes all of the expenses with the hope that the transaction will close so that the agent will finally get paid for all of the work he or she has done. Some of these tasks can indeed be done by the home seller (i.e. flyers, open houses, etc.). However, the most important services of real estate agents are to provide fiduciary advice and counsel to their clients, based on their experience and expertise, as well as to trouble-shoot problems that may arise in a transaction, provide a “buffer” between buyer and seller, and negotiate on behalf of their client. These are services which merit payment whether there is a sale or not.

There are new models being developed for payment of real estate agents, but they are not yet widely used in the industry. One is a consultant model, whereby Realtors would be paid by the hour or by the job, much like lawyers, doctors and others. The goal is to provide choices based on the client’s needs and actually get paid for the services provided, whether there is a sale or not—a much more logical approach. More on this in a future post.

Yes, Stahl was right on one thing--technology is assuming more importance in the industry, but there is no substitute for an experienced professional. I provide MLS listings and other on-line services to assist my clients and potential customers and provide better service. But the internet is just one of many tools in my toolbox. Real estate is still about relationships and people-to-people contact, so I value my clients, especially those who wish to have me serve them in the sale of the property I helped them buy and those who thought I did a good job for them and recommend me to their friends and colleagues. As Mollie Wasserman, an agent in Massachusetts, states in her internet warning:

REAL ESTATE INTERNET WARNING: Despite advertising claims to the contrary, the internet is not an experienced Real Estate Professional. It cannot consult, counsel, advise, have knowledge of local laws and market conditions, make judgments, “own” the result, or most importantly, understand your individual goals and needs and care about you as a Client.

I work hard for my money, and I strive to provide the best service possible to help my clients either buy or sell what is (for most folks) the largest purchase they will ever make. Buying or selling a home is not a simple thing that can be done on the internet. And I’m sick and tired of the general public’s perception that I don’t DO anything to earn my paychecks. Realtor bashing may be in style, but it’s not fair to hard-working agents all over the country who put clients’ needs above their own, solve innumerable problems, and work long hours (including evenings and weekends) to assure that the transaction will close, just so we can finally take home a paycheck. We deserve to earn a living wage too.

To view the NAR response:

http://www.realtor.org/about_nar/60_minutes/NARRespondsToSixtyMinutesMain.html

For additional commentary about the program and the issues:

http://realtytimes.com/rtapages/20070515_sixtybiased.htm

http://realtytimes.com/rtapages/20070518_narresponds.htm

http://tinyurl.com/2cz22o

http://www.realestatenorthernillinois.com/blog_post.asp?post=2182

http://realtytimes.com/rtapages/20060621_banksnewspapers.htm

http://www.realtor.org/home_buyers_and_sellers/nar_works_for_you.html

Fayetteville and One Developer Cooperating to Offer Affordable Housing for City Employees

I want to commend the City of Fayetteville and developer Hank Broyles and his partners, John Nock and Lex Broyles, for their cooperative efforts to create affordable housing for city employees. As you know affordable housing is one of my "pet" subjects in this blog.

Some expensive road realignments were called for at Broyles’ new Holcomb Heights subdivision of 105 homes. The city agreed to pay up to $50,000 towards the costs if Broyles would agree to lower the price on some of the homes.

The least expensive homes in the subdivision were expected to cost $131,000. With the city’s financial help on the road expenses, Broyles said he would be able to lower the cost to $120,000 on six homes. Broyles said he would market the homes directly to city employees because the average city worker would be able to quality for a mortgage on a $120,000 home.

It is important to note, however, buyers do not have to be employed by the city. The homes will be sold to anyone who qualifies.

We all know that municipal workers are needed and appreciated. Police officers, firefighters, office staff, meter readers, park workers, sewer maintenance people - none are over paid by any standard. Without these workers, the city would be a disaster.

Currently more than 50% of the city’s employees live outside the Fayetteville city limits. It is generally believed they cannot afford to live in the city.

It’s refreshing to see what can be accomplished when all parties cooperate. While this innovative cooperation between a developer and the city will lower the cost on only six homes, it is a beginning. It is also a clear example of what might be accomplished in the future.

For more information:

http://www.nwanews.com/nwat/News/52303/

First Quarter 2007 NW Arkansas Housing Market Update

According to the National Association of Realtors®, the GDP (Gross Domestic Product—or total value of goods and services produced in the US) grew at a slower than expected 1.3% in the first quarter of 2007, due in part to the housing slump across the nation.

On April 25 the National Association of Realtors® announced that sales of existing homes plunged 8.4% in March, the worst one-month decline in 18 years. The median price of an existing home nationally fell to $217,000, a 0.3% decline from March 2006. Inventories of unsold homes nationally rose to a 7.3-month supply, the highest level since October. New home sales in March rose 2.6% over February, but were down 23% from March 2006, the second weakest year-over-year sales performance since September 2001, according to an April 25 report from the Census Burea. Surprisingly, the median price nationally of a new home sold in March was $254,000, up 6.3% from the price of a new home sold a year earlier.

Home sales in NW Arkansas, as elsewhere, were down in the first quarter of 2007 compared to the last quarter of 2006. This is a normal seasonal occurrence, since the NW Arkansas housing market is largely weather driven, and we had awful, cold weather. But homes are now taking longer to sell due to elevated inventory in almost all price levels, with the average days on market (DOM) up in all of the NW Arkansas towns. The “buyer’s market” discussed in media reports does exist here, and with high inventory and falling prices, it might be a good time for buyers to purchase a home in NW Arkansas. Nevertheless, each town does have slightly different market trends.

An exception to what I have said above, Fayetteville actually experienced an increase in home sales in Q1 2007 with 258 homes sold (86 per month), compared to 248 homes sold in the Q4 of 2006 and the same number sold in the Q1 of 2006. As for prices, after a drop of almost 14 percent in the last quarter of 2006, the average price of homes sold in the first quarter of 2007 increased by almost 6% to $216,013. The median price of homes sold was $189,900, and the DOM was 137, up from 110 in the 4th quarter of 2006. The highest average sales price in the past couple of years was $236,616 in the 3rd quarter of 2005.

Springdale’s housing market is down from both the past quarter and from the same quarter last year. There were 275 homes sold in Q1 of 2007 compared to 283 in Q4 of 2006 and 313 in Q1 of 2006. Average DOM has increased to 132 over the past year from 111 in Q1 of 2006. The average and median sales prices have also decreased over the past year. Average sales price is down almost 8% compared to Q1 last year and almost 3% from the last quarter. The average sales price for Springdale during Q1 of 2007 was $160,882 after a peak in Q2 of 2006 of $181,380. The median price of homes in Springdale in Q1 of 2007 was $149,900—a decrease to the same level as in Q4 for 2005. It should be mentioned, however, that not only does the decreased average and median sale price reflect lower prices for homes, but also the increased availability of less expensive homes. This might be a good time to invest in a home in Springdale.

Bentonville is still the most expensive place to purchase a home in NW Arkansas, with an average sale price of $235,229 during Q1 of 2007, compared to $212,666 in Q1 of 2006. However, prices have dropped slightly from the highest average sale price in the past couple of years, which occurred in Q4 of 2006 at $238,659. However, the median sale price is now the highest it has been at $209,000, compared to $194,500 in Q4 of 2006 and $180,000 in Q1 of 2006. The median price represents the middle price of all homes sold, with equal numbers of more expensive and less expensive homes sold. This increase represents a 16% increase compared to Q1 of 2006 and almost an 8% increase from the last quarter of 2006.

Average days on market (DOM) in Bentonville has reached 162, up from 142 in Q4 of 2006 and 124 in Q1 of 2006. And the number of homes sold in Bentonville during Q1 of 2007 has decreased significantly to 151, compared to 192 in the same quarter last year and 197 in Q4 of 2006. The highest number of homes sold in the past couple of years in Bentonville occurred during Q3 of 2005, 292 homes.

The picture in Rogers is slightly different from that of Bentonville. It is the same in that fewer homes were sold in Q1 of 2007 compared to Q4 of 2006 (279 compared to 319), but when compared to Q1 of 2006 (275 homes sold), more homes were sold. Also both median and average prices have declined. The average sale price in Q1 of 2007 was $193,807 and the median sale price was $160,000. This represents a drop of 14% compared to Q4 of 2006 and 13% compared to Q1 of last year in average sale prices, and a drop of over 7% in median sale prices compared to Q1 and Q4 of 2006. As in Springdale, this signifies both falling home prices and the increased availability of less expensive homes. The DOM is up to 167 days, compared with 147 in Q4 of 2006 and 122 in Q1 a year ago.

Bella Vista’s market, in some respects, has remained somewhat steady in comparison to the other towns of NW Arkansas. This could be because the price ranges of homes are more limited. Nevertheless, there was also a decline in the number of homes sold in Q1 of 2007 compared to the previous quarter, from 243 to 200. The number of homes sold in Q1 of 2006 was 265. As in the other NW Arkansas towns, average DOM increased from 135 to 145, the highest it has been in the past couple of years.

But prices haven’t changed that much in Bella Vista. The average sales price did decline slightly from $178,789 in Q4 of 2006 to $176,201 in Q1 of 2007 (only 1.51%). The median price increased slightly in the same period from $155,000 to $159,000 (only 2.58%).

All in all, many of the changes are normal seasonal ones and follow similar patterns to previous years. As mentioned earlier, the weather does have a significant effect on the NW Arkansas housing market, and this winter has been extremely cold. Another factor has been the large amount of media type about the “housing slump” which made many buyers afraid to purchase; they didn’t want to pay too much if prices were going down.

Until the past couple of quarters, NW Arkansas seemed immune to these national trends with home prices rising even as they were bottoming out in other parts of the country, but an adjustment has finally occurred.

Yes, prices have come down, so this might be a good time to buy, since the supply of homes is up and interest rates are still down. It is definitely a buyer’s market in almost all price ranges. And now that the weather is improving, I have noticed a decided increase in buyer activity.

Note: Data for local statistics in this report is from the NW Arkansas MLS and included only homes that were listed by real estate agent members of the MLS. It does not include For Sale by Owners or other properties not listed by a real estate firm. For comparison purposes the national median home price in Q4 of 2006 was $219,300. NW Arkansas is still a “good deal.”

These figures do vary according to price range, city, and neighborhood. If you would like more information on your specific neighborhood, email me at judy@judyluna.com.

For more information on other economic indicators for Q1 2007:

http://www.realtor.org/Research.nsf/files/gdp.pdf/$FILE/gdp.pdf

Reflections on the Life of Helen Walton

Helen Robson Walton, widow of Wal-Mart founder Sam Walton, died last week. Her passing signifies the end of an era, but her influence will live on.

Lady, Christian, philanthropist, savvy businesswoman, unpretentious, caring humanitarian – these are but a few of the adjectives used to describe Helen Walton. She was a loving wife and mother to Sam and their four children and “the woman behind the successful man.” One might wonder if (in a different generation) she might not have been the founder of Wal-Mart.

Helen Walton was a woman’s libber before that term was even coined. She earned a bachelor’s degree in finance at the University of Oklahoma in 1942, back when such a pursuit was unusual for a woman.

She pushed to have women on Wal-Mart’s board of directors and in 1986 the first woman, Hillary Clinton, joined the board. Helen also understood early on, the long-term importance of providing profit sharing to Wal-Mart employees, to which Sam agreed.

Always active in the Presbyterian Church, Helen was the first female vice-chair and first female chair of the board of trustees for the Presbyterian Church (U.S.A.) Foundation. She also was active on the board of the University of the Ozarks in Clarksville, Arkansas, and was its honorary lifetime chairwoman.

Helen Walton personally supervised the $3.6 million scholarship fund for Central American students at John Brown University, University of the Ozarks, and Harding University. According to Wal-Mart, about 1,000 students have participated in this program since 1985. Most, if not all, the students have returned or will return to their home countries after graduating with the intent of improving the lives of their fellow citizens.

She was the person behind the Wal-Mart Foundation, which has given untold millions of dollars to the community. One example is a $300 million donation to the University of Arkansas. The foundation had earlier given $50 million to the university's school of business, which was subsequently renamed the Sam M. Walton School of Business.

Other notable contributions include $39.5 million to the University of the Ozarks, the largest gift to a private institution in Arkansas.

Always interested in education and the arts, Helen Walton was a founding member, organizer and 1992 president of the Arkansas Committee of the National Museum of Women in the Arts in Washington, DC.

She was the leading supporter of The Walton Arts Center in Fayetteville.

She also was the impetus behind a plan to include computer technology in all Bentonville-area school districts. That project resulted in a computer in each classroom and a computer lab in each building.

Sam started a small business in a very small town, Bentonville, Arkansas. His wife and partner, Helen, was his bedrock all the way. She provided not only heart and business acumen, she was the source of many of the humanitarian practices established in the corporate structure as the company grew.

These days Wal-Mart bashing is a popular activity. A strong anti-Wal-Mart movement exists but it wasn’t always that way. Many people in NW Arkansas, throughout the country, and even other parts of the world will remember Helen Walton and her husband, Sam, for the many trails they blazed.

For more information:

http://www.nwanews.com/nwat/News/52281/
http://www.nwaonline.net/shared-content/search/index.php?search=go&l=25&q=helen+walton
http://uk.reuters.com/article/governmentFilingsNews/idUKN2018261920070420
http://www.pcusa.org/pcnews/2007/07235.htm

Fayetteville’s Impact Fee Election Results Somewhat Uncertain

When I posted my blog entry April 1 about the upcoming special election on impact fees, I fully expected to post a follow up the day after the April 10 election to state the results. Well, as some of you already know, results are somewhat murky.

The morning after the election the unofficial count was tight, to say the least. Supporters of the fees had a one-vote lead. (Once again, I say, “Don’t ever think your one vote doesn’t matter.)

The major holdup at that point was 15 outstanding absentee ballots. The ballots would be counted if they were received by April 20, the day the election was to be certified.

When the absentee ballots were added to the earlier results, the election was a tie, 2015 votes for and 2015 votes against. Elections have to be won by a majority so the tie means the impact fee increase failed.

As if an election that close isn’t interesting in itself, here’s the really unusual part.

One of the absentee ballots may ultimately be thrown out on technicalities. It seems the overseas voter did not use the same exact address on the application for the ballot as he did on the statement accompanying the ballot.

That particular ballot was a No vote. It was the vote that created the tie. It was included in the final certification.

If that ballot is challenged and subsequently removed from the official count, the election will have been approved by one vote.

Washington County Attorney George Butler is researching the situation but said he expects to find little precedent to resolve the matter.

Because the law is generally against disenfranchising voters, Butler encouraged the Washington County Election Commission to count the ballot in question. Butler stated further that the commission may file an amended certification reversing the election if that becomes necessary.

For more information:

http://www.nwaonline.net/articles/2007/04/21/news/042107fzroadfees.txt
http://www.nwanews.com/nwat/News/52331/
http://www.nwanews.com/nwat/News/52304/

General Aviation Airports are Big Business in NW Arkansas

NW Arkansas is lucky to have several excellent general aviation airports. The airports contribute to the economy by providing jobs, paying taxes, and serving many of the businesses located here. They serve not only the owner of a 2-seat propeller airplane but businesses of all sizes.

In fact, Rogers’ and Fayetteville’s general aviation airports are two of the most successful in the state, according to a recent study commissioned by the Arkansas Department of Aeronautics. Their combined annual economic impact is estimated at $128 million including direct factors such as fuel sales and the trickle-down effect of indirect factors such as wages paid to employees who then spend that income locally.

Rogers Municipal Airport at Carter Field is home to Wal-Mart’s corporate fleet, a fact that certainly helps explain why that airport is the most lucrative general aviation airport in the state. (According to information I was given at the Wal-Mart Museum in Bentonville, Wal-Mart ‘s fleet consists of 21-22 jets.)

Fayetteville Municipal Airport, Drake Field, is home to the University of Arkansas at Fayetteville’s jets. Drake Field’s revenue was ranked fourth in the state, generating $34 million, the ADA study found. It’s commonplace there to have people fly in for Razorback games.

In addition to Rogers and Fayetteville, Springdale and Siloam Springs have general aviation airports with thriving charter service. Springdale’s airport includes a complete aircraft maintenance facility and a 300-foot runway expansion is under consideration.

General aviation airports offer expediency and cost savings to corporations both large and small. It’s easy to understand how Wal-Mart would save money by flying several executives to another city and back in the same day.

But the airports also offer savings for smaller corporations in outlying areas such as Siloam Springs. That city is home to Allen Canning and Simmons Foods, corporations that also have the need to move people expeditiously to other facilities throughout the country. “Without these airports, small communities just aren’t as viable,” said Mark Anderson, Allen Canning’s chief pilot. “For us, people would lose a whole day driving. It’s about the utility and efficiency.”

Another major economic factor is the businesses such as support services, aviation industries and airfreight companies that locate on the periphery of airports.

Speed, convenience and privacy of charter jet service are also becoming increasingly attractive to individuals who can afford it. A 2004 survey conducted by the National Business Aviation Association found that two-thirds of charter operations had a significant portion of new business from travelers who had stopped flying on commercial carriers.

The Arkansas Department of Aeronautics recently reported that in the last 10 years the number of general aviation aircraft based in the state has risen from about 2,300 to 2,808. Between 2005 and 2025, the department estimates that the number of general aviation business jets will increase in number from 182 to 531, almost tripling in number in 20 years.

For more information:

http://www.nwaonline.net/articles/2007/03/10/business/031107bizluxuryaircharter.txt

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=182855

http://www.nwaonline.net/articles/2006/11/11/business/111206fsairportplan.txt

Fayetteville MSA Receives Another #1 Rating

Our best-kept secret has been announced to the world by Bert Sperling of Sperling’s Best Places fame. Sperling has previously researched and written books about a variety of issues such as the best places to raise a family and cities with the lowest crime rates.

This time Sperling looked at quality of life, affordable housing, high percentage of home ownership, low unemployment and fast rate of job growth. He discovered the Fayetteville Metropolitan Statistical Area (MSA) and ranked it number one in the country. (Fayetteville MSA includes Fayetteville, Springdale, Rogers, Bentonville and stretches into extreme southwest Missouri.)

The area boasts five-year-job growth of 26.1% and a low unemployment rate of 3.5%. In addition to the headquarters for Wal-Mart, Tyson and J.B. Hunt Trucking, many other Fortune 500 companies have offices here.

Living costs are low. According to the book, the median home price in the Fayetteville-Springdale-Rogers area averages $212,300 for a 3-4 bedroom home with approximately 2,000 sq. ft. of living area.

We have the University of Arkansas-Fayetteville with all their sports and cultural activities, several museums plus a world-class museum scheduled to open in 2009, a large performing arts center, excellent medical facilities, and our own regional airport with non-stop service to Chicago, Houston, Detroit, Minneapolis and additional cities.

Add all that to the clean air and natural beauty of the Ozarks, many lakes including Beaver Lake with its 449 miles of shoreline, and a very livable four-season climate and you can easily understand why Sperling found this area so attractive.

For the past several years, some 1000-1100 people have been moving here each month. I guess Bert Sperling isn’t the only person to recognize a good thing when he sees it.

For more information:

http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=3863709
http://www.nwanews.com/nwat/news/51179

Affordable Housing May Still be Possible in NW Arkansas

Good news! Builders and cities are beginning to realize that the majority of people cannot afford a mansion to house their families.

I have maintained for considerable time now that there is a shortage of affordable homes. Land prices have increased dramatically while wages have not kept pace.

When builders have to pay more for land they generally build a more expensive home in order to recoup the cost. Fancy bathrooms, gigantic master bedrooms, granite counter tops, top-of-the-line appliances, and 3-car garages are all very nice – but not affordable for the average wage earner.

Three bedrooms, 2 baths, ceramic tile in the wet areas, and 1,000–1,200 square feet are perfectly serviceable homes for many people. These “starter homes” are more important now than ever before.

When homebuyers are forced farther away from the major municipalities to find a home on lower cost land, their cost of commuting to work increases. At the same time, infrastructure is strained and traffic congestion increases.

Now, I’m happy to say, some builders and cities are cooperating in an effort to create affordable housing. Homes can be built with smaller set backs and less space between homes.

One builder is planning to build 1,000 square foot homes in Rogers with an expected sales price of about $110,000.

Building on empty land where the infrastructure is already in place is another way to lower the overall cost of the home. This is called “in-filling” and helps reduce urban sprawl.

Each year NW Arkansas homebuilders showcase their homes in the Parade of Homes. The parade has traditionally featured homes for the more affluent buyer. This year, some builders may highlight less affordable homes, a trend I hope will continue.

The Parade of Homes is open to the public and will take place the weekend of June 22-24.

For more information:

http://www.nwanews.com/story.php?paper=brog§ion=News&storyid=43179

http://www.nwanews.com/story.php?paper=adg§ion=Business_Matters&storyid=180267

Impact Fees – How Much is Too Much?

Less than one year ago Fayetteville voters approved a ¼ of 1% sales tax increase to pay for $65.9 million in bonds for street improvement projects.

Now Fayetteville residents are being asked to vote at a special election April 10th on the question of whether to impose an impact fee on builders to provide additional funds to improve roads.

If the impact fee passes, the additional amounts charged builders will vary from $2,363 for a single family detached home, to $1,319 per room for a hotel/motel, and on up to $2,701 per 1,000 square feet of commercial or office space.

As usual, there is more than one point of view when looking at this problem.

Does it make sense that the builder should be charged for the infrastructure that his project would necessitate? It’s easy to say “Yes, that sounds logical.” But look a little deeper into the problem and you’ll see it is the buyer or renter that will ultimately pay the fee. Homes will cost more and rents will rise.

I’ve written previously about the lack of affordable housing in NW Arkansas as a whole and Fayetteville in particular. Adding another $2,363 to the cost of each home only makes homes less affordable.

Another issue is whether increasing the impact fees already in effect will deter businesses from locating in Fayetteville. That issue, too, can be argued two ways. Some say that businesses seeking to expand or move to Fayetteville will look at other areas where fees are lower or nonexistent, and this has already happened.

If businesses locate elsewhere, Fayetteville’s sales tax receipts will decrease accordingly. Keep in mind that sales tax is a principal source of revenue for city capital improvement and schools. There has already been a decrease in sales tax revenues in the last quarter of 2006.

Others say look at Bentonville. The impact fee for a single home in that city is $4,750 and the city is growing at a major pace.

The new impact fee will make Fayetteville’s the highest in NW Arkansas at $4,897. Springdale has no impact fees and has completed major improvements on their artery streets, as well as neighborhood streets, by sales taxes voted by residents and by bond issues. Rogers charges a $2600 “sewer and water hook-up” fee, which some call a disguised impact fee and which has been challenged in court.

However, the bottom line here is that developers in Fayetteville already pay impact fees for new-construction, which are passed on to the consumers of these homes. Developers also are required to install (at their own expense) new roads and other infrastructure items, such as water lines, sewer lines, etc. An additional road impact fee will basically be another tax, not just on developers and builders of new areas but on everyone who lives in Fayetteville. It’s a case of double taxation, despite what those in favor of the measure say. And it puts the burden of street improvements for older areas of Fayetteville on the developers of new areas. Is that fair?

Ultimately, money for additional (and much needed) street improvements will have to come from somewhere. If taxes need to be increased, so be it—let the voters decide as they have in the past. But let’s be honest.

I have a great concern that Election Day is just around the corner, and I don’t believe the majority of voters have taken an interest in the matter at hand. I encourage everyone to become informed and vote his or her conscience. I personally am going to vote NO.

Here are some links for further information:

http://www.nwanews.com/nwat/News/51665/

http://www.nwaonline.net/articles/2007/03/25/news/032607fzroadfees.txt

http://www.nwanews.com/nwat/News/51598/

http://www.nwanews.com/adg/News/186156/

http://www.nwanews.com/nwat/News/51075

http://www.nwanews.com/adg/Special/182334

http://www.nwanews.com/nwat/News/51559

http://www.citizens4fayetteville.org/

http://voteforfayetteville.org/

Women Buying Homes in Record Numbers

A majority of American women now live without a spouse according to a New York Times analysis of U.S. Census Bureau data. In other words, 51% of adult women in this country are on their own.

Though married couples continue to dominate the market, single women now purchase approximately 22% of all homes bought in this country. Single men constitute only 9% of home purchases.

I found that number surprising but looking a little deeper, it isn’t surprising at all. Today’s women are better educated than ever before. Women college graduates outnumber men 57 to 43. Women are more confident, earn more money, and are becoming increasingly sophisticated about financial matters. Many women wisely see homeownership as the best way to reach financial stability and security.

It wasn’t too many years ago that single women were basically shut out of homeownership because lenders did not want to grant mortgages to them. Now lenders offer a variety of non-traditional mortgage products to encourage women to become homeowners.

Outreach programs by Fannie Mae and Freddie Mac have helped first-time homebuyers and minorities get into their own homes. For example, divorced women are frequently given first time buyer status, thus making low down payment or subsidized loans available to them even if they owned a home in the marriage.

Child support payments can now be counted as income, which boosts the ability of many newly single parents to qualify for a mortgage.

Even recent college graduates are finding mortgages that enable them to become homeowners with only a small cash down payment.

And, women have discovered they don’t need a husband to put up a shelf or paint the living room. Thanks in part to large home improvement stores that offer classes on how to do just about anything to do-it-yourself television programs, women have become empowered. They are willing and able to take on projects their grandmothers would never have considered.

I frequently help single women purchase homes. I bought my first home in 1975, back in the days when single women rarely bought homes, and it was one of the best investments I ever made. Whether it’s your first home or you’re moving up, I will be happy to help you do the same. Call me at 479-966-0435.

For more information:

http://www.rismedia.com/wp/2007-02-12/as-the-nation-changes-so-do-home-buyers/

http://www.mortgagenewsdaily.com/7172006_Woman_Home_Buyers.asp

http://www.bankrate.com/brm/news/real-estate/women-buyers1.asp

2006 NW Arkansas Housing Market Report

I have just finished a marketing report for 2006 for NW Arkansas. It gives conditions of the housing market, absorption rate, the number of homes for sale by price range, and much more. The towns covered are Bentonville, Fayetteville, Rogers, Springdale, and Bella Vista. See what home prices have been doing in the past years to help understand what is happening in the market now as the needed "adjustment" is also occurring here. To view this report, visit my main website at http://www.judyluna.com and click on 2006 Market Report under Articles and Links on the left of the home page.

Do-it-Yourself Checklist

I’ve known people who seem to have the ability to do almost anything and do it well. Unfortunately, I’ve also known people who undertake tasks they never finish or when they are finished, you wish they never started.

If you are thinking about repairs or improvements to your home, please consider these points before you start:

Do I have all the skills to do the job right the first time?
Do I have the time required to do the job properly?
Can I actually do the work to a professional degree, or will it look as if an amateur did it?
Are all the right tools available? Can I afford to buy or rent all the right tools?
Have I considered all aspects of the job from beginning to end?
Do I need a license for electrical or plumbing tasks?
Do I need a building or zoning permit?
Is there a risk I will damage the home?
What do I risk if I do the work myself?
What is the possibility that I may be injured?
Will I lessen the value of my home?

All of these questions are fundamental but #11, “Will I lessen the value of my home?” is frequently overlooked by the do-it-yourselfer intent on saving some money. The question becomes vitally important when the homeowner wishes to sell the home.

Buyers will notice sloppy workmanship and it will affect their perception of the property. Sometimes a buyer will turn around and leave without any further consideration of the property.

Other times sloppy repairs (think crooked tile or a bad seam on the kitchen counter top) will result in a buyer offering several thousand dollars less on a property.

Even worse is a remodeling project that doesn’t meet local codes. That can be a nightmare.

So, I urge you to consider all aspects before you do-it-yourself. If you have the necessary expertise, fine. If you are not proficient, don’t shortchange yourself now. Have a qualified professional do the work.

For more information:

http://www.nwaonline.net/articles/2007/02/07/your_home/020807homeimprovement.txt

9th Graders to be Included in Fayetteville High School

The Fayetteville school board voted March 15 to add 9th graders to high school. Currently 9th graders attend two junior high schools.

The vote was tight – 4 members for, 3 against. By passing this item, the board accepted the recommendation of the Future of FHS Select Committee.

In February the board voted to accept the committee’s other recommendation – namely to continue operating only one high school.

Still unclear at this point is when the 9th graders will be added to high school and when/where the new high school will be built.

For more information:

http://www.fayar.net/admin/ftb_3-15-07.pdf

http://www.fayar.net/admin/ftb_2-22-07.pdf

Springdale Limits Parking Cars in Front Yards

The City of Springdale has passed some common-sense (but difficult to enforce) rules to reduce the number of vehicles parked in front yards.

An ordinance adopted by the City Council earlier this year will now begin to be enforced. It gives residents the opportunity to build one additional parking space no larger than 9 feet by 19 feet in their front yard. The new space must be landscaped and adjacent and parallel to an existing driveway. Residents are also allowed to pave up to 40% of their front yard for parking, and homes with existing gravel driveways will not be required to pave them.

Violators will be issued a citation on the first offense. After that fines of up to $500 for each offense and $250 per day for continued offenses will be assessed.

At first thought this may seem a bit unnecessary, but drive around the city and you will quickly understand the need for the ordinance. There are many neighborhoods where cars and trucks are parked all over the property. Sometimes the vehicle has a “For Sale” sign on it, other times it is simply a matter of too many vehicles for the size of the driveway. Worse yet are the vehicles in various stages of repair or those that will never again run on their own power.

On the other hand, the large number of vehicles in the yard in some neighborhoods is a reflection of the times. Many older homes and duplexes, for example, have only one-car garages. This may have been adequate in the past, when each family had only one car. But now, many families have more than one breadwinner and multiple vehicles. Older children may also have their own vehicle. There is simply no room to park all of them without parking on the lawn or blocking the street.

Another issue is that in rental areas, landlords could be asked to build additional parking spaces to accommodate their tenants’ needs. Concrete work is not cheap, so to build even one additional park pad can be prohibitively expensive. Also less affluent homeowners may not be able to do so. Luckily the Springdale ordinance allows for homeowners to apply for a variance with the Springdale Planning Commission in hardship cases.

And all of this is related to the issue of affordable housing (or the lack thereof). Increasingly low income area dwellings are home to multiple families, who share the dwelling in order to be able to afford the rent or mortgage payments. And with multiple families come multiple vehicles.

Overall, I think eliminating this eyesore will help maintain property values. But my question is WHERE (for multi-vehicle families in rental or low-income areas) the additional vehicles will be parked if the home’s owner is unwilling or unable to afford to build an additional park pad.

Enforcing this new ordinance is going to be difficult, if not impossible. If vehicles cannot be parked in the yard, they may end up being parked in the street, causing difficulty for traffic. They won’t go away, and fining property owners or tenants will not necessarily solve the problem.

Rogers is considering a similar ordinance.

For more information:

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=181226

http://www.nwaonline.net/articles/2007/03/11/news/031207rzcounciladv.txt

January Home Prices Declined in Northwest Arkansas

According to an article in the business section of the Morning News last Monday, home prices began sliding down in Benton County (decrease of almost 6%) in January with a significant drop in sales (down 19.69% from January of 2006). At the same time, while average prices in Washington County also decreased by 11%, the number of sales increased by 8.28% compared to January of last year.

This is a good-news/bad-news scenario for Northwest Arkansas, depending on whether you are a buyer or a seller of a home. For sellers, it means that they may not be able to sell their home at the price they might have hoped had the market continued rising at the same pace as during the past several years. For buyers, it means that with lower prices, they might be able to get a nicer home in their price range, and perhaps more people will now be able to consider purchasing a home.

A positive trend, not mentioned in the article, is that an increasing supply of more modestly-prices homes has contributed to the decrease in the average price of homes sold. This is good news, since it means that builders have finally seen the light and started building more affordable homes. This is also good news for buyers who haven’t been able to afford a new home because prices for such homes were so high. For example, there are now new homes being built in Fayetteville for less than $150K (only 2 subdivisions so far, but hey, it’s a start). This price for a new home hasn’t been seen for several years in Fayetteville. And this trend also exists in other communities in NW Arkansas.

According to Kathy Deck of the U of A Center for Business and Economic Research, the decline in home sales could be the beginning of the kind of corrections which have been occurring elsewhere in the nation. Until recently the NW Arkansas real estate market has largely been immune to these trends.

For more specific data on the January Arkansas Home Sale figures, the Morning News article can be seen at:

http://www.nwaonline.net/articles/2007/03/05/business/030607arrealtors.txt

To view a copy of Judy’s Market Report for 2006, write her an email at judy@judyluna.com

Homeless Count in NW Arkansas Revised Upward

The number of homeless people in NW Arkansas has been revised from 839 to 1,170. The 839 number was the preliminary estimate taken from a census of the homeless in January. The census was conducted for the Northwest Arkansas Housing Coalition, which planned to use the information to help its members apply for federal grants.

In addition to the 1,170 homeless, many more people are close to being homeless. Agencies that provide services to the needy see numerous examples every week of people who will soon be homeless – those who are just one paycheck away from paying the rent or those who have to choose between eating or heating.

As if that information isn’t sad enough, recent reports say NW Arkansas agencies will receive no money from HUD this year to help the homeless. More than $1.4 billion in HUD Continuum of Care grants was awarded nationwide to approximately 5,000 local programs to provide emergency shelter, transitional housing and permanent support to homeless individuals and families, according to a HUD press release. Not even $1 will reach NW Arkansas!

What’s wrong with this picture?

For more information, see my post of February 11, 2007 “Recent Census Estimates 839 Homeless in NW Arkansas”

http://www.nwanews.com/nwat/News/50430/

http://www.nwanews.com/nwat/News/50431/

http://www.nwanews.com/story.php?paper=adg§ion=Special&storyid=182968

http://www.nwanews.com/nwat/News/50434/

Future of Fayetteville High School Update

In a close decision, Fayetteville School Board voted 4-3 to continue operating only one school for all high school students in the district. Currently, that means grades 10-12.

There is much more to be considered. For example:

Will 9th grade be removed from Junior High to High School?
Will the present school somehow be expanded or abandoned in favor of a new school elsewhere?
If it is to be a new site, where will that be?
What are the costs of these decisions?
What is the resale value of the present high school property?
Is enrollment expanding enough to justify the expense?

The Future of Fayetteville High School Select Committee charged with evaluating the future of the high school recommended adding 9th grade to high school but the board did not vote on that subject.

My son graduated from FHS a few years ago so I feel justified in giving my opinion. I’m in favor of keeping 9th graders in junior high. They need another year of maturity and chances of leadership positions in junior high before being tossed into the high school where they are “small fish” in a very big pond.

I’m also in favor of one high school because I fear having two high schools may create a rivalry of sorts. One school may be perceived as better, or more modern, or have better labs and classes, etc. Or, and let’s hope this would not happen, one school may happen to have more affluent students because it’s located in a “better” part of town.

It is worth noting that while all these decisions are being made, Springdale and Rogers have each seen their enrollment go flat after several years of incredible expansion. Springdale’s enrollment has dropped about 100 students from the end of 2005-06 school year to the present time. Rogers has lost nearly 200 students.

Springdale is now postponing construction of several new schools that were planned.

I wish Fayetteville School Board well as they deal with these difficult decisions.

For more information:

See also my post “Last Chance to Influence Decision on Fayetteville’s High School Expansion” of February 8, 2007

http://www.nwanews.com/nwat/News/50372/

http://www.nwaonline.net/articles/2007/02/25/news/022607szattendanceboundary.txt

More Tax Cuts for Arkansans

In addition to the state’s largest tax cut in history (reducing the sales tax on groceries by 50%) more good news arrived this week on a variety of tax cuts. These measures are designed to boost the economy, make Arkansas more attractive to business and retirees who carefully study tax implications before moving to a new state, and help many of our most vulnerable residents.

Increase in Homestead Tax Credit Becomes Law

An increase of $50 in the homestead tax credit was signed into law. Currently, homeowners in Arkansas are eligible for a credit of up to $300 on taxes for their principal residence. The new maximum credit of $350 will become effective with the 2007 assessment year and will appear on property tax bills in 2008.

There are approximately 696,000 homesteads in Arkansas and it is expected that about 538,000 homesteads will we benefit from some or all of the additional $50 tax credit.

The homestead tax credits are financed by a one-half percent sales tax collected by the state, which, in turn, reimburses the counties for the property taxes they did not collect because of the tax credits. According to the state finance department, a $60 million balance was on hand at the end of last year. Governor Beebe has stated, “We were able to determine that we could conservatively and reasonably [increase the credit] and still be sound going into the future.”

Income Tax Cuts for Working Poor Move Closer

It looks like state income tax cuts for low-income people are on the horizon. The House tax committee has endorsed a bill that would exempt approximately 62,000 Arkansans from paying state income tax.

In its current form, the bill would eliminate the following groups from state income tax:

Single people with an annual gross income tax (AGI) of less than $10,200;
Married couples filing jointly with less than two dependents and AGI less than $17,200;
Married couples filing jointly with two or more dependents and AGI less than $20,700;
Head of Household filers with AGI less than $13,700.

Arkansans with income above the federal poverty level but less than 33% above it would receive tax credits to partially offset state income tax. The state finance department estimates 89,000 taxpayers would be eligible for these credits.

This is a step in the right direction. Just imagine a family of four (or more) trying to make ends meet on less than $20,700 a year. If this bill becomes law, it would provide tax relief for people in low-paying jobs and cut the workload at the Department of Revenue at the same time.

A Bill Advances to Equalize Taxes on Military Officers and Enlisted Personnel

Under existing law, enlisted military personnel do not pay state income tax on the first $9,000 of pay. However, officers are taxed on all military pay over $6,000.
The $3,000 difference seems strange to me and apparently to Rep. Sandra Prater, D-Jacksonville, as well. She has introduced a bill that would make the first $9,000 of military pay exempt from state income tax, regardless of rank. The bill passed the House and Senate and has been sent to the Governor.

Reducing Sales Taxes on Utilities Paid by Manufacturers

Bills to reduce the sales tax that manufacturers pay on natural gas and electricity seem to be sailing through the legislature. If signed into law as expected, the sales tax paid on utilities used by manufacturers would decrease from 6% to 4.5% on July 1, 2007. Another scheduled decrease would drop the tax to 4% on July 1, 2008.

State officials say the decreases will reduce state revenue by $20.2 million next fiscal year and $30.5 million the next year.

Perhaps your first reaction to this news might be “What about the taxes I pay on utilities? I’d like to pay less, too.” But the situation bears a closer look.

Arkansas needs to retain the industry it has while at the same time it must recruit more economic development to the state. The 6% sales tax on utilities puts Arkansas at a disadvantage. Most of the neighboring states charge manufacturers lower or even zero sales tax on utilities.

The Arkansas Chamber of Commerce is a strong advocate of this tax cut. If it passes, Arkansas will be in a more favorable position to recruit new employers. Arkansas is still trying to land a huge Toyota plant and there are other possibilities on the horizon.

I say go for it - I’m tired of hearing about the ones that get away, especially now with the recent loss of manufacturing jobs in this area.

For more information on these subjects:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/22/topics/assembly07/022207lrlegpropertytax.txt

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=182003

http://www.nwanews.com/story.php?paper=adg§ion=National&storyid=182089

New Tax Cut Benefits Everyone in Arkansas

Effective July 1, 2007, the state sales tax on groceries will be cut in half – from 6% to 3%. The details are still being worked out but this much is definite: When you buy groceries for human consumption, you will be taxed 3% less than the current rate.

The average savings is estimated to be at least $200.00 per year for a family of four.

Other items you buy at the grocery store will continue be taxed at 6%. That includes such things as paper products, cleaning supplies, pet food, diapers, personal grooming items and miscellaneous household supplies.

The reduction in sales tax is possible because the State of Arkansas has a huge surplus on hand and that surplus seems to be increasing each month. One recent estimate is an $844 million surplus in the state’s coffers by June 30, 2007.

There are innumerable ways to spend the surplus – roads, education, tax rebates and reductions, health care, ad infinitum.

But here is the plain truth: No tax is more regressive and repugnant than a tax on food! Everyone has to eat and levying a sales tax on food simply means that the lower a person’s income, the higher the percentage of their income they must spend in order to feed their families.

I urge the legislature and Governor Beebe to eliminate the remaining 3% tax on groceries in the near future. But that might be hard--it would have been better not to tax food in the first place, as other states have done. But this tax cut is a step in the right direction.

Note: County and city sales taxes remain unchanged. It’s possible some local governments may find it possible to lower their tax rates in the future but they remain in place for now. For instance, Fayetteville, Springdale, Rogers, and Bentonville all have sales tax rates of 2%. In addition to the city taxes, Benton County assesses an additional 1% while Washington County’s sales tax rate is an additional 1.25%.

Please watch for an additional article I expect to write soon on other tax cuts already signed into law or under consideration in the legislature.

For more information:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/16/topics/assembly07/021607lrleggrocerytax.txt

http://www.arkansas.gov/dfa/excise_tax_v2/et_su_local.html

What is the Economic Impact of Hispanic-Owned Businesses in NW Arkansas?

Seeing signs recently in Fayetteville about a Korean restaurant preparing to open triggered thoughts of the many small businesses in NW Arkansas owned and operated by immigrants.

Minority-owned businesses are nothing new, of course. They have been the backbone of America since immigrants first came to America. As the immigrant population grows throughout the U.S., so does the number of businesses owned by minorities.

According to a new study by the Center for an Urban Future, a New York City think tank, immigrants have been more likely to be self-employed than native-born residents in every U.S. census since 1880. Further, immigrant entrepreneurs have been an overlooked and little-understood piece of cities' economies. The research shows that more businesses are being started by foreign-born vs. native-born entrepreneurs in major cities, driving growth in sectors from food manufacturing to health care.

NW Arkansas mirrors the nationwide trend.

Benton County’s overall population grew by 22% in the five-year period 2000 to 2005. At the same time, the Hispanic population grew 78%, from slightly over 13,000 to nearly 24,000. Hispanic population in Washington County showed a slightly smaller percentage of increase, 73%, while the overall population increase in Washington County was 14%. Translating that to numbers means the Hispanic population grew from approximately 13,000 to more than 22,000. Certainly no other ethnic group comes close to such an increase in our area.

So, it’s no surprise to see to see more and more signs in Spanish while traveling in the two counties. There are restaurants, grocery stores, auto sales and repair shops, clothing stores, daycare centers, real estate agents, notaries public, Spanish-speaking radio stations and newspapers, and more.

For many immigrants, entrepreneurship is the best way to rise above a menial, low-paying. Immigrants are known for their willingness to work hard to obtain a brighter future for themselves and their children.

However, they face many significant roadblocks, notably the language barrier and lack of available business loans. Another problem stems from the perception of banks and chambers of commerce the immigrants brought with them from their native lands.

It sometimes takes years for immigrants to feel secure enough to divulge business and personal information to banks. Many immigrants do not comprehend what a banker means when asked about their “business plan.” Their plan is to join with family members and work long, hard hours.

There is no doubt that minority-owned businesses contribute greatly to our local economy but the amount of the impact is difficult to determine. No one in NW Arkansas has made a thorough study. Some area chambers of commerce are reaching out to the Hispanic community, as are some banks. However, a comprehensive study is lacking.

The cost of such a study is the biggest obstacle. The Skyline Report, an economic summary of the real estate market in NW Arkansas which I frequently mention in my blog, is prepared for Arvest Bank by the Center for Business and Economic Research of the Sam Walton School of Business at the University of Arkansas. I’ve read estimates that the Skyline Report costs $250,000 annually. While certainly expensive, this comprehensive analysis is extremely useful for measuring the real estate market.

I believe the economic impact of Hispanic-owned businesses is being overlooked at best and ignored at worst. It is time for a thorough study of their importance in NW Arkansas.

The Hispanic population is the largest minority group in NW Arkansas and the U.S. There is no sense in burying our heads in the sand any longer; Hispanics, as well as other ethnic groups, are here to stay.

Perhaps one of the banks could see the benefits of such a study or area chambers of commerce could join together to fund an analysis. It needs to be done.

For more information:

http://www.nwanews.com/story.php?paper=adg§ion=Special&storyid=180945

http://www.hispanicbusiness.com/news/newsbyid.asp?id=55217

http://www.boston.com/news/local/massachusetts/articles/2006/09/17/
immigrant_businesses_transform_us_neighborhoods/?rss_id=Boston.com
+--+Massachusetts+news (copy and paste this entire link to read the article)