Cape Business Trends newsletter September 17, 2007
The New Cape Cod
Cape Business has been discussing for years how the Cape’s economy has been shifting from a seasonal one to a year-round one. In our September/October issue, we identify six seismic shifts in the economic landscape that could determine your business success in 2007 – and beyond.
• Shifting from a seasonal to a year-round, 24/7 global economy.
• It’s all about demographics. The fastest-growing population ranges from ages 45 to 65.
• Four out of 10 households are second homes.
• Cooperation instead of competition.
• There are an estimated 2,500 businesses on the Cape conducting their operations at home.
• Banks and other lending institutions have discovered the small business and home-based business.
For more insight into how your business can take advantage of the economic and demographic trends that will determine your future, join Cape Business, Peter Karlson of NeuEon and Barry Neagle of Neagle & Associates for the first of several breakfast seminars on Wednesday, October 17, at the Cultural Center of Cape Cod in Yarmouth, co-hosted by Bob Dubois and the Yarmouth Area Chamber of Commerce.
To RSVP, please call us at (508) 385-3811 or click here to sign up online. There is a $20 charge for breakfast and a contribution to the nonprofit Cultural Center.
Home sales numbers look up
Whoa. After months of a downturn in home sales and prices, August saw a surprising spike upwards across the Cape, even as national statistics continued to reflect a swoon in housing.
The Barnstable County Registry of Deeds reports the volume of real estate sales in August rose nearly 21 percent from a year ago, while the median price of a home rose 1.4 percent from August 2006. The median home price a year ago was $350,000; the same home would fetch $355,000 now.
Year to date, the volume of sales is up 2.1 percent. Homeowners, however, have to swallow a median 7.4 percent drop in the value of homes.
Looking ahead, mortgage volume remains about 12 percent below year-earlier levels. But it is pretty clear that the national crisis involving sub-prime loans is having little, if any, direct impact on the higher-income Cape economy. Other numbers of note:
2007 sales volume: 4,359
2006 sales volume: 4,270
2007 median sales price: $342,500.00
2006 median sales price: $370,000.00
2007 mortgage volume: 13,309
2006 mortgage volume: 15,124
But proceed with caution
None of the real estate and mortgage experts we talk to, however, are willing to view the August numbers with too much confidence. Cautious optimism is the rosiest interpretation.
There are too many adjustable-rate mortgages that will adjust higher in the next eight months, they warn. Expect more foreclosures through the end of the year.
Several positive developments:
The Cape’s local banks are primed to reclaim some of the residential mortgage market they lost in recent years to aggressive mortgage companies and Internet lenders that have been particularly hard hit by the sub-prime crisis. Many of those competitors have either disappeared entirely from the market or been forced to up their lending standards to be more akin to those of the banks.
“Clearly, the market had been moving away from community banks for some time,” observed David Brennan, senior vice president and director of mortgage banking at Cape Cod Five Cents Savings Bank. “We see a return of market share now. The Massachusetts Bankers Association and the regulators are working with community banks to try to come up with solutions to the problem ”
State lawmakers are priming new regulations for the mortgage banking industry while developing relief for homeowners facing foreclosures, Brennan notes.
Health care cost inflation
It’s probably no surprise, but it is official. The cost of health insurance is rising for small businesses and their workers, even though the rise in premiums this year was the lowest increase in eight years.
This year, the cost of premiums paid by workers and their employers was up 6.1 percent, while wages rose an average of 3.7 percent and inflation went up 2.6 percent nationwide.
Premiums averaged $12,106 for a family of four this year, with workers paying, on average, $3,281 of that. Premiums to cover a single person cost $4,479, with employees paying $694.
Families typically pay 28 percent of their premiums, while single people pay 16 percent, the survey said, and those proportions have been stable. But the amount workers have been paying has nearly doubled since 2001. This year, monthly contributions averaged $273 for families and $58 for single workers.
As costs rise for workers and companies, revenues for health insurers continue to soar. But health insurance companies are still paying out roughly the same as they have for years, said Charles Boorady, an equity research analyst with Citigroup. So when insurers charge more for premiums, they're trying to cover what they pay out in claims, he said, and that means profits are fairly level.
"The price increase doesn't look aimed at expanding margins, it looks aimed at preserving margins," Boorady said.
Employers and insurers want ban on billing for treatment errors
Saying no other industry generates revenue from its mistakes, employers and insurers are asking Beacon Hill lawmakers to pass legislation banning health-care providers from collecting reimbursements for costs associated with hospital-acquired infections or medical errors.
The coalition says health-care costs are growing at three times the rate of inflation and preventable errors “should not be part of the usual cost for health care,” according to a letter submitted to the Committee on Public Health by the state’s major insurers, its leading employer organizations and the state Group Insurance Commission.
The coalition wants the committee to add the ban to legislation requiring the collection and public reporting of hospital-acquired infections. State public health officials last month reported that such infections may be causing up to $473 million in avoidable medical costs every year in Massachusetts.
Succession planning seminar
There is an impending crisis being driven by the aging of the baby boomers. Within the next 10 years, about two of every three small to medium-sized enterprises will be transferred as older owners look to cash out. In addition, many non-owners will be leaving the workforce.
This exodus will put tremendous pressure on finding enough willing buyers and enough qualified employees for all the businesses that will be in the marketplace. This, in turn, will create downward pressure on selling prices.
For many small and medium-sized business owners, a significant portion of their wealth is often tied up in the value of their businesses. And with this impending decrease in business value, many business owners’ plans for their retirement years will sadly not be fulfilled. Will businesses simply be forced to liquidate and close down? The downside of lack of planning is undeniable; the associated risk of business closure and a loss of jobs can be the resulting legacy.
Join us for a seminar to guide your strategy on Thursday, September 27, at 7:30 a.m. at our Plymouth offices at 225 Water Street. RSVP by calling us at (508) 385-3811. There is no charge.
In advance of the seminar, click here to take a survey on succession planning. If we receive sufficient responses, we will compile the results to share with our readers.
Grand plans emerging for Middleborough casino
The debate is on whether a nearby casino will help or hurt the Cape economy, it is becoming evident that its developers envision one massive complex – in part because of its proximity to the Cape.
A report in the Boston Globe says developers of the proposed casino in Middleborough want a destination resort that would draw a national tourist clientele because of its proximity to Cape Cod and would be crammed with 4,000 slot machines, 180 table games, and amenities like a 10,000-seat auditorium for sporting events and shows.
Details of the proposed Mashpee Wampanoag Indian casino appear in a business plan recently filed by the tribe and developers with the US Department of the Interior, which must rule on the viability of the small tribe's ambitious plans.
Cape Codders rate the issues
As we look to our future on the Cape, consider how a survey of Cape Cod residents views the most important priorities. Does their opinion coincide with yours? Do the sentiments of residents gibe with the needs of the business community?
In our September/October issue, the By the Numbers page identifies 20 priorities. No. 1 is traffic congestion; No. 6 is the availability of jobs or economic opportunities.
Health & Wealth
Cape Business reaches nearly 10,000 businesses every two months. Now, our newest magazine, Health & Wealth, is mailed directly to the 20,000 highest-valued homes on Cape Cod quarterly. Significantly, nearly half reach the primary residents of second-home owners here. Even more significantly, 75 percent of those primary homes are located elsewhere in Massachusetts.
That’s important for two reasons: these second homeowners are visiting their houses on Cape Cod year-round and professionals – from financial planners to attorneys – can realistically serve their needs in both locations.
Our upcoming issue is timed to take advantage of the Thanksgiving, Christmas and New Year’s holiday season with stories on financial planning, retirement planning, tax planning, outdoor and indoor living, home entertainment, wellness, real estate, travel and shopping.
If you have not seen Health & Wealth, we would love to visit you with a copy and discuss how this magazine can connect your business with our 20,000 homes. Please call Bob Viamari at (508) 385-3811 or e-mail bob@capebusiness.net.
Giving back to the community
The seventh annual Cape and Islands United Way Day of Caring, chaired by Citizens Bank, will take place on Sept. 19. The event is a collaboration between the United Way and the local business community to help human services organizations.
An estimated 300 volunteers will provide fall cleanup, general maintenance and other assistance at more than 20 sites across the Cape.
Participating businesses include Bank of America, Bank of Cape Cod, Cape Cod Cooperative Bank, Cape Cod Five, The Community Bank, Eastern Bank, Rockland Trust, Shepley, Sovereign Bank and TD Banknorth.
New auto insurance carriers coming our way?
This news, compliments of Rogers & Gray Insurance Agency Inc. and the Insurance Journal:
Massachusetts Insurance Commissioner Nonnie Burnes says four insurers not now writing auto insurance in the state have said they will enter if her plan to allow competitive pricing goes forward.
Burnes spoke with Insurance Journal the day after releasing her draft regulation governing the transition from the state's strict fix-and-establish auto insurance rate system to a deregulated system giving insurers more pricing and underwriting freedom.
Under the plan, competitive rating would begin April 2008. Between now and October, Burnes hopes to finalize the regulation with input from the public, the industry, lawmakers and others.
New Jersey passed sweeping deregulation in June 2003. Since then, GEICO, State Farm Indemnity, Mercury General and Esurance have entered the state, and other carriers with plans to limit their business there changed their minds.
According to a recent report from a gubernatorial task force, there are 19 insurers now writing in the Massachusetts private passenger automobile insurance market. More than 60 percent of the business is written by companies that write either exclusively or primarily in Massachusetts.
Insurers now writing or considering entering Massachusetts, however, will face at least one obstacle they do not deal with elsewhere: a prohibition on using a host of socioeconomic factors in their pricing and underwriting.
The draft regulation makes years of driving experience, driving record and a vehicle's model features as the primary rating and underwriting factors.
The regulation bans the use of credit scores in pricing but only within the first year. Burnes said she wants more time to study credit scoring and whether to lift that ban after the first year.
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