Market Trends: Sept. 1999

Key Industry Indicator Down

Many economists look to the number of new home constructions on a month-to-month basis as a prognosticator of the economy’s immediate future. After one of the strongest runs in history, housing starts have dropped in comparison to the preceding month for three out of the last five months. These numbers, combined with interest rates’ climb over the 8 percent level for the first time in two years, have generated concern that the multi-year economic boom that has benefited the United States may finally be slowing.

In addition, June and July results marked the first decreases in housing starts from the comparable months in 1998 in the first half of this year, contributing to concern that housing starts will continue to drop off of 1998’s pace.

Pesticide Battles Heat Up

WASHINGTON, D.C. – “For almost three years, the Environmental Protection Agency has refused to implement the Food Quality Protection Act on the basis of sound science.”

The industry will be pleased to note that those words came from three members of the U.S. House of Representatives. These politicians, two democrats and one republican, are leading the fight to ensure that any EPA decisions affecting pesticide registrations are based on scientific research as opposed to default assumptions not based on facts.

“The FQPA established a new health-based standard for registering new pesticides and reregistering existing ones,” noted the three congressmen, referring to the EPA’s controversial risk cup assessment method that views all of a product’s applications collectively. “In order to meet the new standard, EPA needs substantial quantities of new data. Yet, it hasn’t issued any regulations specifying what information is needed from registrants/manufacturers.”

The congressmen are all supporters of a bill, called H.R. 1592, that, if passed into law, would require EPA to back up all of its decisions with sound science. A companion bill (S. 1464) was introduced by 22 senators in the Senate.

While FQPA calls for EPA to evaluate the safety of more than 9,000 pesticides in the next 10 years, Aug. 3 was the first deadline for EPA to have the first 3,000 evaluations concluded.

The agency reported it has completed this first batch of evaluations, and in doing so it cancelled the registration of two important agricultural pesticide products. Both of these products are members of the organophosphate family of pesticides, which has raised industry concerns that key lawn care organophosphate products may be in jeopardy.

“Turf and ornamentals are essential to a clean environment,” noted Allen James, executive director, Responsible Industry for a Sound Environment, in testimony before the U.S. House of Representatives Committee on Agriculture on Aug. 3. “In order to achieve these benefits, one has to fight off literally thousands of insect species, plant diseases and weeds. The loss of any pesticide product in a planned pest control strategy would reduce the array of products available to adequately manage pest problems.”

New York Fines TruGreen-ChemLawn

ALBANY, N.Y. – The New York State Department of Environmental Conservation levied a $600,000 penalty against TruGreen-ChemLawn for alleged violations of the state’s pesticide laws.

The penalty, the largest of its kind in New York state history, covers more than 60 alleged violations stemming from more than 35 applications of commercial lawn pesticides between 1994 and 1999. The bulk of the alleged violations dealt with a failure on TruGreen-ChemLawn’s part to adequately notify homeowners of the products applied to their property.

“This enforcement action sends a strong message to the lawn care industry and other pesticide users that the DEC is vigorously enforcing pesticide laws and regulations to protect the public and our natural resources,” noted DEC Commissioner John Cahill. “As a result of this consent order, TruGreen-ChemLawn will study alternatives to traditional pest control methods that may ultimately help establish innovative industry-wide pest management practices that rely less on broad-spectrum pesticides.”

The DEC suspended $200,000 of the penalty, contingent on TruGreen-ChemLawn’s implementation “of more extensive notification, written contract and lawn posting requirements,” according to a release from the DEC.

The billion-dollar lawn care company also agreed to reduce its use of pesticides by 5 percent throughout the state by adhering to integrated pest management practices.

Bob von Gruben, executive vice president for TruGreen-ChemLawn, said, “We take very seriously our commitments and relationships with our customers and the DEC. During the nine-year period reviewed by the DEC, TruGreen performed more than 7.5 million service visits and reduced pesticide usage by over 50 percent statewide."

Studies link Home Price to Landscape

GREENVILLE, S.C. – It’s the information contractors have long sought – a home’s landscape quality may be linked to its sale price, according to two studies conducted by a Clemson University professor.

Landscape Quality and the Price of Single-Family Houses: Further Evidence from Home Sales in Greenville, S.C. and The Demand for Better Landscaping – A Hedonic Approach are two studies researched by Mark Henry, professor of agricultural and applied economics at Clemson University on the subject.

According to Henry’s studies, which relate between 200 and 250 Greenville home prices to their characteristics, location and landscape quality, houses that obtained an “excellent” landscape rating from a local landscape contractor could expect a sales price about six to seven points higher (see chart, below) than equivalent houses with “good” landscaping. Improving the landscaping from “average” to “good” resulted in a home price premium approximately four to five percentage points higher when the house was sold.

“Like many home improvements, such as central air conditioning,” Henry explained, “the value of superior landscaping is likely to be recovered, at least in part through an increased sales price when the house is sold.”

The reason for conducting the studies, according to Henry, was because there are so few guidelines available to homeowners on the return in sales price that they might expect from added investments in their home landscaping.

“It’s simple economics,” Henry said. “I wanted to see what a contribution to a product, such as a home, could do to its sale price. Could a return on investment be realized?”

Although the studies’ results proved positive in Greenville, Henry admitted that the same type of results are not guaranteed for other cities across the United States until similar studies are done in those areas.

“The results of this study are reasonable for the time and geographic area and shouldn’t be generalized,” Henry warned. “For example, in Tucson, Ariz., where there are many rock gardens and not much lawn space, a study like this may not prove any connections between home price and landscaping quality.”