Recovery or External Manipulation?

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Commentary by J. David Rauch
Down here in the grass roots it sure looks and sounds like a bona fide economic recovery underpinned by a resurging housing rebound.  Even though unemployment and gas prices remain high (California raised its gasoline tax; now the highest in the nation at 72 cents/gallon) housing prices have increased in all major markets.  Indeed, the media drumbeat is again loud and incessant.  Have you seen these headlines?  “Florida is on Fire”; “10 Signs We’re Not in a Bubble”; “It’s a Seller’s Market”;  “Home Prices Post Biggest Gain in 6 years”; ” Why it’s Better to Buy a Home Now than Rent.”  In March, 75% of agents with broker Redfin said their clients’ offers were countered by rival bids, up from 56% who said so in late 2011. The competition has been most intense here in California, where 9 out of 10 homes sold in San Francisco, Sacramento; cities in Southern California drew competing bids during the month. One home in an Elk Grove, California subdivision recently received 62 separate bids. Yet when talking with our builder clients about their project pipeline there is a tone of caution in their voices.  When we ask them if they are full-throttle forward there is hesitancy.  Could it be that builders are just gun-shy from the last housing bubble?  Or is there fear that interest rates could start rising “dramatically” as soon as the Fed buying of $85 billion per month in mortgage-backed securities (quantitative easing: QE) ends?  In May, Chairman Bernanke told Congress that “the U.S job market remains weak and that it is too soon for the Federal Reserve to slow its extraordinary stimulus programs,” according to the recently hacked Associated Press.  Then, in June he slipped and said that he may back off on the throttle as early as the end of 2013.  Panic ensued and then he later corrected himself so as to calm the markets – and bankers.  Below are historical rate averages:

  • 42 years is 8.15%
  • 30 years is 7.45%
  • 20 years is 6.52%
  • 10 years is 5.72%

With rates currently at 4.5%, prices can go up 28% nationally just to equal normal affordability over the last 10 years. If that happens, that will create price/income ratios that are 27% above their historical norms. So what if the music stops (Fed buying) and there are some chairs missing and mortgage rates go up a lot?  Housing analyst Keith Jurow who recently wrote “The US Housing Recovery Is a Mirage and a Serious Delinquency Crisis Is Coming” asserts that there is no convincing data to support the view that housing markets have turned the corner.  His conclusion is that “the much-vaunted housing recovery is actually a mirage and that a new delinquency crisis is coming.”  He writes that banks have severely curtailed the number of foreclosed properties which they have put on the market. The effect of this severe reduction in foreclosing activity by mortgage servicers is to artificially increase the median price of homes sold in just about every major metro. Jurow has reported in several previous articles that delinquent homeowners are continuing to walk away from their underwater properties.  Homeowners have been greatly influenced by those in the media who have been asserting that the bottom has been reached and prices are clearly heading higher.  Going against a widely-shared consensus is never easy. Keep in mind, though, that experts have been declaring a housing bottom and full-blown economic recovery for more than three years. But what if it’s not just the threat of a major “interest rate” correction that is holding back buyers? As reported by Heidi Moore in the Guardian, Gary Shilling said in an interview this week, “It’s a precarious recovery because it’s based on rentals, not new home owners.”  Builders are breaking ground on multi-family homes – rentals – at a far faster pace than they are on single-family homes this year. Starts on such rentals are up 40% so far this year. That’s confirmation that the most powerful buyers of residential homes right now are banks and private investment firms, flush with millions of dollars and eyes for a good deal, who are looking for homes to sell or rent. “If you’ve signed a lease in the past year, there’s a good chance your landlord wears a tailored suit and works on Wall Street,” The New Republic wisely wrote in February. The Blackstone Group alone – just one of many investors, including Colony Capital, that are snapping up properties – spent $1.5 billion on homes last year, according to Bloomberg News. This keeps the housing game all in the family. Where investment firms like Blackstone are called the “buyside” of Wall Street, banks are the “sellside”. That’s because they do the selling: of stocks, of bonds, of mortgages, of homes. Banks, who hold the great stock of housing because of housing-bust dump of foreclosures, are limiting the supply of foreclosed homes for sale so that there isn’t a glut on the market. According to Heidi Moore, “Something is holding back construction. Anecdotal evidence suggests that local and regional banks who used to fund residential construction are still holding back.” The giddy rise in house prices, too, should be examined skeptically. For one thing, in a sane market, such double-digit rises for so long are not sustainable. Housing prices depend on the economy and the health of the consumer. The economy is not improving that fast; both unemployment and income is relatively stagnant; and lending is not rising, we should be suspicious that housing – which depends on all of those – is suddenly booming. House prices are rising when the rest of the economy is languishing; that’s either a sign of an overheated market or some external manipulation.

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J. David Rauch Bio

Dave Rauch is the Founder and President of ProTec Building Services (ProTec). He ensures that work quality is consistent.  Dave maintains a consistent presence within the company.  While managing the growth of ProTec, he strives to improve everything that ProTec does, especially exceeding client expectations.  At Mr. Rauch’s previous company he designed the original HOA manual and monthly building maintenance programs specific for each HOA. In 1996 Dave opened ProTec, which now provides maintenance programs to over 600 communities and other services to 2,000 communities.

George Van Oosbree Bio

George Van Oosbree is the Senior Vice President and Director of Operations in Nevada. He has been a manager with ProTec for 17 years. He holds a California/Nevada General Contractors and painting license; as well as, certifications in Playground Safety and SWPPP. He is also a United States Green Building Counsel LEED Accredited Professional and EPA Certified Lead Renovator.  Developers rely on George’s knowledge (nearly 100 High-rise and Mid-rise Projects) and 30 years of experience to construct sustainable and maintainable projects.

Andy Henley Bio

With over 20 years’ experience in construction management and janitorial, Andy knows what it takes to repair and maintain your largest asset, your homes and common areas at your community. Not only will Andy provide unparalleled customer service for all ProTec’s work but he will ensure that all jobs and service exceed client expectations. Call Andy and request to meet at your community. He will walk your community, detailing what maintenance and repairs are needed to keep your property values increasing.

Candy Allen Bio

ProTec’s controller, Candy Allen, has over two decades of experience in accounting and brings a wealth of knowledge and experience to the executive team.  Candy also has extensive HR, office management and organizational skills derived from her years of experience in the service industry.  What truly sets Candy apart from her peers is her energy and zeal to get the job/challenge done correctly and immediately.  She’ll explain that her success comes from devoting herself to creating a team environment in which the company can accurately track and maintain their various business and accounting systems.  Teamwork, honesty and hard work are all core elements of Candy’s work ethic.

Laura Swirski Bio

As ProTec’s Human Resources Manager, Laura Swirski, brings knowledge and experience in HR and Organizational Development from a variety of industries ranging from property management, non-profit, government, public utility, and hospitality.  Laura enjoys an employee focused and hands-on approach to HR.  She believes employees are a company’s most important resource.  An organization is successful when employees are in the right job and are involved, committed, and work together toward shared goals.  Laura is conscientious, a hard worker, and desires to learn, improve, and make a difference.

Fernando Urrea Bio

Fernando Urrea began his ProTec career in 2009. After a short leave he returned to ProTec in 2014 as the San Diego Maintenance Division Manager. He holds a General Contractors License; as well as, EPA Certified Lead Renovator. Fernando worked at Standard Pacific Homes and Pacific Bay Homes in the San Diego Divisions and has over 15 years’ experience in new home construction management. While working in Military Housing for 10 years he was able get hands on experience on all trades and management skills. His new home building and maintenance knowledge are unparalleled and is what makes Fernando a great asset.

Mark Adams Bio

Fascinated by construction from an early age, Mark developed the skills and knowledge to construct and repair any building. Prior to ProTec, Mark honed his skills at Quality Built Consulting on construction defects/diagnostics nationally. Mark is a licensed California General Contractor and a certified applicator in Excellent Coatings (Waterproof Coatings), SIKA Products (Sealants), PROTECTO Wrap (Waterproof Membranes) and Superkrete (Overlay Concrete Systems). Mark has been a manager at ProTec for 15 years and is the top HOA estimator in San Diego County. He prides himself on being able to assist HOA Boards and Community Managers resolve any type of repair or construction project.

Lee Sterling Bio

While attending Arizona State University pursuing a degree in engineering, Lee Sterling enlisted in the United States Army prior to Desert Storm. After completing his service he began working in the property service industry. Duly licensed as a Building (B1) and Roofing (C39) contractor, Lee rose through the ranks of the industry becoming the Division Manager and acting Chief Engineer for properties in San Diego, Irvine and Brea. His commitment to quality and superior service has earned him recommendations from his peers, clients and customers.

Cesar Ibarra Bio

Cesar Ibarra is ProTec’s Janitorial Manager and has been with the company for 8 years. He ensures that the janitorial work quality is consistent and manages the planning of large level custodial projects. He prides himself in his knowledge of janitorial services and has over 10 years of experience in the Commercial Cleaning Industry. He and his team devote themselves to our clients and provide customized janitorial services that are specifically tailored for each community or project.

Paul Mayeski Bio

Paul oversees ProTec’s Maintenance Manuals and Inspections Division. Before joining the ProTec team in 2000, Paul spent 4 years converting his Industrial Arts education into becoming a trained cabinetmaker, followed by 13 years building custom homes and then 7 years administering building maintenance programs and overseeing maintenance manual implementations for one of San Diego’s largest community management companies.  Because of his combined experience in the building and community management industries, he is uniquely suited to ensure that our clients’ projects are successful.

Chris McHenry Bio

Chris has over 25 years of construction experience in the residential and commercial industries. He has done everything hands on from operate heavy equipment, ro build and remodel custom homes, and commercial tenant improvements. He started working in his family’s business building custom homes during the summers in high school. He moved on as a Project Manager for an apartment maintenance construction company in Rancho Santa Margarita. He proceeded to get his contractor’s license and owned his own company for 7 years. Chris also holds the positions of superintendent on a high rise construction project and Project Manager with an industrial/commercial company.

Sal Mendoza Bio

Salvador Mendoza is our Los Angeles regional manager for ProTec Building Services. Since starting with the Company in 2008 he has devoted himself to the challenging world of maintenance for mid and high rise buildings. Salvador’s past experiences of running his family owned construction business, along with his real estate and mortgage banking experience, provide him with a unique perspective within our industry. He has a created the company’s first Planned Maintenance Contract (PMC), which allows for a custom annual maintenance calendar of the building components for each individual building, enabling clients to plan ahead and have an annual maintenance budget

Mirzet Velic Bio

As ProTec’s Vista Maintenance Division Manager, Mirzet brings immense experience in the HOA industry and knowledge of maintenance, repair and construction methodology. Mirzet joined ProTec in 2006 as an Account Manager.  Prior to ProTec he honed his experience at All American Construction as a Maintenance Technician.  With over 15 years of experience in contract management, construction, electrical, and property management Mirzet can solve any technical problem. However, Mirzet’s true tour de force is his Customer Centric service model; he takes care of clients’ needs before they even know they have a need. 

Timothy (Ty) Haisch Bio

Ty is ProTec’s Construction Division Manager for the North County San Diego region, working out of the Vista office.  Ty joined ProTec in 2010 as a Project Supervisor.  He has moved up in the management ranks due to his excellent work record, supervisory skills, hard-work and dedication to getting jobs done in a timely manner that have made him a “go-to” manager at ProTec.  Prior to joining ProTec, Ty was a manager at TDT Construction.  Yes, Ty has many years of experience, but it is mostly his excitement with solving complex problems, that cause Ty to stand out among his peers.  Ty loves challenges and will happily solve our clients most vexing or technical problem(s).

John T. (JT) Anderson Bio

John learned the value of hard work at his family business at the early age of 5, where he started out as a janitor.  He went on to learn additional trades and skills, where he eventually left the business world to attend college at The University of Hawaii and the University of Utah.  He received his degree in Political Science and Business.  After moving to San Diego in 2004 he founded Elite Services, which provided building services to Commercial and HOA clients.  In 2016, John saw an opportunity to join the ProTec team where he has put his many talents to work, expanding ProTec’s list of 172 services and engaging new clients.