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www.elpasobuilders.com
2014: issue 10
Why California Is In The Middle Of Another Housing Crisis Affordability and mortgage lending issues abound Editor’s note: The saying “so goes California, so goes the rest of the country” may apply in this instance. Read an insight from the CEO of the Realtor’s Association in California to get a preview of what may come to the rest of us. His warnings have long range implications. Decades from now, when history writes the story of the Millennials, they may well be remembered as the first generation for whom using smartphones and social media was as natural as taking a breath. Yet unless things change, there’s a good possibility they’ll also be known as the generation that couldn’t afford to buy or rent a home. It’s ironic that when the first Millennials were born, their Baby Boomer parents couldn’t afford a home either. Looking back to October 1981, interest rates on a 30-year, fixed-rate mortgage exceeded 18%. It wasn’t until rates fell below 10% in 1986, and to the 7% range in the early 2000s, that affordability ceased to be a major impediment to homeownership. Today, California’s housing affordability problem is back – only this time it is fueled by rising home prices and lack of access to capital rather than double-digit interest rates. On Nov. 14, the California Association of Realtors will convene economists, policymakers, and practitioners for “The Real Estate Summit: Partnering for Change in
California.” The summit will explore the issue of housing affordability, as well as California’s infrastructure, foreign investment, consumer trends, housing finance, and policy implications. So how serious is the problem? CAR’s Housing Affordability Index – which tracks the percentage of households that can afford a medianpriced, single-family detached home assuming current interest rates and 20% down – fell from 33% in the first quarter of 2014 to 30% in the second quarter, a 26% decline from a peak of 56% in early 2012. While home buyers needed to earn an annual income of $56,320 to purchase the medianpriced house two years ago, today they need an additional $37,270, or $93,590 total annually, to qualify. The reasons behind the decline in affordability are many: slower-thanexpected economic growth, incomes that haven’t kept pace with rising home prices or rents, pent-up demand, lack of supply, tighter lending criteria in response to new mortgage regulations from Congress, and indecision about the future of Fannie Mae and Freddie Mac, to name a few. What the numbers don’t reveal is the impact the problem is having on individuals and families. Nationally, more than half of adults surveyed say they’ve taken a second job, postponed retirement contributions, run up credit cards, or moved to a cheaper neighborhood in order to cover their
rent or mortgage over the past three years, according to the MacArthur Foundation. Another study reports that 45% of collegeeducated Millennials have moved back in with their parents because they can’t find a job or the one they have doesn’t cover student loans and a place to live. A lack of new home construction is likely to cause further affordability issues unless housing starts increase in line with local job gains, according to the National Association of Realtors. Its analysis found that too few homes are being constructed in relation to local job market conditions, and that lack of construction has “hamstrung” supply and slowed home sales. Here in California, it has been estimated that the post-recovery real estate market could easily absorb 250,000 new units of owner-occupied or rental housing – a need that isn’t even close to being fulfilled. What's the key reason?
Many small builders continue to experience limited access to credit and rising construction costs. Despite strong demand, the number of singlefamily housing permits issued in August 2014 declined by nearly 21% from the same month in 2013, while the number of multifamily permits was down almost 24% year over year. There are some who believe California’s housing affordability problem will work itself out as the economy improves and consumer expectations align with real estate market realities. They may be right. The question is: What will be the ultimate cost of such inaction, both now and over the long term? By Joel Singer, CEO California Association of Realtors as reported on Hardwire.com
Suddenly, The New Home Sales Trend is Flat Again New home sales increased only slightly in September, up 0.2 percent over August, bringing the annual rate of those sales to 467,000. Sales were up 17.0 percent from the September 2013 pace of 399,000 units. Perhaps bigger news in today's joint release from the Census Bureau and the Department of Housing and Urban Development was the revision to the August new home sales number. The initial report of those sales indicated a very significant 18 percent increase over July's number, sending sales to a seasonally adjusted annual rate of 504,000 and over the half-million mark for the first time since May 2008. The estimate was well over analysts' expectations; the consensus had been 430,000 units. Turns out the analysts were closer to the mark than the government agencies which today downgraded the August estimate to an annual rate of 466,000. This takes what had been a potential trend of improvement back into the stagnant sub-500k range that's been intact throughout the post-crisis period.
At the end of September there were an estimated 207,000 new homes available for sale, a 5.3 month supply at the current absorption rate. This is up from 183,000 available homes one year earlier which was at that time a 5.5 month supply.
On a non-adjusted basis there were an estimated 38,000 new homes sold in September, unchanged from the previous month and 7,000 more than a year earlier. A house sold during the month was on the market a median of 3.1 months. At the end of September there were an estimated 207,000 new homes available for sale, a 5.3 month supply at the current absorption rate. This is up from 183,000 available homes one year
earlier which was at that time a 5.5 month supply. The median price of a new home sold in September was $259,000 and the average sale price was $313,200. In September 2013 the median and average sale prices were $269,800 and $321,400 respectively. New home sales in the Northeast region were unchanged from August at a seasonal rate of 30,000 units but that was an increase of 20.0 percent from
September 2013. The Midwest had a 12.3 percent month-over-month increase and sales were 6.7 percent above a year ago with an annual estimate of 64,000 units. In the South annual sales were at a 261,000 unit pace, up 2.0 percent for the month and 18.6 percent on an annual basis. The West saw an 8.9 percent drop in new home sales in September but the rate remained 19.1 percent higher than the same month in
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Builders Outlook
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2014 issue 10
2014 issue 10
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Builders Outlook
President’s Message | Frank Torres
El Paso Disposal
President, El Paso Association of Builders
My message for this month is dedicated mostly on giving thanks to all the members that had, and still are participating in the different activities and events for the month of October. The Home and Garden show at the Civic center was very successful, even thou the traffic appeared to be less than last year, vendors were very happy with the sales, less people but more serious buyers. Thanks to all the participants especially, Ray, Margaret, members that supply information at the association booth and most of all to Edgar Montiel (Palo Verde Homes) his crew, subcontractors and all the suppliers that contributed with materials and appliances for building that beautiful home inside the Civic center. That is a lot of work to build and dismantle one house in just a few days, thanks Edgar. If you did not make it to the October general meeting you missed an eye opener presentation on how and where the money collected by the Water Utility for storm water is invested all around our city. The presentation was made by the president and CEO of El Paso Water utilities John Balliew. Thanks John. Thanks to all the builders that entered their homes on the 2014 Treasure Tour of Homes. We had almost fifty homes to show around El Paso and New Mexico, it will run from October 24th to November 2nd. The association golf tournament (El Paso Desert Open) will be taking place November 5 at Painted Dunes Golf Course, thanks to all the members that will be sponsoring this event by putting a team together and, or buying any other form of advertisement. Special thanks to Sam Shallenberger and Ray and all that make this a fun day and also a good fund raiser for our Association. Have a blessed month and do business with a member.
772-7495
Showroom: 2131 Missouri 915 • 533 • 6045
fax • 533• 6096
Thomas R. Brown, Owner
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Builders Outlook
2014 issue 10
Perspective Ray Adauto, Executive Vice President EPAB
The El Paso new home market is in flux, that is to say that we are once again doing something that other parts of the country did earlier, drop in building. Well to be honest our builders are still building just not like the rest of the country. For the first time in a number of years builders have inventory and that inventory is harder to close on than before. I get asked seemingly every day about why this is so. Discussions with members will quickly tell you why and add some caveats to the general answer. First of all the Fed brought on new rules in January that simply swung the pendulum too far in “protecting” the consumer from a bad loan. In doing so the Fed created mortgage rules that hamper the average person from qualifying for a loan. Credit requirements and the deadly debt to income ratio really hurts locals from qualifying. Credit is more of a necessity in El Paso as we see people wanting more than they can afford and using credit to get it. Want a new TV? Easy payments and free delivery. Need a car? Low down and easy payments. Kids need new clothes? Put it on the card. It’s really no different than other American cities, only this city has a lower average family income than other places like Dallas or Houston, Phoenix or
Homes, roads, and customer service San Antonio. So credit, in fact, is used daily here where in other parts cash or a check would pay for the wants. Therefore the debt to income ratio is the first obstacle. Secondly is the increasing price of homes, primarily because of increased costs associated with building a home. New codes, permit fee increases, fees for this and that, higher costs of land and supplies all add up. We’re not immune to these but it seems to come at the worst possible time when permit fees and everything else goes up. I have a third story here, one you may not like but it affects every new residential property: BRAC is over and the military is building on post what normally would be in the private sector. This has to contribute to lower sales and rentals of apartments outside “the wall”. Members are used to building for the military but the military is in the construction business competing directly for that customer. Any time a military installation is constructing housing it diminishes the ability of the private sector to join in the build out. In fact since BRAC concluded sales and rents have declined and inventory has gone up. Look at the deals on apartments. Back to the days of yore. Free first month, no deposits, upgrades…yeah it’s like 2002 all over
again. El Paso has over a 7% vacancy rate on apartments, the highest in Texas. How do you get people to invest when this is happening? You don’t. So here we are as Texas is setting new records for home construction and El Paso is left at the door. We created the Treasure Tour of Homes to stimulate the new home market and while it’s not the magic pill at least we have consumers talking about new homes. You all know that it’s better to prepare for a realistic 2015 now, one that will continue to evolve hopefully into a much better year than 2014. The EPAB supports Prop 1 on the ballot for a lot of reasons, not the least of which is that Prop 1 is going to be the start of needed funding for road work in Texas. Many Texas roadways are in dire shape and TxDot has to piece meal repairs or construction because the money isn’t in the traditional funding. Passing Prop 1 will give us a start up on getting the needed work done. Vote YES for Prop 1. Finally customer service. When we announced the Treasure Tour of Homes the first reply I got on email was from a sales person “concerned” about the hours of the tour. The message was that we would be open too many hours, too
late, and “people have things (whatever that means) to do Sundays”. I was amazed. The builder is risking everything so that the sales person has a product to fill the needs of a potential customer. The show runs 10 days. You figure it out. If I was the builder who this sales person represents I would change sales persons. How arrogant to suggest otherwise. Sales don’t magically appear, they have to be worked on. I can thankfully count so many of the sales professionals who spend a lot of time working with a client, looking out for both the client and the builder, and selling what’s in the best interest of both. In the process the sales person makes money which pays for a home, family and bills with maybe a little to splurge or save. To the 98 percent of you that do the job without whining congratulations. That’s customer service with a purpose. To the other 2 percent maybe you need to find something else to do. Your attitude may infect others. Take some time to watch some TV shows like “The Profit, or “Hotel Impossible” or “Shark Tank”. Learn something or get out of the way so the sales get done. Nothing is accomplished without work.
2014 issue 10
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Builders Outlook
Industry News Remodeling Market Reclaims All-Time High The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) reclaimed the high-water mark of 57 in the third quarter of 2014. This is the sixth consecutive quarter for an RMI reading above 50. An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity. “Most remodelers remain confident that the market is improving as home owners undertake renovations, large and small,” said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, N.H. “The consistency and longevity of positive RMI readings are in line with the gradual recovery of the housing industry.” The RMI’s future market conditions index rose to 58 from 56 in the previous
quarter. All four of its subcomponents— calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals— increased or remained level with the previous quarter’s reading. The current market conditions component of the RMI increased one point to 57 this quarter. A two-point gain was made among the categories of large additions as well as smaller remodeling jobs with readings of 56 and 58, respectively. “The stabilization of the RMI in the mid50s for more than a year demonstrates the slow, steady recovery of the housing industry that we expect to continue,” said NAHB Chief Economist David Crowe. “The major headwind to a stronger recovery is a shortage of qualified labor and subcontractors in some parts of the county, making if difficult for remodelers to employ carpenters and finish projects as quickly and economically as many of their customers expect.” For the full report, visit nahb.org/RMI. For more information about remodeling, visit nahb.org/remodel.
Nationwide Housing Starts Top 1 Million For the third time this year, nationwide housing starts surpassed the million-mark, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Total housing production in September rose 6.3 percent to a seasonally adjusted annual rate of 1.017 million units. “These numbers show starts returning to levels we saw earlier this summer, where they hovered around one million units,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “We are hopeful this pattern of modest growth will continue as we close out the year.” “September’s uptick reveals that last month’s dip in production was more of an anomaly than a market reversal,” said NAHB Chief Economist David Crowe. “I expect we will see a continued recovery as job creation grows and consumers gain more confidence in the housing market.”
Single-family housing starts were up 1.1 percent to a seasonally adjusted annual rate of 646,000 units in August, while multifamily production climbed 16.7 percent to 371,000 units. Combined housing starts increased in all regions of the country. The Northeast, Midwest, South and West posted respective gains of 5.3 percent, 3.5 percent, 4.2 percent and 13.9 percent. Issuance of building permits registered a 1.5 percent gain to a seasonally adjusted annual rate of 1.018 million units in September. Multifamily permits rose 4.8 percent to 394,000 units while singlefamily permits decreased 0.5 percent to 624,000 units. Regionally, the Northeast, Midwest and West registered overall permit increases of 12.3 percent, 8.2 percent and 5.9 percent, respectively. The South posted a 4.7 percent loss.
Four-Month Upturn Ends as Builder Confidence Falls in October A W A R D E D
TEXAS BUILD E R O F THE Y E AR 2013
We build so you can GROW
After four consecutive monthly gains, builder confidence in the market for newly built single-family homes fell five points to a level of 54 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. “We are seeing a return to the mid-50s index level trend established earlier in the summer, which is in line with the gradual pace of the housing recovery,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “While there was a dip this month, builders are still positive about the housing market.” “After the HMI posted a nine-year high in September, it’s not surprising to see the number drop in October,” said NAHB Chief Economist David Crowe. “However, historically low mortgage interest rates, steady job gains, and significant pent up demand all point to continued growth of the housing market.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three HMI components declined in October. The index gauging current sales conditions decreased six points to 57, while the index measuring expectations for future sales slipped three points to 64 and the index gauging traffic of prospective buyers dropped six points to 41. Looking at the three-month moving averages for regional HMI scores, the Northeast and Midwest remained flat at 41 and 59, respectively. The South rose two points to 58 and the West registered a one-point loss to 57.
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Builders Outlook
2014 issue 10
The Economy
Unintended Consequences and Slower GDP Growth Over the past 60 years GDP growth has been spectacular, averaging close to 4%/year with GDP doubling every 20 years. More recently, GDP growth has been lackluster, averaging about 2%/year since 2000. As a GDP now result, doubles every 35 years. In part this slowdown is due to the recession, slowing population growth and a lack of corporate investment in plant and equipment. These are Elliot Eisenberg temporary problems that should not be overblown. By contrast, those who believe in “Secular Stagnation� ascribe the recent GDP slowdown to the fact that our economy is mature, that our best days are behind us and that technology can no longer deliver like it has. While I think the notion of Secular Stagnation is bunk, our GDP growth of the last century or century and a half has been, without a doubt, artificially inflated. This is because we have ignored the “law of unintended consequences.� Every time we invent something new, more often than not, something unexpected goes wrong. Burning coal, which brought about the industrial revolution, badly fouled the air leading to the premature deaths of millions. The automobile helped usher in acid rain, gaining access to cheap sugar created
tooth decay, working at computers all day is making us fat, asbestos causes lung cancer, antibiotics create super bugs, aerosol almost destroyed the ozone layer, leaded gasoline lead to lead-poisoning, chemical dumping and the burning of fossil fuels releases mercury into the air and from there, rainfall washes it into the ocean and into fish. And now we face the enormously expensive issue of global warming. (And don’t even ask about Dodd-Frank). My point is not that technological progress is bad. Quite the contrary, it’s great, but it’s not quite as great as we think because the negative consequences arising from it are never accounted for. The premature death of a coral reef, the rise in skin cancer rates and the eutrophication of coastal waters to give just a few examples- are ignored when calculating GDP. And these costs, along with the costs of remedying these damages are both large and unknown. Moreover, monies spent cleaning up the messes caused by technological progress actually make GDP bigger. Now that we are more aware of “unintended consequences� we may be less optimistic about the future. And GDP growth going forward may be slower than in the past, but this is not due to Secular Stagnation. It’s simply a sign of economic maturation along with a better awareness of our impact on the planet. Moreover, this realization should not cause us to give up on technological
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innovation. As a matter of fact, the only way to fix the problems mentioned above is with more technology. Genetically modified food is the only way we are going to feed the fast growing population of the planet and the impact of global warming and rising sea levels will only be mitigated with new building technologies and improved energy sources, even though they will undoubtedly cause unintended consequences. Compared to 10, 20 or 30 years ago, GDP growth appears to be slowing. Some of the reason is cyclical, but some
is because our estimates of earlier GDP growth were excessive because we did not take into account the unintended consequences of new technologies. What is for sure is that if we stop designing and applying new technologies to solve problems, GDP growth will slow further. Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com.
2014 ISSUE 10
Builders
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Builders Outlook
utlook on the scene | Fall Home Show a success The 2014 Fall Home and Garden show went off without a hitch and thousands of visitors enjoyed the displays. Show Technologies from San Antonio delivered another spectacular show with special guest Wayde and Bret from Animal Planet’s TANKED! Featured at the show was a beautiful display home constructed by Palo Verde Homes, a stunning exhibit with a bedroom, kitchen, bath and living room plus a beautiful outdoor component. “What we want to show is that you can create some really cool areas with the right materials and the right suppliers,” Edgar Montiel, Palo Verde Homes. “Building inside the convention center is a challenge since we have only a limited time to do it and there were other events going on just on the other side of the wall,” Montiel recounted. Suppliers were the following: BMC West, Cabinet Masters, Designers Mart, DunnEdwards Paints, Ferguson, Forever Green Landscaping, Foxworth-Galbraith, Interceramic, Jack White Building Specialties, Lowe's Home Improvement, Marble and Granite Design Concept, Plasterqueen, Rio Grande Stucco Products, Sunwest Windows & Glass, Supreme Glass, St. Mary's Custom Shutters, Trim Team, Morrison Supply/Western Wholesale Supply. “We had a really good turnout and the visitors could see a very sharp group of exhibitors who had time to work with them to ensure they got information,” said Tommy
Mantini, Co-owner of Show Tech. Although the crowds were spaced throughout the weekend most of the exhibitors felt good about sales and appointments. One exhibitor, Mechanical Technologies, told the Outlook that they had more leads at this show than the one in the spring. “Actually it looks like all of us had some really good opportunities to talk with the visitors,” said a representative. The Fall Home and Garden show will be back next fall, not in the spring as usual. “We can’t use the Convention center because it will be turned into a bowling alley for the men’s Bowling Congress. “We can’t use another facility because frankly we won’t fit and we want this to be a first class show,” Mantini said. “We hate that we can’t come back in the spring but we know that the fall show is developing quite nicely,” he continued. Attendance numbers were not finalized at press time but clearly the numbers were full of buyers rather than tire kickers. “We love this show because we can make sure that our big advertisers like National Furniture Liquidators who provided a man cave to one lucky winner get great exposure,” said JoJo Garcia, program manager at KOFX 92.3 FM. The El Paso Association of Builders partners exclusively with Show Technologies to produce our Home and Garden Shows.
The El Paso Association of Builders gratefully aknowledges the suppliers that helped to make the Palo Verde Modeal Home at the Fall Home & Garden Show a huge hit with visitors:
Palo Verde Homes showcased their home building at the Fall Home & Garden Show. Visitors had a chance to view the latest trends available in our market. The El Paso Assocition of Builders recogmizes their time, talent and effort.
BMC West Cabinet Masters Designers Mart Dunn-Edwards Paints Ferguson Forever Green Landscaping Foxworth-Galbraith Interceramic Jack White Building Specialties Lowe's Home Improvement Marble and Granite Design Concept Plasterqueen Rio Grande Stucco Products Sunwest Windows & Glass Supreme Glass St. Mary's Custom Shutters Trim Team Western Wholesale Supply The EPAB also extends our thanks to those who helped at our booth: Frank Torres, Beverly Clevenger, Kathy Parry, Kathy Rose, Lorraine Huit, and New Members, Walter Pichardo and Daniel Sotelo
el paso development news Aloft Hotel Confirmed for Downtown El Paso An Aloft Hotel location will open in Downtown El Paso, according to a press release issued today. The hotel, which is part of the Starwood Hotels group, will open in July of 2016. The hotel will include 100 "loft-like" rooms, an indoor pool, a W XYZ bar, and 3,000 square feet of meeting space, according to the press release. “Aloft is a great match for the dynamic city of El Paso and will appeal to the next generation of travelers with its urban design, live music at the W XYZ bar, and unbeatable location at the heart of downtown,” states Brian McGuinness, Senior Vice President, Specialty Select Brands for Starwood in the press
release. “The enthusiasm of travelers worldwide is fueling the Aloft brand’s rapid growth as it approaches the 100th hotel milestone.” Though no Downtown address or location is identified in the press release, the Aloft hotel will most likely occupy the historic Bassett Tower, a 15-story high rise at 303 Texas Avenue. The art deco office building, which was designed by Henry Trost and completed in 1930, is currently vacant. The hotel is being developed by Bassett Partners EP and will be managed by Aimbridge Hospitality.
An Aloft Hotel will open at Bassett Tower in Downtown El Paso in 2016.
Another Union Plaza Building May See Renovation Structure in Downtown El Paso is One Block from Ballpark
A Downtown El Paso structure in Union Plaza may see renovations soon, according to renderings posted online. (www.loopnet.com)
Union Plaza, one of Downtown El Paso’s most unique neighborhoods, could see the renovation of another of its historic buildings according to concept images posted online. The building, located at 500 San Francisco on the western edge of Downtown, is the current home of The Plum lounge and famously housed Club 101 several years back. Its current size is at about 11,700 square feet, but 13,181 square feet would be available to lease due to the expansion and renovation. Spaces will be for retail and restaurant uses. According to renderings of what the structure may look like once construction is complete, the facade will see a major changes including storefronts with large windows, varying materials, and landscaping. A tall glass shaft will take a prominent spot along Durango Street, rising up to a new rooftop terrace that may also be available to lease. Spacious patios could hold seating areas on sidewalk portions in
front of the building, which are wider than usual. The building is located a baseball throw away from the Triple-A ballpark, which is just to the northeast. It is also at the western terminus of the pedestrian pathway currently under construction on the northern side of the convention center. The renderings, which were created by PhiloWilke Partnership of El Paso (www.pwarch.com), have been posted on a commercial listing at LoopNet (www.loopnet.com). According to the listing, the renderings and tenant names are for marketing purposes only, meaning the eventual project may look different once realized. This is the latest in a string of proposed Union Plaza renovation projects that have sprung up in recent years. The most recently announced project is the renovation of a vacant building less than two blocks away. That project, at 513 West San Antonio, is creating a mixed-use development that includes apartments and retail.
ADP to Add 150,000SF Facility in West El Paso New Building Part of Company’s Plan to Increase Workforce by 1,100 Automatic Data Processing (ADP) will double its presence in El Paso by 2020, including adding another building to create a West Side campus. The company announced last week that it intends to hire an additional 1,100 employees to add to the approximately 1,100 existing employees. In its announcement, ADP states it will construct a 150,000 square foot facility adjacent to its existing building on Resler Drive, about half a mile south of Loop 375. The new structure will be located immediately north of the current building, creating an “ADP Campus” of sorts. This is the same size as the current building on Resler. This isn’t the first expansion announcement that ADP has made for its El Paso office. In 2012, the company announced plans to create an additional 585 jobs in the Sun City and invest $21 million to expand its operations, a deal that result-
ed in an incentives package from the City of El Paso. Those expansion plans never moved forward. The City is now poised to amend that agreement to increase the number of jobs that ADP must be create to 1,100 and the amount of the required investment to $41 million. In return, the City will provide tax rebates to ADP. ADP has until the end of 2015 to begin construction, though groundbreaking is expected before the end of 2014. The new building must open by the end of 2017, though ADP expects to open by September of 2015.The City will also take action at its September 16, 2014 meeting to nominate the expansion as an Enterprise Zone Project through the Economic Development Bank of the State of Texas. ADP also operates a center on two and a half floors of Stanton Tower in Downtown El Paso. It is unclear if that
location will remain open or will be incorporated into the West Side expansion. This is the third major announcement in El Paso this year regarding major opening or expansion plans for call- and solutions-centers. Prudential Financial announced in April that it will open a “business and technology services center” in El Paso that will add 300 jobs. It
will use an existing building in East El Paso. And in July, Charles Schwab announced that it will create a new operations center in El Paso that will add 445 data entry and processing jobs. It will invest $21.5 million and open in West El Paso.
Builders Outlook Issue 10.2014 Ground Broken for Campbell Apartments Near Downtown A South El Paso neighborhood near Downtown will see a brand new apartment building rise within about twelve months, just one block south of Paisano Drive. Groundbreaking was held Thursday for the 88-unit Campbell Apartments at 501 South Campbell Street. The urban, mixed-use building will rise five stories, with retail and parking on the first level and apartment units on the upper floors. There will be 3,654 square feet of storefront retail space available which may be divided in up to four separate tenants. Behind the retail spaces, there will be 48 parking spaces in a covered garage. On floors two through five, there will be a total of 16 one bedroom, 56 two bed-
room, and 16 three bedroom units. Apartments will surround an interior courtyard, and most will have balconies along the outside overlooking Campbell Street and Third Avenue. According to the project's developer, Soto Enterprises, Inc., apartment units will include kitchen appliances along with a washer and dryer. The apartments will be energy efficient and have refrigerated air. "Our hope is to help remove the stigma that has come to be associated with this area and encourage other builders and organizations to invest in the downtown area by building these apartments," states Joe Soto, Chief Operating Officer of Soto Enterprises. Access to the apartment levels and to the parking garage will be secured. In addition, residents will be able to choose whichever internet, TV, and telephone provider that services the area. Buildings that previously existed on the half block in South El Paso have already been demolished, meaning the groundbreaking will be the beginning of new construction. Soto hopes to have the project complet-
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The Campbell Apartments will rise five stories in South El Paso, just south of Downtown, as shown in this rendering. Construction could be complete by fall of 2015. (Courtesy Soto Enterprises) ed in under a year. Exigo Architecture and Micca Builders, both of El Paso, are also involved in design and construction of the Campbell Apartments.
The groundbreaking was held Thursday, October 9, 2014
First Downtown Wayfinding Kiosks Installed After years of planning and development, wayfinding signs and kiosks are now being placed around Downtown El Paso. The first phase of the project includes 18 wayfinding kiosks and 28 directional signs attached to existing street light fixtures, according to downtownelpaso.com. The kiosks are generally four-sided and will come in two sizes, a medium nine-foot tall kiosk, and a larger 12-foot high kiosk that includes overhead lighting powered by solar panels. The Downtown Management District is managing the project for the City of El Paso. LEFT: One of the first wayfinding kiosks in Downtown El Paso was installed last week. It includes overhead lighting powered by solar panels. (downtownelpaso.com)
Horizon Airport May Become Residential Development Project Could Replace Airstrip with 457 Single-Family Homes, Two Parks A 90-acre portion of the Horizon Airport will become a residential development. That’s according to an application filed with the El Paso City Plan Commission.
The developer of the project, listed as DVEP Land, LLC, is proposing 457 single-family homes for the site, which is about a mile east of Joe Battle Boulevard and half a mile south of Pellicano Drive. Two parks are also planned for Sky View Estates, as it is called in the application. The property is a long, narrow piece of land that runs about one mile from east to west. Horizon Airport, originally named West Texas Airport, was a private, familyowned runway that served general aviation flights. In all, the airport land consists of 200 acres. The property is located outside of El Paso city limits, but within the City’s Extraterritorial Jurisdiction (ETJ). This requires the property to file subdivision applications with the City of El Paso.
Nothing Bundt Cakes Next ‘Fountains’ Tenant A new tenant could bring specialty pastries to the Fountains at Farah in East El Paso, according to permits filed with the City. Nothing Bundt Cakes will open up a spot in the shopping center. According to the retailer’s website (www.nothingbundtcakes.com), Nothing Bundt Cakes stores offer bundt cakes in an assortment of flavors such as Red Velvet, White Chocolate Raspberry, Carrot, and Lemon, among others. Cakes also come in different sizes, according to the site, including “Bundtinis,” “Bundtlets,” and larger sizes such as double-tiered cakes. Stores also sell gift items, cards, and decor. The store will be the first in El Paso for Nothing Bundt Cakes, which has headquarters in Las Vegas. Nothing Bundt Cakes was founded in 1997 and has around 80 stores in the United States, including several in Texas. No word on the timeline for opening the El Paso location.
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Expert Advice
Affordable Care Act Update Joe Bernal Employees Benefits of El Paso
The open enrollment period for health coverage during 2015 runs from November 15, 2014 to February 15, 2015. Coverage can start as soon as January 1, 2015. This applies to individual plans only; businesses can offer coverage to their employees at any time. Starting in 2015, employers with 100 or more full-time employees must offer health coverage to their full-time employees or pay an "employer responsibility" penalty. The penalty will apply to employers with 50 or more full-time employees starting in 2016. To avoid a payment for failing to offer health coverage, employers will need to offer coverage to 70 percent of their fulltime employees in 2015 and 95 percent in 2016 and beyond. This helps employers that, for example, may offer coverage to employees who work 35 or more hours, but not yet to those who work 30 to 34 hours. (Unlike most employers, the Affordable Care Act considers employees who work 30-39 hours per week "full-time.") The Affordable Care Act exempts businesses with 50 or fewer full-time equivalent (FTE) employees from having to provide health insurance. However, if you want to offer coverage, you can use the Small Business Health Options Program (SHOP) Marketplace. Employers that offer SHOP coverage and have fewer than 25 full-time equivalent employees may qualify for a Small Business Health Care Tax Credit. Employers must pay at least 50 percent of their full-time employees' premium costs. The tax credit is worth up to 50 percent of the employer contribution (up to 35 percent for tax-exempt employers). As licensed insurance agents, we can help you compare SHOP plans to other available options and help you enroll in whichever is the best fit for your business...at no extra cost to you. For more information contact Joe Bernal joe@employeebenefitsep.com 915-542-0900 (c) Copyright 2014 Employee Benefit News. All rights Resrved.
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2014 issue 10
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Builders Outlook
Business News Fed uses key words in decision The Federal Reserve’s main policy decision in October comes down to a handful of key words that offer a sense of how much longer central bank officials intend to keep short-term interest rates near zero. Fed policy makers meeting in late October are likely to debate whether to keep the language in their previous policy statements pledging to keep their benchmark rate near zero for a “considerable time” after their bond-buying program ends. They are highly likely to vote to stop the purchases, so that language will have to be tweaked at least slightly–but perhaps just so. One camp of Fed officials wants to drop the “considerable time” phrase. Some don’t like it because they think it overstates how long they are likely to wait before raising rates. Others who are not eager to raise rates soon are ready to scrap the language because it implies the decision on when to move will be based on some time frame rather than on the economy’s health. Many investors expect the Fed to start raising its benchmark short-term rate in the middle of next year, a view some top policy makers have encouraged. The other camp of Fed officials wants to leave the “considerable time” language in the statement this week to avoid rattling the markets, which have been volatile lately because of slowing global growth.
These officials wouldn’t want to drop the phrase now and possibly prompt investors to think wrongly that the Fed is likely to raise interest rates sooner than expected. They would rather wait to adjust the language at Fed’s December meeting, which is followed by a press conference at which Chairwoman Janet Yellen can fully explain any change. While these policy makers remain confident U.S. economic growth will hit a 3% annual rate in coming months, they don’t want to trigger a repeat of the socalled “taper tantrum” that occurred in the spring and summer of 2013. At the time, then-Fed Chairman Ben Bernanke’s suggestion that the central bank might begin pulling back on the asset purchases sent bond yields and borrowing costs in the broader U.S. economy sharply higher in a short time frame. “Some things in the statement are going to have to change if we do end the [bond] purchase program,” Eric Rosengren, president of the Boston Fed, said in a recent interview. “We’ll have to think about exactly what’s the appropriate wording and certainly the financial context that we’re in given the volatility we’ve seen in markets. We’re going to have to weigh how best to avoid further unsettling markets that seem to have unsettled themselves pretty well on their own.” Among the financial developments the Fed is monitoring is the recent surge in the value of the dollar, which could hurt U.S. exports and put downward pressure on inflation, which has run below the Fed’s 2% target for more than two years. By Pedro Nicolaci da Costa, WSJ
95% success rate in achieving
Wal-Mart to pay more than minimum wage Wal-Mart Stores plans to say goodbye to the minimum wage. The huge retailer’s chief executive, Doug McMillon, said Wednesday that the company plans to end minimum-wage pay for its workers in the future. “It is our intention over time that we will be in a situation where we don’t pay minimum wage at all,” he said. That plan would put Wal-Mart in a league with Costco Wholesale and Gap Inc. among employers committing to pay workers more than the minimum wage. President Barack Obama has publicly saluted Costco, Gap and several small businesses for voluntarily raising starting pay. The federal government sets a $7.25 an hour minimum wage, but many states now have higher pay floors. As the largest private-sector employer in the country, Wal-Mart could have an outsized influence on the minimum wage debate. Unlike Costco and Gap, Wal-Mart hasn’t put its weight behind the president’s push to increase the federal minimum wage to $10.10 an hour. Executives have said they would remain neutral on the proposal. So far the measure has failed to gain support in Congress. Less than 6,000 of the retailer’s 1.3 million U.S. employees currently make the prevailing minimum wage, Mr. McMillon said. The average hourly Wal-Mart worker is paid $11.83 an hour. That’s below the average hourly earnings of $14.46 for all non-supervisor retail employee last
month, according to the Labor Department. Mr. McMillon said the company is constantly weighing the balance of compensation and benefits and “believes in a meritocracy,” where employees earn more as they take on additional responsibilities and advance through the retailer. His comments come as union organizers and workers plan to stage protests around the country Thursday asking Wal-Mart to commit to hourly pay starting at $15 an hour and offer consistent, full-time work. Similar protests have been held by fast-food workers and union groups that represent low-wage workers. Hobby Lobby Stores Inc. and IKEA Group are also among retailers that have publicly committed to paying above the minimum wage.But other businesses and some economists warn that raising the minimum wage could lead to job loss and increased prices for customers. Senate Minority Leader Mitch McConnell (R., Ky.) has touted his opposition to raising the minimum wage in his re-election campaign. “If you engage in this kind of a minimumwage increase right now…you’re going to destroy between half a million and a million jobs,” he said in a debate. By Shelly Banjo and Eric Morath WSJ
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The Burden of Payroll Record Keeping Paying employees means more than just issuing checks. Your company also needs to keep accurate records for current and past employees for a certain period of time. There are record requirements from both the IRS and the U.S.Department of Labor, which enforces employment rules for several other federal agencies. These records include the following information: name, address, occupation, and Social Security number, as well as details of compensation such as the dates paid, tips, non-cash payments, compensation subject to withholding and payroll taxes, pay period, and fringe benefits provided to employees. In addition, you must keep copies of all pertinent federal forms filed. To further complicate matters, there are numerous state, local, and other regulatory agencies that may require additional recordkeeping. For example, various government agencies enforce their own laws involving unemployment insurance, wages and hours, child support, creditor garnishment, and unclaimed or abandoned wages. Without the proper records, your company will be unable to comply with regulatory requirements. If you are subsequently audited by federal, state or local agencies, you could be hit with back taxes, interest and penalties. Burden of Proof The burden of proof, or the responsibility to substantiate items on your tax returns, such as payroll and payroll-related costs, at one time rested entirely on the taxpayer. Since the passage of the Internal Revenue Service Restructuring and
Payroll Record Guidelines Employee earnings Maintain a minimum of four years to meet various state and federal requirements.
Reform Act of 1998, the burden has shifted to the IRS in the event of a courtroom proceeding, but only if you meet the requirements to retain proper records and make them available for inspection. So while the law now takes some of the heat off taxpayers, it only applies if your company diligently maintains records and cooperates with reasonable IRS requests. Obviously good records are vital but maintaining them is a daunting task. Many businesses solve this problem by outsourcing payroll. A payroll service provider can relieve your business of the many headaches involved in preparing paychecks and reporting to government agencies, and it can also store your documentation and provide you with reports as needed. Recordkeeping is just one more reason why outsourcing payroll makes sense for so many businesses.b By Dianne Parker as reported by TAB partner Avitus Group
Employee time cards Keep for at least three years if your business is subject to the Fair Labor Standards Act (engaged in interstate commerce), although it's a good practice for all businesses to keep the files for several years in case questions arise. Personnel records Retain three years after an employee has been terminated. Employment tax records Keep four years from the date the tax was due, or the date it was paid whichever is longer.
2014 Issue 10
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www.elpasobuilders.com www.epbuilders.org
Membership News
Guel construction provides maintenance to association building. With the busy schedule that is the world of Rudy Guel he and his team spent a week working on and upgrading the exterior of the EPAB office. Guel Construction climbed on the roof to cover the roof with a new coating, spending day’s doing the work in the heat. Guel Construction’s crew worked long hours with the latest materials. “I know that the work is hard but my guys are really good and they think of this building as their place, since they built it,” Rudy said to the Outlook. “In the six years since we opened the building we’ve been fortunate not to have any major
problems on the roof so our preventive maintenance was due to make sure we stay good,” he continued. In addition to the roof work Guel also applied a protective coat on the wood beams in the front of the building and inspected the walls, windows and other items. Work will continue on some minor things that need attention but all in all Guel Construction has done a great job for the association. Our sincere thanks to Rudy Guel and the crew. Great job!
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Builders Outlook
2014 issue 10
Associates Council
Sam Shallenberger Western Wholesale Supply
I want to thank the volunteers who took time to help at the Home and Garden show. We could always use the help and so if you didn’t come out this year let’s make plans for you to be there next year. The more we have the better, but where we need help is in getting you IN the show to take advantage of the potential customers walking through. Fall shows tend to have a more serious buyer looking to spruce up before the holidays. I know I’ve been guilty myself about not thinking that way but after looking at the crowds this time I have to admit things have changed. In today’s economy you can’t afford to miss even one selling chance so why did you miss out on the thousands who attended the show this time? I think that excuses about not
affording a booth are not really thinking through the deal. How many potential customers did you talk to that weekend? Five, ten, twenty or a hundred? You missed a bunch by not putting a booth in, so chalk it up and make plans for the next show in October 2015. I am pleased that we’ve had a pretty good response to the Pro Am golf but we have fallen short for advertising since we’ve not experienced that in a long time. I understand that business is tough but you have to find sources to cut through and talk with the decision makers and this tournament is loaded with those. My thanks to our new partner StrucSure Home Warranty for stepping up and being the lead. Scot Whisenant is working to make
sure you know who he and his company are and we’re thankful. Another new sponsor is Deutsch and Deutsch Jewelers out at the Fountains at Farah. Roger Baron from D&D is putting up a Rolex for the first person to hit a hole in one on the Deutsch and Deutsch par 3. We’re looking forward to the upcoming installation dinner on December 12 and much more for the new year. I want to ask each associate member to include the association in your marketing dollars next year. Support what you can but support it. It’s vital during these lean times.
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www.elpasobuilders.com www.epbuilders.org 6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038 ■ execuTive oFFicerS Frank Torres – President GMF Custom Homes edgar montiel – vice President Palo Verde Homes carlos villalobos – Secretary Treasurer Palo Verde Homes Sam Shallenberger – Associates chair Western Wholesale edmundo Dena - immediate Past President Accent Homes ray Adauto – executive vice President El Paso Association of Builders Jay Kerr -Attorney of record
■ couNciL/commiTTee cHAirS Associates council Sam Shallenberger Build PAc Randy Bowling Desert Green Building council Javier Ruiz Land use council Sal Masoud Young Designer Award John Chaney remodelers council Rudy Guel membership retention Mike Santamaria, Greg Bowling Finance committee Carlos Villalobos Women’s council Lorraine Huit ■ ADviSorY To THe BoArD J. Crawford Kerr, Attorney, Firth, Johnston & Martinez ■ BoArD oF DirecTorS Beverly Clevenger, Automated Division 6 Builders, Inc. Leti Navarette, Custom Dream Homes Kathy Parry, Hunt Communities Edgar Garcia, Bella Vista Custom Homes, Inc.. Bud Foster, Southwest Land Development Services Juanita Garcia, ICON Custom Home Builder, LLC Walter Lujan, DAWCO Home Builders Joey Najera, Joseph Custom Homes Rigo Mendez, Mission Homes Nick Bombach, Casas de Leon, LLC Lydia Mhouli, Crown Heritage Homes JJ Vasquez, Pacifica Homes Dan Ruth, Millenium Homes Ken Wade, El Paso Building Materials Ruben Orquiz, MTI Ready Mix Kathy Carrillo, Pioneer Bank El Paso Henry Tinajero, WestStar Bank Chuck Gabriel, Carpets West Ted Escobedo, Snappy Publishing John Chaney, Passage Supply Joe Bernal, Employee Benefits of El Paso Linda Troncoso, TRE & Associates Orlando Rodriguez, Mass Media Advertising, Inc. Bret Thompson, Foxworth Galbraith Lumber Chris Worm, City Bank Texas Sal Masoud, Del Rio Engineering
■ TAB STATe DirecTorS Randy Bowling Greg Bowling
■ NATioNAL DirecTorS Bobby Bowling IV. Demetrio Jimenez NATioNAL ASSociATioN oF Home BuiLDerS (800) 368-5242
TexAS ASSociATioN oF BuiLDerS (800)252-3625
2013 Builder member of The Year Edmundo Dena Accent Homes 2013 Pat cox Award Sam Shallenberger Western Wholesale Supply 2013 Associate of The Year WestStar Bank Larry Patton, Burt Blacksher and Henry Tinajero
Honorary Life members Wayne Grinnell Don Henderson Chester Lovelady Cliff C. Anthes Anna Gill Brad Roe Rudy Guel E H Baeza Past Presidents committed to Serve Greg Bowling Kelly Sorenson Mark Dyer Mike Santamaria John Cullers Randy Bowling Doug Schwartz Robert Baeza
Bobby Bowling, IV Rudy Guel Anna Gil Bradley Roe Bob Bowling, III E. H. Baeza Hershel Stringfield Pat Woods
ePAB mission Statement: The El Paso Association of Builders is a federated professional organization representing the home building industry, committed to enhancing the quality of life in our community by providing affordable homes of excellence and value. The El Paso Association of Builders is a 501C(6) trade organization. © 2014 Builder’s Outlook is published and distributed for the El Paso Association of Builders by Ted Escobedo, Snappy Publishing ted@snappypublishing.com El Paso • Texas • 79912 915-820-2800