The economic impact of foreclosures

It was no surprise that one of National Association of Home Builders (NAHB) major advocacy issues discussed at the Board of Directors meetings last week in Orlando was home foreclosures and their continuing significant negative impact on the housing market and economy.  We are all well aware of the impact of short sales and foreclosures on property values.  But there’s more to the story.

At one of the meetings I attended, NAHB’s Chief Economist, David Crowe, noted that for every $100 loss in the value of their property, consumers spend an average of $3 to $5 less.  The estimated loss in property value in a result of the housing crash is $6.5 trillion dollars.  That’s $6,500,000,000,000. If my math is correct (I’m not use to working with such large numbers), the loss in property value has resulted in a drop in consumer spending of between $195 billion ($195,000,000,000) and $325 billion ($325,000,000,000).

The U.S. Department of Commerce Bureau of Economic Analysis recently reported thatU.S. current-dollar GDP increased 3.9 percent, or $561.2 billion, in 2011 to a total of $15,294.3 billion.  So the drop in consumer spending equates to a decrease of between 1.3% and 2.1% in U.S. GDP.

According to Andrew Abel and Ben Bernanke, every 2% decrease in GDP results in a 1% increase in unemployment.

So home foreclosures and short sales impact much more than property values.


Home Buyers Opinions Regarding Short Sales and Foreclosures

Sales of new U.S. homes fell to in August. The fourth straight monthly decline during the peak buying season suggests the housing market is years away from a recovery.

The Commerce Department said Monday that new-home sales fell 2.3 percent to a 295,000 – a six-month low – and less than half the roughly 700,000 that economists say must be sold to sustain a healthy housing market.

But all home sales remain weak. August sales for previously occupied homes at a seasonally adjusted annual rate of 5.03 million were slightly above last year’s sales but still almost a million less that the roughly 6 million older homes that economists say need to be sold each year to sustain a healthy housing market.

The low sales have been attributed to a lack of consumer confidence and on competition from short sales and foreclosures which are selling at an average discount of 20 percent. But is that really the case?

The Builder Magazine/American LIVES 2011 Study of buyers who had recently purchased or looked at newly constructed homes measured, among other things, home shoppers opinions regarding Short Sales and Foreclosures. The survey asked:

“Home shoppers have different opinions about Short Sales and Foreclosures. Check what is true for you.”

 I’ve heard that Short Sales take forever and sometimes you don’t even get the house.
 I’ve heard that the Foreclosures can be a really good deal.
 You need to know a lot more than I do to consider a Short Sale or Foreclosure.
 You can find some really good deals in a Short Sale.
 I’ve heard that Short Sales are a pain in the neck, even if you finally get the house.

In the Builder Magazine/American LIVES 2011 Home Buyer Study, 40% responded that they’d heard that the Foreclosures can be a really good deal and 38% believed that you can find some good deals in short sales. But 41% heard that Short Sales take forever and sometimes you don’t even get the house, 40% felt that you need to know a lot more than they do to consider a short sale or foreclosure, and 32% had heard that Short Sales are a pain in the neck, even if you finally get the house.

Short Sale or Foreclosure homes are selling at an average discount of 20 percent, and they are lowering neighboring home values, making many re-sales a bargain compared with new homes and creating an average 30 percent disparity in prices.

Given the uncertainty about jobs and the economy, is it a surprise that people are shopping for “deals?” Getting a “perceived deal” can give you the psychological lift you need to be confident that you are making a good decision. In addition, our expectations are being set by all of the “deals” being offered by other parts of the economy – groceries, dining, vehicles, and vacations.

According to the latest report from my friend and fellow MIRM, Mike Pennington, while the number of distressed properties in Ada and Canyon counties is declining, it is not declining at the rate we need to cause average prices of homes to increase.

Because all real estate is local, I would like to know how you would respond to the survey question on short sales and foreclosure.

President / Builder – Chuck Miller Construction Inc.
(208) 229-2553


Americans overwhelming consider owning a home essential to the American Dream

I realize it has been awhile since I posted anything. But I am back and I believe this is too important not to share.

A recent survey of people likely to vote in 2012 conducted on behalf of the National Association of Home Builders (NAHB) shows that despite the ups and downs of the housing market, home owners and non-owners alike consider owning a home essential to the American Dream. 75% of the people polled said that owning a home is worth the risk of fluctuations in the market and 95% of home owners said they are happy with their decision to own a home. Follow the link below to download the slides and listen to an audio recording of the June 7 presentation of the results of the survey.

But don’t stop there. If you agree, contact your elected officials and let them know.

President / Builder
Chuck Miller Construction Inc.
(208) 229-2553

What are you thankful for?

“The hardest arithmetic to master is that which enables us to count our blessings.” — Eric Hoffer 

As we prepare for another Thanksgiving holiday, I would like to encourage everyone to count our blessings. It has been a challenging couple of years for many of us. But I sincerely believe in the Law of Attraction and the importance and power of developing an “attitude of gratitude.” Learning to appreciate what we have makes life more valuable and meaningful. Sharing our gratitude improves your quality of life because it can only result in positive emotions. So let’s spread some positive emotions. I’ll start.

  •   I am grateful for my faith and my connection to my Source of Being.
  • I am grateful for my ability to think and reason and choose and for my desire to learn and grow.
  • I am grateful for having been born in the USA and for the freedoms we enjoy – the freedom to worship and believe as we choose, the freedom to express our opinions, the freedom to elect our leaders.
  • I am grateful for my family and friends and for the love and friendship we share
  • I am grateful for my health, for the food that nourishes me and the fresh water that sustains me.
  • I am grateful for my home and for a warm comfortable bed to sleep in
  • I m grateful for my successes in life – personal and professional
  • And I am grateful for the challenges that I face – for the opportunities they provide to face and overcome my fears and to learn and grow.


Your turn.
President / Builder
Chuck Miller Construction Inc.
(208) 229-2553

Improved insulation increases energy-efficiency

 Insulation is a key element in building a more comfortable and energy efficient home in Boise, Idaho or elsewhere.

 Insulation materials are rated according to their ability to resist heat flow. The thermal resistance rating is known as an “R-value”. The higher the R-value of a material, the better its ability to resist heat flow.

 Most new homes are insulated with fiberglass batt insulation.  However, improper installation of the fiberglass batts can significantly reduce its effectiveness.  Gaps or voids can provide paths through which heat and air can easily flow into or out of the home.  Compressing the insulation behind piping and electrical wiring also reduces the thermal resistance.

 Newer types of insulation like blown-in-blanket fiberglass, batts made of denim, blown cellulose, and spray foams have higher R-Values and protect against convective heat transfer because they penetrate around obstructions and into odd-shaped cavities, completely filling gaps or voids and providing a monolithic blanket of insulation that forms a tight seal around wiring, plumbing, and framing materials.  

 Benefits of improved insulation

 Improved insulation provides:

 Improved comfort

 Improved insulation reduces conductive heat losses and gains resulting in warmer interior surfaces in the winter and cooler interior surfaces in the summer. As noted in my article on advance framing, approximately 40 percent of our physical comfort is due to the radiant heat exchange between our bodies and the surrounding interior surfaces. Improved insulation reduces this radiant heat exchange and minimizes temperature differences between rooms, thus maintaining a more consistent level of comfort throughout a house.

 Improved indoor air quality

 When insulation materials are properly installed, there are fewer gaps and voids through which unconditioned air can leak into a house. This helps avoid dirt, dust, and other impurities that can negatively affect indoor air quality. A tight building envelope is a critical component to ensure good indoor air quality.

 Reduced heating and cooling loads

 Improved insulation also helps to reduce heating and cooling loads, allowing smaller “right-sized” heating, ventilation, and air-conditioning (HVAC) systems. The cost savings from using smaller HVAC equipment can be used to offset the additional cost of high efficiency heating and cooling equipment.

 Lower utility bills

 More than 40 percent of the energy consumed in a typical household goes to heating and cooling. Proper insulation reduces this energy consumption which results in lower utility bills.

Chuck Miller GMB   CGB  CGP   MIRM   CMP   MCSP   CSP

President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

Where are the jobs?

Two of the biggest issues facing this country today are unemployment and energy. Our elected officials seem to think that the solution to both is developing emerging renewable energy technology. I disagree.

In a blog in February 2009 titled “Home Remodels, Retrofits Are Key To An Energy-Efficient Future” I noted that “Industry research indicates that even the most aggressive efficiency goals for new homes won’t make a dent in overall energy consumption.” And that “remodeling and retrofitting the nation’s older homes is by far the more efficient solution.”

Today, McKinsey Quarterly arrived in my inbox. The subject “Where are the jobs?” In case you aren’t familiar with McKinsey Quarterly and McKinsey & Company, McKinsey Quarterly is the business journal of McKinsey & Company. Their goal is “to offer new ways of thinking about management in the private, public, and nonprofit sectors.” Quarterly articles are written by McKinsey consultants and “offer practical ideas based on the Firm’s experience with the world’s largest companies and on proprietary research and close ties to academic institutions.”

McKinsey notes that many governments, including our own, have been actively trying to promote growth, competitiveness, and employment. But the state that “policy makers who hope that advanced “clean” technologies can create work on a large scale will probably be disappointed, because these sectors are just too small to make an economy-wide difference. The local-business and household-services sectors are a much better bet: from 1995 to 2005, services generated all net job growth in high-income economies.” As I emphasized in my blog 18 months ago, McKinsey consultants have concluded that “Low-tech “green” activities, such as improving the insulation of buildings and replacing obsolete heating and cooling equipment, could generate more jobs than renewable technologies can.”

Just look at the chart below. A 10% increase in construction employment would create 637,000 jobs. To create the same number of jobs in the clean technologies sector would require an 82% increase.

  To learn more, read “Where the US will find growth and jobs” (March 2010).

Now consider this.

 How much do you spend to heat and cool your home every year? If you reduced that expense by 30% to 50%, what would you do with the money you saved? Even if you only spent a portion of it, it would further stimulate the economy and create jobs in other sectors, like retail.


President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

A tightly sealed building envelope is key to building an energy-efficient home

The boundary between the conditioned, indoor living spaces and the unconditioned and outdoor spaces is referred to as the “building envelope” and consists of the walls, floor, and ceiling or roof. An airtight building envelope contributes directly to the energy efficiency and comfort of a home.

Air leakage accounts for 25 percent to 40 percent of the energy used for heating and cooling and also reduces the effectiveness of other energy-efficiency measures such as increased insulation and high-performance windows. Thus, a tightly sealed house envelope results in lower utility bills.

There are hundreds of penetrations through a typical home’s building envelope. These include gaps in framing members and penetrations for wiring, plumbing, and ducts. Tightly sealing the house’s envelope, combined with proper ventilation, can reduce energy bills and eliminate unwanted drafts and pollutants.

Reduced air infiltration combined with proper ventilation not only reduces energy bills but also improves the quality of your indoor air. Outdoor air that leaks indoors makes it difficult to maintain comfort and energy efficiency. In addition, heated or cooled indoor air leaking outdoors can account for 25 – 40% of the energy used for heating and cooling in a typical home.

There are a number of ways to construct a tight thermal envelope including house wraps like Tyvek or Typar and spray foam. One of the most effective ways is to use a double air-barrier system. 

Photos courtesy of The Dow Chemical Company

Installing STYROFOAM™ Residential Sheathing, Tongue & Groove, DURAMATE™ Plus, TUFF-R™, Super TUFF-R, THERMAX™ or STURDY-R™ over the OSB structural sheathing provides a thermal break to reduce heat loss and heat gain through thermal conductance. The vertical joints of the insulation board are tongue and groove and the horizontal joints are flashed with poly z-flashing. This allows the insulation board to act as an exterior air barrier as well as a drainage plane for rain control. This exterior sheathing eliminates the need for building paper or housewrap thus reducing construction costs.

Windows are set in sealant and flashed on all four sides.

Benefits of a tightly sealed thermal envelope

Improved comfort

A tighter building envelope reduces the amount of unconditioned air, drafts, noise, and moisture that enter your home. Proper air sealing will also minimize temperature differences between rooms. As a result, tight envelopes can maintain a more consistent level of comfort throughout a house.

Improved indoor air quality

A tighter building envelope reduces the infiltration of outdoor air pollutants, dust and radon as well as eliminating paths for insect infestation. Properly sealing the building envelope will also reduce moisture infiltration from outdoor air in humid climates.

Fewer condensation problems

Moisture and condensation on cold surfaces inside wall cavities can lead to mold problems and structural damage. Exterior air barriers and drainage planes prevent moisture from entering wall cavities eliminating or significantly reducing these problems.

Reduced heating and cooling loads

A tightly sealed thermal envelope helps reduce heating and cooling loads, enabling the use of smaller “right-sized” heating, ventilation, and air-conditioning (HVAC) systems. The cost savings from using smaller HVAC equipment are used to offset the additional cost of high efficiency heating and cooling equipment.

Lower utility bills

Chuck Miller GMB  CGP  CGB   MIRM   CMP   MCSP   CSP
President / Builder – Chuck Miller Construction Inc.
(208) 229-2553